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Carbon Pricing and its Discontents

The issue of carbon pricing has been one that has haunted both the Rudd and Gillard Administrations since the initial election of the Labor Party to Government in 2007. With this weeks announcement of a framework for a carbon price mechanism, led to a  predictable attack by the right, but it raises bigger questions.

Alan Jones, Tony Abbott and the hypocrisy of the Right

I can’t help but feel that Gillard’s interview on the Alan Jones Breakfast Show was a political windfall for the PM. Gillard undoubtedly took up the fight by going head to head with Jones. Whilst remaining calm and maintaining a confident argument, Gillard allowed Jones to show himself to be a truly rabid interviewer. His constant interrupting, often condescending tone and his berating of the Prime Minister over her lateness displayed Jones’ existential hatred for Gillard. And whilst this will not win her any votes from Jones’ devoted followers, the stoush may just energise many on the left in the Labor Party, as well as sympathetic Greens supporters who would are keen to fight the Sydney shock on any issue.

Gillard also took the front foot on attacking Tony Abbott. When announcing the framework she specifically called out the Opposition leader on driving a scare campaign, whilst promising to not ”take a backwards step” in the oncoming debate. 

Recently, it has come to light that Abbott himself argued for a carbon tax, and has thus far refused to repeal it if he comes into power after the next election*. The point here being that on the issue of climate change, Abbott is as former Liberal Leader Malcolm Turnbull described him, “a weathervane”, changing his opinion as he chooses for base expediency.

Of course this is the argument now being made against Gillard, with the exception being that she denied she would introduce a carbon tax before the election. But here the right still falls short. Neither Abbott or Jones seemed to find any issues with the Howard Government introducing WorkChoices after never mentioning anything of the sort druing the 2004 election. It is because of such inconsistencies that the Right is tainted in the current carbon tax debate.

In saying this, I fear too many in the left support the carbon tax either consciously or subconsciously because it is so heavily opposed by the Right. This is of course not a enough of a reason to support the tax, especially when you consider that carbon prices are often an unjust and inadequate way of dealing with climate change, and one that should be treated with great suspicion by progressives.


Carbon Pricing; a mythical solution to a very real problem

Whilst I consider the above political context important, as it will dictate the actions of many progressives that support Gillard, the truth is it is a form of pop politics; fighting between two increasingly similar sides with little direct consequence on the lives of ordinary people. The social, economic and environmental effects of a carbon price is where the real debate should be focused.

It is an oft-repeated line that a price on carbon is the most effective way of reducing emissions because of its reliance on “market mechanisms”. That is, by applying a cost to emitting carbon dioxide and other greenhouse gases, the state/market will provide an incentive to invest in measures that will reduce emissions (i.e. renewables, energy efficiency etc.) 

However, carbon pricing rather then being highly effective is in fact inherently limited in reducing emissions and falls far short of what is require to limit climate change. 

An article by James Goodman and Stuart Rosewarne from the Climate Action Research group in the Friends of the Earth publication “Chain Reaction” articulates the inherent flaws of a carbon price as follows:

  • By focusing on taxing fossil fuel usage, carbon prices fail to focus on extraction.
  • The extra cost of fossil fuels is unlikely to make it more expensive then renewables, especially solar, which currently still has high start up costs.
  • Increase energy demand is likely to counteract any increase in renewable use.
  • The costs can be passed on to consumers. Often, it will be those least able to afford the cost who will pay for the right of industries to pollute.

The carbon taxes’ ultimate failure is relying on the hidden hand of the market to push a transition to a non-polluting society. The Australia Institute (TAI) in it’s Between The Lines summary of it’s report ‘Zero Sum Game? The human dimensions to emission trading' notes

"Figures released as part of the Consumer Price Index data show that electricity prices increased by 63% over the last decade compared with 37% for the CPI as a whole.

Higher prices have not caused electricity use to fall. Figures from the Department of Environment, Water, Heritage and Arts show residential consumption of electricity increased 25%over the last decade”.

TAI follows this by saying:

”..renewable energy targets are usually seen as the poor cousin of price-based mechanism…..However, in the case of domestic electricity, the evidence is clear. Price plays a second fiddle to a wide range of other factors”

Indeed, the same is likely to  industrial energy use, and whilst price signals are ineffectual in forcing lower electricity usage, it would also be unlikely that it would force investment into renewables, especially as coal remains the cheapest power source.

