Poetic justice in the carbon price rematch
Sydney Morning Herald
Saturday February 26, 2011
IN a major revamp of his climate policy Tony Abbott has moved on from his four-word slogan - "great big new tax" - to rhyming couplets, "Julia Gillard has never seen a tax she didn't like, and Labor has never had a tax it wouldn't hike".He has also added the charge that Gillard is breaking an election promise. Of course while the Prime Minister had ruled out a carbon tax during the election campaign she never ruled out an emissions trading scheme or a carbon price, but her election policy was so crazy and confused it's a bit hard for her to defend.(She said she would have an ETS, but delayed until at least 2012, even though she believed a carbon price was the only way to meet our greenhouse gas reduction targets. Meanwhile, she said she would use a "citizens' assembly" of 150 ordinary folk to test opinion on a policy she had already decided was needed.)In every other respect the Opposition Leader's cost of living attack remains unchanged.But for Labor, the challenge of winning parliamentary support for a carbon price this time around is very, very different - because now Gillard has to to straddle the conflicting agendas and mutual suspicion between the business community and the Greens.In late 2008, when federal cabinet decided to press ahead with an emissions trading scheme even as the global economy slid into crisis, it took an explicit decision to design something that would pass the Senate with the support of the Coalition rather than the Greens. It appeared logical at the time, even though it didn't work out so well in the end.The Coalition had gone to the 2007 election supporting emissions trading and had just elected Malcolm Turnbull as its leader. Negotiating with the Coalition would allow Labor to craft a scheme that was more palatable to business and an easier political "sell".But Tony Abbott's promise to oppose a market mechanism come what may (actually that's not what he said at the beginning, but it morphed into a "never, ever" position when the "great big new tax" line started to rate well in the polls) and the fact the Greens emerged from the 2010 election sitting on the cross benches in both houses, has pushed the minor party to the centre of the negotiation.In any event, with the Greens at the table the outcome is going to have to look different to the Rudd-Turnbull deal of 2009, which is exactly what is worrying some parts of the business community, even though they support the idea of a carbon price in principle.The final 2009 package proposed an initial fixed carbon price of $10 a tonne for one year. Neither Labor nor the Greens have said what the three-to-five year fixed price should be this time but industry is working on the assumption it could be about $25 a tonne.The final 2009 package proposed industry compensation of $3.3 billion over the first 12 years for electricity generators and $35 billion for trade-exposed industries. Greens senator Christine Milne has made it clear she thinks "rent-seeking" big business should get limited compensation and the electricity sector should get none.And already there is a tussle over whether business should be able to buy permits overseas from the outset.The Climate Change Minister, Greg Combet, has responded to concerns from chief executives on his "roundtable" that they were being told less than they read in the papers - by setting up two taskforces on the contentious issues of compensation to electricity generators and industry.Of course, should industry still feel the Greens are exercising too much clout, they could always start to pressure the Coalition to deal themselves back into the negotiation.And the carbon price is not the only place where Labor is mediating between a business agenda and green one.The Greens argue it is contradictory for the government to try to reduce greenhouse pollution with a carbon price while at the same time in effect encouraging it with different policies.High on their list is the fuel tax credit for diesel used by mining companies - which if abolished would net the government the better part of $5 billion a year.Getting a bit more revenue from the cashed-up miners might just appeal since the government is still smarting from losing $60 billion of revenue from the original mining super profits tax over its first 10 years, after the miners invested just $22 million in an anti-government advertising campaign.But governments have failed when they have tried to claw back the tax break before - the Howard government had a shot at the diesel fuel rebate in 1996 before backing down after - you guessed it - a mining industry advertising campaign.And since the goods and services tax, the benefit is delivered not as a rebate but as a tax credit to all off-road diesel users, making it harder to target just the miners and not farmers or fishers or foresters as well, and harder to rebut the miners' case that diesel is a legitimate business input cost. Still, the Greens will have a go and the miners are watching.Over in the domain of the Resources Minister, Martin Ferguson, a place where business types feel a bit more at home, consultation is proceeding about how to implement Gillard's promise to introduce new standards to ensure that "never again will a dirty power station be built".Many power companies are arguing that promise was made back when the government wasn't going to have a carbon price any time soon and, now that it says it is going to have one, the new regulation is no longer needed.But the clear message from government is that the election promise will be met (it's actually the only one of the government's climate-related election promises still standing, after the early demise of the citizens' assembly and cash for clunkers) so industry has a fall-back position for the rules to be implemented more "flexibly" and phased out quickly when and if a carbon price happens.The Greens think the new regulation is already too weak, since it would not prevent up to 15 coal-fired power stations already being planned.The carbon price rematch has now got off to its predictably sour, scratchy start. But the initial shouting match with the Coalition - whether conducted in slogans or rhyming couplets or haiku - is not Gillard's biggest worry. Mediating between business and the Greens will really test her political skills.