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Turnbull on ETS

Malcolm Turnbull’s statement on the proposed ETS has to be partly understood as a political act seeking to encourage anti-science fruitcakes in the Coalition to learn to live with an ETS.  It is mainly seeking to address competitiveness concerns which can be best addressed short-term by emphasising that the tax base is ‘energy consumption’ with a switch toward ‘production’ based taxes further down the track.

Malcolm’s proposals are close to endorsing Labor’s ETS and I have sympathy for his attempt to support the government on this one.

I have already indicated to Malcolm that he faces another constraint in relation to the ETS. Some Coalition supporters (e.g. me) will cease their support and help to consign the party to historical irrelevancy if it does not support a comprehensive and effective ETS. It would have been better if the Liberal Party had devoted its efforts to strengthening the ETS rather than as has sometimes seen to be the case – to sabotage it. Perhaps this message should be communicated to the real fruitcakes of Australian politics – Barnaby Joyce, John Williams and Wilson Tuckey.

This is how I respond to Malcolm’s arguments. I mainly ignore the political issues. These can be clearly seen in Turnbull’s attempts to diffuse ‘carbon leakage’ concerns that are the basis for opposition within his own party to the ETS.

  1. An ETS should offer no less protection for local industry than a US ETS as in the Waxman Markey Bill (WMB), approved by the House of Representatives but yet to pass the Senate. The final legislation may be different from WMB.

Response: The WMB may be different. Malcolm is partially reviving the anti-unilateralist position – we won’t do anything until others do. This is what stopped George Bush and John Howard from ratifying Kyoto. One can argue that Australia’s position should reflect the seriousness of climate change impacts irrespective of what the US does. Exporters should be exempt from carbon charges on a temporary basis as in the current WMB but should eventually be charged.

BTW Malcolm hasn’t said anything about imports or, for example, border tax adjustments. The issues of importer competitiveness here are also important.

2. There must be a regular review by an expert independent body, to ensure that the Australian ETS does not materially disadvantage Australian relative to American industries. The legislation must bind the Government to correct any disadvantage identified by the review process.

Response:  In the medium term industry should feel pressure and move from   carbon-based fuels. The idea is to apply pricing pressure to induce behavioural change. The difficulty with Malcolm’s proposal is that it leaves open  possibilities for endless interest group bargaining that already seems to have captured the Rudd Government.  Better to exempt carbon-intensive exports now and fade out exemptions through time in a set, non-negotiable, way.

3. To limit carbon leakages exporters should be on a level playing field with the US and other economies and should therefore receive full compensation for higher energy costs until the bulk of their competitors face a similar carbon cost.

Response: Exports should be exempt not industry generally and (as above) these exemptions should fade over time. There are only a few industries with significant carbon leakage issues. Protection of these few industries should be specific – exemptions should not be broad-based.

4. Fugitive methane emissions from coal mining should be treated in the same way as they are in the US and Europe.

Response: These emissions should be taxed in relation to their share of home consumption.

5. As in the WM agricultural emissions should be excluded from the ETS and agricultural offsets included. Australia’s greatest near term potential of reducing its CO2 emissions are to be found in the better management of its landscape.

Response: A complex issue. Eventually agricultural emissions related to Australian consumption of emissions from agriculture should be brought into the ETS if they can be. Agree there are cheap, efficient sequestration options in agriculture.

6. The scheme must ensure that general increases in electricity prices are no greater than comparable countries to minimise the impact on all trade exposed industries.

Response: Domestically consumed electricity that is carbon-based should be charged.  Households should be compensated if charges deliver revenue to governments in terms of lower income or other taxes. We should build up human and skill capabilities for nuclear and renewable technologies (both!) that will move the economy away from carbon-based electricity.

7. Electricity generators should be fairly and adequately compensated for loss of asset value to ensure capacity to invest in new abatement technology and to fund maintenance of existing facilities for energy security purposes.

