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First step on carbon tightrope

The Age

Friday February 25, 2011

Michelle Grattan is political editor.

It's knocked off two leaders so far, and Gillard has to tread carefully if she's not to become the third. JULIA Gillard has formally launched a fight for a carbon price that will hugely test both her policy leadership and her ability to communicate a hard message to voters who may believe in climate change but could baulk at the cost of combating it.Carbon pricing has helped bring down two leaders: Kevin Rudd and Malcolm Turnbull. If Gillard bungles her salesmanship, the next election could see her become a third victim.Gillard has learnt from the experience of her predecessor, who for crucial months took a low profile in the debate. She'll be front-and-centre in the battle. "In the debate that will ensue, I am not intending to take a backward step," she told her news conference. Unlike Rudd, she won't be distracted by the mirage of a marriage with the Liberals. Tony Abbott won't even flirt.Yesterday Gillard unveiled the architecture of her pricing plan, but it was only foundations and scaffolding. Floorboards have yet to be laid or walls erected.As Abbott quickly pointed out, her plan is a blatant breach of Gillard's election promise not to introduce a carbon tax. Notably, Gillard shied away from the T-word at her press conference, although she admitted in question time that the initial part of the scheme, a fixed price, was "effectively like a tax".By last night, Gillard was saying on TV: "I'm happy to use the word 'tax' . . .I understand some silly little collateral debate has broken out today. I mean, how ridiculous. This is a market-based mechanism to price carbon."Gillard explains her post-election U-turn by saying the hung parliament changed things; she makes a virtue of it by stressing the need for climate action.The hung parliament is one reason why this first announcement is so minimalist. Yesterday's plan has come out of the cross-party climate committee, where it was agreed by government and Greens. The government wanted to get the Greens signed up to the basics before arguing over the fine print, including compensation for polluters. Significantly, it puts off a basic argument with the Greens over targets until the fixed carbon price is moving to a trading scheme.The two independents on the committee, Rob Oakeshott and Tony Windsor, agreed to putting the plan out for discussion but had wildly divergent positions yesterday. Windsor is completely reserving his position; Oakeshott says he would vote for the plan "tomorrow".Apart from having no detail, even fundamentals of the Gillard plan are vague. She insists the fixed price is "hard wired to go to a cap-and-trade system". But the emissions trading scheme, the second stage, wouldn't come for three to five years and there is also provision for it to be deferred, depending on international and other circumstances.By the time that decision would be made, Labor may or may not still be in power. By not promising a pre-election move to a trading system, the government is being sensibly conservative, but also making it easier for Abbott to run on a simple line of "we'll scrap the tax".The carbon price debate will be huge undiminished for being a rerun of that in the last parliamentary term. It has advantages and risks for both sides.For Gillard it is a chance to establish authority by showing policy leadership. But the dangers are formidable. Both government and Greens have interests in consummating a deal, but the government can't afford to be forced into a position where the plan becomes too tough to be accepted by industry or the public.The government is setting the start date at July 2012, so things would be bedded down well ahead of the election, due in 2013. The ultimate test will be whether the government will have won the argument come time to go to the ballot box.That will depend on its ability to convince people, first, that climate change requires urgent action (including because Australia could lose out economically if it doesn't move) and, second, that the plan is not going to put excessive pressure on people's cost of living (this goes to the compensation package and whether people believe it is adequate).Since the earlier days of the debate, the climate issue has receded somewhat in people's minds while the cost of living has probably become more pressing. Rising electricity prices will make a carbon price more difficult to market.For Abbott, Gillard's announcement is an opportunity that also holds longer-term dangers. The Liberals were happy yesterday the issue united them, and they were impressed with Abbott's strong speech in the House attacking Gillard over her broken promise.The government switching the debate to carbon will blot out other issues for a while and allow the Liberals a respite from their recent troubles.Abbott, always best on negative ground, has a simple anti-tax argument to run. On the other hand, if climate change has more pull than it might appear, people could see his argument as simply short-sighted.As the debate proceeds, Turnbull's performance will be carefully watched. He remains a believer in a carbon price. But breaking ranks would have such catastrophic consequences for himself and his party that is hard to see him doing so he will have to find some path between principle and pragmatism. Given the balance of party opinion on carbon pricing and on Turnbull himself, this issue is not his way back to the leadership.The bottom line is that the government is right to be pursuing a carbon price because that is the correct policy for Australia to have. This plan with its modest start and "let out" if a trading scheme proves too hard is being pitched as the classic compromise.It lacks the ambition of the initial Rudd version, and serious judgments about its substance can't be made until we have the detail. Except to say that building a modest house is usually better than having no dwelling at all.

© 2011 The Age

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