Climate policy after carbon pricing – where to now?

Phil Harrington is an economist, climate change policy analyst, consultant and activist with Climate Action Hobart. Green Left Weekly’s Susan Austin asked him about his views on the federal government’s carbon pricing package and how to respond to it.

What do you think of the carbon pricing scheme that is being introduced?

It’s way too little, way too late. It is designed to give the appearance of action and is being used by the government to justify the position “we’ve fixed that now” — but in fact nothing is fixed.

Most importantly, this package is a completely inadequate response to the science of climate change. It will see Australia’s emissions continue to increase for around another 20 years into the future, and then fall by just 2% by 2050, not the 80% claimed.

Five years ago, the Intergovernmental Panel on Climate Change (IPCC) said global emissions had to start falling from 2015, and emissions from developed countries need to fall by 80% to 95% by 2050, to have just a 50% chance of limiting global warming to 2°C (would you cross the road with a 50% chance of getting to the other side?)

More recent science is suggesting that we have badly underestimated the speed and severity of climate change, and that targeting 2°C of warming is a recipe for disaster. Yet actual global emissions have grown faster than any IPCC scenario dared to suggest.

Frankly, we are heading for the wall and spin will not save us.

A $23 a tonne carbon price sounds impressive, but all the major emitters have been largely or completely exempted or so thoroughly “compensated” that they will feel no pressure to reduce emissions at all.

In fact, there are proposals for new coalmines everywhere, while the minerals boom that is driving our emissions growth continues unabated. State and federal governments are actively encouraging these developments, completely failing to make the connection with rising global and Australian greenhouse gas emissions.

Which sectors are left out of the scheme?

Fishing, forestry and agricultural producers, which are responsible for almost 20% of Australia’s emissions, are left out.

The major emitters in the mining and minerals processing sectors are getting over 92% of their emissions permits for free.

The transport sector beggars belief. Cars and trucks, that produce the vast majority of the greenhouse gas pollution from this sector, are fully compensated by fuel excise changes, to ensure they face no incentive to reduce their emissions.

Heavy vehicles may join the scheme in 2014, but only subject to a future decision to do so. Shipping and railways, the least greenhouse polluting of the mechanical transport modes, are covered by the scheme from day 1, putting them at an immediate commercial disadvantage to their higher polluting cousins.

What about other climate policies — will they remain or be expanded, along with the carbon price?

Unfortunately, quite the opposite. From the old days, a few targeted policies hold on at the national level — the Renewable Energy Target (already slated for extinction in 2020, and practically, many years before), a handful of energy efficiency performance standards and labeling requirements, energy efficiency opportunity assessments for big energy users (with strictly voluntary implementation of course) and energy performance targets in the Building Code of Australia.

But these policies — despite saving 56 million tonnes of emissions in 2012 and potentially up to 109 million tonnes by 2020 — are regulatory in nature and therefore “non-complementary” to the carbon price.

On these grounds, they are at grave risk of being disbanded. We have already seen the government walk away from solar hot water rebates, cut the rebate for solar photovoltaic and remove the rebate for insulation, at a time when they are claiming to be promoting a “clean energy future”.

Every state and federal — and maybe even local — government review of climate policies and programs now starts out with the question “is this complementary to the carbon pricing scheme?”

Since the legislation does not take into account the emissions reduced by all these programs, by definition, none of them can be shown to be “complementary”. The carbon pricing scheme took away their complementarity, forcing us to pay a regressive carbon price instead.

State emissions reductions targets, local government walking school bus schemes — a thousand good emission-reducing initiatives right across the country — have had their fundamental rationale ripped away.

If your local school does encourage walking school buses, and therefore manages to shave a few tonnes of emissions out of parents driving kids to school, those emission savings simply get reallocated under the carbon “cap” to someone else to emit instead — most likely a major industrial and greenhouse polluter.

The net effect, therefore, of all these well-intentioned measures will be precisely zero emissions reduction. As people wake up to this, more and more important measures will be given up as pointless — unless this carbon pricing scheme is fixed first.

Is the carbon price the cheapest policy that the government could have chosen?

This claim is made on purely theoretical, or even ideological, grounds, but there is hard evidence that many other policy measures would be cheaper, i.e. cost less per tonne of greenhouse gas emissions removed or abated.

For example, the government’s own publications on numerous energy efficiency measures show that they do better than negative $23 per tonne abated, never mind the carbon price of +$23 per tonne abated. That is, they are proven, negative-cost measures.

And yet many of these measures will be undermined by the carbon price. In fact, the Productivity Commission — that will be reviewing aspects of the scheme — has already made it clear in submissions to government that it views most regulations as “non-complementary”. It will clearly recommend they be removed, in line with its well-known anti-regulation stance.

So why has the government focused on this carbon price strategy?

Carbon pricing rests on a beautiful, elegant theory — a theory that has become almost a religion in this country.

This theory is known as the Efficient Markets Hypothesis, or “neoliberalism”. This is the view, in short, that free markets, peopled with independent agents, each armed with perfect information (or near enough), and (of course) sufficient purchasing power, will — provided only that governments do not get in the way — resolve all economic problems in an optimal manner through price-based transactions and price-based transactions alone.

It is the view that all problems may be “financialised”, thus turning them from something real and quite possibly threatening into a financial abstraction, to be bought and sold (as frequently as possible, on a healthy margin) — a derivative.