Response. Disagree, compensation is unnecessary. Exporters using carbon-based electricity can receive temporary compensation but there is no need to compensate producers who pass most costs onto local consumers and producers who supply primarily the local market.

8. Effective incentives and/or credits must be established to capture the substantial abatement opportunities offered by energy efficiency, especially in buildings.

Response: Agree – technical improvements should be encouraged with subsidies as should relevant R&D.

9. There must be adequate incentives for voluntary action which can be added to Australia’s 2020 target.

Response: Agree, answered in 8.

11 comments to Turnbull on ETS

  • […] original post here: Harry Clarke » Turnbull on ETS Share and […]

  • conrad

    Until the Liberals actually manage to get some sort of coherent policy on things like this, I reckon they’re doomed. They just look like a bunch of fools.

  • Uncle Milton

    Harry, with respect, there are very few coalition supporters who think you like about climate change. The vast majority, I suspect, think that anything that greenies and lefties think is true must be definition be false. That is certainly the position taken by virtually all coalition-supporting media commentators.

    Of course you are right that it is a nonsense to try insulate all industries from structural change, when the whole point of the exercise is to change the relative price of carbon to move the economy away from more carbon-intensive industries and towards less carbon-intensive industries.

    This debate maps one-for-one with the debates a generation ago about tariff reductions. Despite superficial appearances, nothing about economic policy debates ever really changes.

  • hc

    I think that is a bit exaggerated Uncle Milton. I think Turnbull for one is committed to deal with climate change. But irrespective of how the balance goes I think that unless the Liberals change their attitudes on issues such as this they are, as Conrad says, doomed. New parties will emerge on the conservative side of politics and that will be a good thing.

    In some respects the Greens and the Left have a reciprocal hatred of the Coalition which is symmetrically unhealthy. The greens should pursue a green agenda but not be pathologically opposed to markets. Generally they should see economic rationalism as supporting their causes. I nbelieve it is so.

    The Whitlam 25% tariff cut amazed me and, in those days, I was a Labor supporter.

    BTW the Whitlam move shows that logic can win in politics.

  • derrida derider

    Turnbull is in an impossible position here. That’s what happens when you’re in a commonsense minority while the majority of your party room has gone barking mad. If I was him I’d seriously consider resignation over this; while it’s the honest and courageous course it may also serve his ambitions better in the long run.

    Rudd has used the issue as a blatant wedge, in the manner of John Howard, and will reap the political dividends. But it’s frustrating for those of us who would, given the stakes, have much preferred a decent policy outcome over partisan advantage, even if that advantage lies with the party we prefer. Climate change is too important to play these sort of games with.

  • Uncle Milton

    Turnbull probably is committed to dealing with climate change, but his Party is not, and he does not have the authority to carry his Party. How can he possibly deal himself in to doing a deal with the government when his own party room doesn’t think there is a problem to be dealt with in the first place? Tony Abbott just today was reported as saying he doesn’t believe the science. On what possible rational basis could he make this statement? There is none. It’s just a gut reaction the (unwashed, unhinged, inner city) greenies.

    And what possible incentive does Rudd have to deal with Turnbull? If Rudd deals, he saves Turnbull’s leadership. If Rudd plays hardball, either Turnbull caves (which would immediately bring on a leadership challenge from the Right) or Turnbull resists, which would lead to a double dissolution that Labor would win handsomely (Abbott’s analysis, not mine). Turnbull is toast either way.

