Ben Eltham | The Calm Before the Carbon Storm


The phony war is over and the battle to price carbon is about to start. The thing is, it doesn’t look like Gillard is going to announce anything too terrifying, writes Ben Eltham.

First published in New Matilda, here

So we finally have an announcement on the carbon tax. At least, we have an announcement that we will have an announcement.

According to the Prime Minister’s office, details of the carbon tax will be announced this Sunday.

“After hearing a report on the discussions of the Multi-Party Climate Change Committee, Cabinet agreed tonight that sufficient progress had been made to allow an announcement date to be set for Sunday 10 July 2011,” the Prime Ministerial press release stated.

The phony war is over, and the battle to price carbon — a defining feature of the political landscape since 2006 at least — is about to resume in earnest.

Now, finally, concrete details of the government’s scheme are starting to be announced, and they are already describing a policy outcome short of the Armageddon forecast by Tony Abbott.

Yesterday’s important announcement was that petrol would be largely exempted from the carbon tax, with some caveats for heavy transport users like trucking companies. (Big businesses will also lose a number of their current tax breaks on fuel excise). Assiduous negotiation on Tony Windsor’s behalf has also secured a series of safeguards for farmers and other rural industries, and sole traders and small businesses that run company utes and vans will be protected. In return for their agreement, the Greens have struck a deal to get the Productivity Commission to examine the whole framework of federal fuel taxes in a rigorous and comprehensive manner.

In policy terms, there is no doubt this is a step backward from the purest version of a carbon tax, which would treat all carbon pollution the same, whether it is emitted by a low-income commuter or Andrew Forrest’s corporate jet. But politically, the deal is a no brainer for a government desperate to assuage the  nerves of ordinary citizens about their household budgets. Once again, Greg Combet has shown his supple skill in the art of the deal, not only keeping Windsor, Oakeshott and the Greens on board in the Multi-Party Climate Change Committee process, but also bedding down a politically palatable petrol price announcement that Labor can now use to rebut Tony Abbott’s assaults.

As a result, the path now appears clear for a full — well, reasonably detailed, at any rate — carbon tax announcement on Sunday.

For the Government this announcement will come not a moment too soon. For months, Julia Gillard and her colleagues have drifted south in the polls while trying to sell a carbon tax that is itself a broken election promise — but with no details to sell, and no firm figures to describe. As a result, Tony Abbott and the business lobby have had a field day, running a well-orchestrated fear campaign that has convinced many voters that the carbon tax will be bad for the economy.

In fact, the level of carbon pricing the Government is likely to adopt will have almost no long-term impact on the economy, as a series of Treasury models and the real world experience of the European emissions trading scheme suggest.

Australia already has a number of carbon taxes, by the way. You probably just don’t know them by that name. Top of the list are petrol and diesel excises, which together raked in $13.2 billion in 2010-11, according to the Budget Papers.

We also have the Petroleum Resource Rent Tax, which levies a royalty on oil and gas extraction in Australian federal waters, responsible this year for $940 million.

In other words, carbon-based taxes already bring in more than the approximately $11.5 billion that Ross Garnaut has estimated a $26/tonne carbon tax will levy in its first year. Which rather puts some of the over-heated rhetoric about the destructive impact of a carbon tax into perspective, doesn’t it?

Also coming into sharper perspective are the carbon policies of the Opposition — or, rather, the lack of them. As I’ve repeatedly argued here at New Matilda, the so-called “direct action” policies of the Coalition are at best unrealistically ambitious and at worst bald-faced lies. No one doubts that pollution abatement can be purchased at taxpayer expense, for example by bribing big energy companies to shutter the vastly polluting brown coal power plants of the Latrobe Valley. But a policy in which there is no cap on pollution and no price on carbon will surely struggle to achieve a 5 per cent reduction in carbon pollution by 2020.

The closer you look at “direct action”, the sketchier it appears. Much of the policy is based on untested and scientifically dubious assertions that as much as 85 million tonnes of carbon can be locked up in Australian farmers’ soil. And because direct action relies on government spending to achieve pollution reduction, it is obviously subject to other budgetary considerations each and every year.

In other words, to pay for this uncosted policy, an Abbott government would either have to cut government spending in other areas, or raise taxes. Abbott has steadfastly refused to explain which it will be. As Tim Colebatch writes today in The Age, “Few observers believe [direct action] will deliver anything like a cut of 33 per cent in per capita emissions by 2020. They say Tony Abbott would then have to choose between spending far more than planned or scrapping the target.”

“If you think he would choose to honour the target, then you can make your own guess as to what he might make you pay,” Colebatch continued. “But I think he would scrap the target.”

Intelligent observers of federal politics like Fairfax’s Laura Tingle seem to have sniffed a change in the wind. Abbott’s small-target strategy has so far proved astonishingly successful against a government uncertain of both its tactics and its long-term philosophical beliefs. But his fixation on media stunts (like the ill-fated proposal to hold a carbon tax plebiscite) and his breathtakingly threadbare policy platforms have started to make even enthusiastic Abbott supporters uncomfortable.

Abbott’s performance on the ABC’s 7.30 last night will not have removed any of those doubts. Up against a competent interrogator in Chris Uhlmann, he struggled to articulate anything more than his usual slogans, even if there was no obvious implosion.

In contrast, the Government looked surprisingly perky yesterday in Question Time. Labor will need to claw back perhaps a dozen points in the opinion polls to regain anything like a competitive position by the time the 2013 election rolls around. But it can only take one step at a time, and the most important step of the entire year will be this Sunday’s carbon tax announcement. Labor will need to lock in behind the policy and convince its remaining supporters in the union movement and broader community to get out there and explain it to doubting voters like its political survival depends upon it.

Because it does.

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