Furthermore, the Government’s current plan is to move from the stable Carbon Tax to an emissions trading scheme (ETS). As bad as a carbon tax would be, it is entirely plausible that an ETS would be even worse, seperating climate policy from the public and into the hands of speculators and bankers. Indeed, the European Union’s ETS is a stellar example of this, with a volatile carbon price, incredible complexity, often manipulated and loaded with compensation to polluters that reduced incentives to reduced emissions. As a result, pre-GFC Europe reduced its carbon dioxide emissions by only 2% compared to what was predicted without the ETS. Similar results would have been experienced in Australia with the Rudd Governments Carbon Pollution Reduction Scheme (CPRS), which, as Clive Hamilton points out, would not have reduced carbon dioxide emissions below 1990 levels until 2035.

Why Carbon Pricing?

If carbon pricing is such a fundamentally ineffective and unjust way to deal with climate change, the question then becomes why bother? Why not make it the main priority to invest in renewable energy? Why not use regulation to mandate emission reductions? The reasons are complex and many but I will try and focus on the main ones.

Firstly, carbon pricing reinforces the dominant ideology within political and business circles, namely, Neoliberalism. By relying on price signals, the current tactic is to dress the policy up in technocratic language, such that the market is some infallible institution that will automatically produce the best outcomes. This type of rhetoric is designed to serve two main purposes:

  • it hides the fact that markets are hideously unequal, and tend to work in favour of those with the biggest ownership stakes
  • it seperates the forces of public control over private industry.

Secondly, carbon pricing can lead to material gains for business. By not directly challenging the right the pollute, it allows the dirty industries to continue to profit from destructive forms of production. In fact, the coal powered future has already been guaranteed by Governments, with NSW trying to subsidise coal for power stations for almost 20 years. As mentioned before, it also shifts the burden of financing the small adjustments that will occur to the ordinary peoples in the form of regressive taxation. Carbon pricing is also notoriously vulnerable to rent seeking by industries. The aforementioned EU ETS was substantially impaired by this, whilst the CPRS would not have returned money to the government until 2020

Thirdly, I believe the left is to timid to challenge the dominant thought on the subject. The reality is that to reduce emissions and prevent runaway climate change, developed countries like Australia will have to rapidly convert to renewable energy. The Zero Carbon Australia Stationary Energy report that the cost of powering Australia with 100% renewables would cost $370 billion over 10 years. Whilst this equates to a reasonable 3% of GDP over that period, the fact is forcing polluters to pay this bill would require a mass public movement. After all, the Australian public saw the extent to which the Mining Industry would go to save $60 billion over the same period of time. It is easier for many to expose the exaggerations of the Right and rely of free marker voodoo then to truly organise a meaningful movement.

Some Final Thoughts

To be completely honest, I don’t find myself completely opposed to a carbon tax. It is more transparent then an ETS, and I could hypothesise a tax which would be progressive. One based on a companies profits per carbon emission, such that only those most able to pay would. However this would not attempt to shift incentives to green technology, but rather it would act as one funding measure, to ensure working people don’t unjustly pay for the transition.

The fact remains that the only way a just transition away from a high emissions society can occur is by mandating a reduction in pollution, combined with a coordinated campaign of tariffs, subsidies, loan guarantees and direct investment into renewable energy. A poll by the Essential Media group found only 7% of people were opposed to Government assistance to the Renewable Energy sector, with 56% in favour of direct subsidies. This gap between public opinion and policy will not be corrected by “good governance”, only by mass mobilisation. This could combined with a union movement to press for a green job programs, putting people to work for a living wage doing work that will benefit the environment

The Environmental Movement has often applied the “precautionary principle” (rightly in my opinion) to issues like nuclear power and carbon sequestration. So I would like to pose this question; why not apply it too Carbon Pricing? Whilst in theory it may work, it is most likely to lead to little too no reductions in carbon emissions, as well as a transfer of wealth from public to private hands. Whilst pop politics will be played around the issue, the real question is should we play with a carbon price?

* UPDATE - Tony Abbott has since announced the Coalition will abolish the Carbon Tax if elected. I felt I should leave the comment about he’s initial timidness in the post though as I believe it was an interesting note, considering Abbott’s immediate hysteria over the issue.