  • Harry: I am intrigued that you have yet to post or respond to my original posting. In case your found it too abrasive, I have sanitised it a bit, and I would still be glad if you would explain to me why it makes sense for the world to reduce anthropogenic carbon dioxide emissions by 2050 by the amounts proposed by the G8, by 80 per cent of 2000 levels for developed countries, and 60 per cent globally. The Government sees the ETS as the first step to Australia meeting the G8’s proposed targets for adoption at Copenhagen in December. That means global emissions should by 2050 and forever after be no more than 3.3 GtC, which is 40 per cent of baseline emissions in 2000, which were 8.16 billion tonnes of carbon (GtC).
    If the Copenhagen target is achieved, it means that global anthropogenic CO2 emissions will by 2050 be less than the current annual uplift of emissions by the global biota (mostly oceanic and land plants) which was 5.3 GtC in July 2006-June 2007 (www.globalcarbonproject.org, funny that Raupach & Le Quere do not put up post-June 2007 data, surely not because it demolishes Raupach & Canadell’s claims of “weakening” if not “saturated” biota sinks, perish the thought!) This annual uplift of CO2 by plant life manifests itself in the annual increase in global forestry, fish and food crop production reported by the FAO (as well as in the still on-going growth of corals in the GBR), and it has accounted for no less than 57 per cent of total emissions between 1958 and 2008.
    None of the IPCC’s scientists, including its Australian contributors like Pep Canadell and Mike Raupach at CSIRO and Will Steffen at ANU, has explained why the world should reduce emissions to 40 per cent of the 2000 level when uplifts average 57 per cent of ongoing post-2000 emissions. Steffen presides over the ANU’s Climate Change Institute, which steadfastly refuses either to admit that the uplifts are growing (from 2.3 GtC in 1959-60 to about 6 GtC now) or to inform us what the impact of reducing emissions to below the uplift rate will be on world food supply, and neither featured in the Open Day’s Lecture Programme. See for example the Synthesis Report of the Copenhagen gathering in March, written by Steffen et al which has about 40 references to food production being jeopardised by warming, revised July 2009, available at http://www.anu.edu/climatechange), and not a single reference to the positive effects of known increases in CO2 emissions leading to 57% uptakes through NPP to the global biota which have constantly been shown to outweigh negative impacts of all but extreme warming (e.g. Norby & Luo 2004).
    There are other scientists who are aware that the “partial” atmospheric pressure of CO2 plays a crucial role in plant growth, and that cutting emissions will reduce that pressure with intolerable consequences for global food production and living standards – see Lloyd and Farquhar, various.
    Therefore, Harry, please explain (1) why it will be a Good Thing to reduce emissions to below the current average uptake rate of 57% of emissions., and (2) why you cannot see that since biotic uptakes already regularly (at 57% on average over the ENSO cycle) virtually achieve the G8 target of 60% cut in gross emissions, only a small increase in farm yields across the globe would achieve the full target? For example it would be much cheaper (compared to CCS and the like) to raise African cereal yields to North American norms, and that would be enough to bring uplifts to more than 60% of emissions.
    Once again Harry, please explain why you and the economics profession have never grasped – and are not prepared to consider papers showing this – that ALL the IPCC, Stern, Garnaut et al projections of increases in atmospheric CO2 in this century are based on the neo-Malthusian Wigley-Enting-Canadell assumption that the global biota is or very soon will be totally “saturated” with CO2 If they are right not a single extra tomato or rose in your garden Harry will ever grow, let alone new trees on your favourite golf courses. The Canadell claim of impending “saturation” of both oceanic and land sinks has to be the most sublime nonsense ever to have been perpetrated by climate scientists, ignoring as it does all evidence to the contrary – and common sense. The oceans already store close 4,000 GtC, so the annual increase of around 2 GtC is hardly alarming, and the land biota mass has increased by around 150 GtC since 1958 with no evident untoward effects or any evidence of slackening. Canadell et al PNAS 2007 simply cooked their Fig.2 A – just try getting that upward AF line from their own data at http://www.globalcarbonproject.org, I bet you cannot.
    Cheers

    Tim

  • hc

    I didn’t delete anything Tim and I checked – it is not in my spam queue. I have no idea what happened to your earlier comment.

  • Thanks hc – anyway the version as posted is much better! – but I would still be glad of your replies when you have time.

  • MAGB

    Without nuclear power, any kind of ETS in Australia will simply be an Employment Termination Scheme. With India, China and Russia all refusing to do anything, cutting CO2 is totally pointless. There are other more important issues to deal with.

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