It is the very same theory that brought you the global financial crisis, the European debt crisis, the US bailout, free trade and competition policy.

The government and all its main advisors and bureaucrats are firmly wedded to this ideology.

If you had to point out just three main flaws with Australia’s carbon pricing scheme and its “clean energy” packaging, what would they be?

First, as I mentioned, the package bears no relation at all to the scientific and physical reality of the unfolding climate emergency.

By setting such weak, ineffectual targets, by exhibiting such anti-leadership on the national and global stage, we are lapsing deeply and I believe consciously into denial. We are giving up. We are saying, “I give up — it’s all too hard”.

We are dreaming this is not at all ‘the critical decade’, as it has been declared, and that Professor Ross Garnaut, the government’s own but delightfully wilful greenhouse advisor, has not supported “contraction and convergence” towards a common global carbon budget an order of magnitude less than Australia’s current per-capita emissions.

The maths is very clear — a sustainable global carbon budget in 2050 is less than 1 tonne a year for every person alive at that time — but Australia currently sits at 25 tonnes per capita and is planning to reduce its emissions by just 2% by 2050.

We are dreaming to think that it’s OK if the coal that we don’t burn here is sent to China and burnt there instead. Do you think they have a different atmosphere over there? Or is it just that it keeps the coal unions and the coal barons happy? We are dreaming that “clean energy” means natural gas and “clean coal” and maybe nuclear as well.

You won’t find “clean energy” defined in any one of the 18 pieces of legislation that form the clean energy package, by the way — that is because the government wants to pretend that it means renewables — in line with all the images you see in the TV campaigns — while really pushing coal seam gas and other fossil fuels.

The second big problem is the government’s claim it will reduce Australia’s emissions by 80% by 2050 — that’s a complete con. As the Treasury’s own modelling shows, (see page 77 of Treasury’s Low Carbon, Strong Growth: modelling a carbon price, Commonwealth of Australia, 2011), the real number is 2%, while the rest is going to come from “international abatement”; that is, purchasing carbon credits from overseas.

But what does this really mean? At best — if it’s genuine — it means someone else’s emissions will have to fall much further than their fair share, so that we can buy that abatement and re-emit it here instead. If that country has a target of its own — as it must if we are going to deal with this issue — they’ll have to reduce their emissions even further, because they’ve sold off the rights to some of that abatement.

It’s the old imperialism at work again. They get to do the work, and we get to be fat and lazy.

I say “at best”, because Oxford University, among many others, has demonstrated in case study after case study that most internationally-sourced abatement is not genuine abatement at all.

Often the projects that create “offsets” for deserving emitters like Australia to purchase (instead of spending our hard-earned money on real abatement, creating real investment and real jobs here), actually generate higher global greenhouse gas emissions.

An example is where “credits” are generated simply because a country that claims it was going to develop a coal-fired power station, but then develops a gas-fired one instead, gets credit for the difference in emissions between these two projects.

But the only thing real that has happened is, a) there are new emissions in the first
country from the gas-fired power station, and b) there are new emissions in the second country, as the phony credits allow emissions to be higher than they otherwise would.

Support for genuine sustainable development in developing countries is one thing, but it should not be used as an excuse for higher emissions by the world’s richest countries. These things must be completely delinked.

Big problem number three is the lack of “complementarity”. All Commonwealth measures, all state climate policies and all local government climate policies throughout Australia are potentially undermined by this scheme in its current form.

A simple legislative change would fix this — by requiring the Climate Change Authority to take all these measures into account when recommending the level of the emissions cap — but there is very little prospect of the government making such an amendment right now.

To do so would require an acknowledgement that they stuffed up — and it would require them to put substance before spin.

Am I saying that carbon pricing is a disaster for climate policy? That it has no place at all? No. Am I saying that this carbon pricing package is a disaster for climate policy? Yes I am. Can it be fixed? Yes, in theory, but there’s no evidence the government has any appetite to do so.

Instead it is banking on all this being too complex for most punters, and it will roll out the spin machine instead.

What do you propose be done to fix the carbon price package?

• Amend s.291 (2) of the Clean Energy Act 2011 by adding a new section that the Climate Change Authority must have regard to in recommending future caps: the new section is the abatement effect of all existing and expected climate policies and measures by commonwealth, state and territory governments.

This simple amendment will immediately and forever alleviate big problem number three. Recall we have until 2015 to get this right as the problem only arises when we move to the cap. So, no excuses.

• Remove the provision for emitters to acquit up to 50% of their emissions permits in junk bonds … sorry, international permits. If we did this, we would actually begin the transition to a low-carbon economy, instead of pretending that we doing so.

We might even create some intellectual property — the real currency of the post-carbon world — along the way, by learning how to reduce emissions other than by shuffling paper.

• Set a real target for 2020. And for 2015. And for 2013. Illusory targets for 2050 — about 14 electoral cycles into the future — may allow politicians to talk big, but those targets are about as credible as the people that utter them.

This is the critical decade, not the 2050s. We are three skinny years from what the best-science-the-world-has-to-offer tells us must be — but still will not be — the global emissions peak.

We need a government with the honesty to face the science, and then the courage to face the people — to tell it like it is. We respect that. It’s all we’ve ever respected. It’s called leadership. And it’s our only hope.

[Much of the content of this interview can be found in a longer article by Phil Harrington
called “Waking the Dreamer — steampunk and climate policy after carbon pricing”, published in Sustainable Australia 2012 by Black Hawk Publishing.]