Grading The ALP’s Climate Policy

Should Gillard have introduced a carbon price before the election? There are plenty of reasons to criticise Labor’s climate policy but the timing may not have been right for such a difficult reform, argues Ian McAuley

One technique in teaching public policy is to present students with a case which puts the decision-maker in a difficult situation. The initial — and understandable — first reaction from students is to say, “She shouldn’t have allowed herself to get into such a situation”. And then the teacher responds, “Point taken, but the question is what should she do now?”

Following this system, the Prime Minister’s climate policy would have to earn at least a passing grade.

Introducing a carbon price five weeks before an election was never going to be an option for Julia Gillard — particularly when the Opposition had so clearly defined a carbon price as a “big new tax”. Yes, there is strong support for government action on climate change but the specifics of a carbon price are hard to sell — inevitably it means higher prices for gasoline, gas and electricity and these costs will flow through to all products in time.

That is not to say it cannot be done. Australian governments have driven through some very difficult reforms in recent history, such as the Hawke/Keating tariff reductions and the Howard tax changes. These reforms certainly had their opponents, and, like a carbon tax, they were subject to deceitful misrepresentation — but they didn’t ultimately incur any electoral cost for the governments introducing them.

The key thing to note here is that these reforms were introduced with good timing in relation to the electoral cycle. Research confirms that almost any change meets with initial resistance. It takes time for electorates to accept reform.

To give the Government its due, it did have a strong plan to deal with climate change before the Abbott putsch destroyed any fantasy of consensus.

It is easy in hindsight to criticise Rudd for relying on bipartisan support, but few people were saying that when Turnbull was opposition leader. There is nothing unusual about bipartisan consensus on serious issues threatening national security; in fact, what is unusual is for a party to try to undermine a government on such an issue.

It is also easy to say Rudd should have called a double dissolution election. To do so overlooks the mathematics of the Senate. Labor gained a good base in the half-Senate election of 2007, and hopes to build on this in the coming half-Senate election. In a double dissolution it would have had to re-contest the whole Senate, and thus would have run the risk of single issue or small constituent minorities holding the balance of power. Remember that in a half-Senate election, 7.7 per cent of the vote gains a quota. A double dissolution clears a few blocked bills, but it runs the risk of erratic government for a further six years.

The Government’s more serious error, however, was to announce the abandonment of its climate policy in April this year.  Political advisors can explain the reasons in terms of marginal seats, for it is clear that the costs of a carbon price will fall disproportionately on people already struggling to make ends meet, and who have already faced an 18 percent rise in electricity prices and a 9 per cent rise in gasoline prices over the last year — a point missed by some of Gillard’s critics. Those who are well-off have the means to adjust to a carbon price by investing in domestic solar power, improving their insulation, and upgrading their cars — but such options are simply not available to those trying to balance each month’s cash flows. Any government would introduce compensation packages, as the Howard Government did for the GST, but these take time to develop.

It is the marginal seat obsession, perhaps, which is responsible for such a timid approach to the issue. A hard-headed political strategist would have taken the attitude that it’s quite sensible for a party to sacrifice some seats in order to secure a net gain — but this isn’t the way politics works. No member of parliament wants to sacrifice his or her hard-won seat in order to give the party an opportunity to pick up seats elsewhere. Also, as research shows, decision-makers are influenced by loss aversion: we value what we have more than what we may gain.

So long as we have single-member electorates we can expect parties to pursue marginal seat strategies. We know these strategies don’t always work: this election would be unusual if there were not quite a few seats defying the trend, but that won’t change parties’ behaviour.

In the meantime the best hope we have for climate change is Abbott’s warning that Labor will bring in a carbon tax; he may be doing the Government a favour. The measures announced so far — connecting the grid to remote sources of renewable energy, modernising the car fleet, and supporting cleaner power stations and greener buildings — are all useful and practical interim initiatives.  In any event, even if Labor is re-elected, it will continue to face a hostile Senate until July 2011. There is no point in even trying to bring in a carbon tax earlier, particularly in light of the way the media portray a Senate rejection as a failure by the elected government.

In any event, even if Labor is re-elected, it will continue to face a hostile Senate until July 2011. There is no point in even trying to bring in a carbon tax earlier, particularly in light of the way the media portray a Senate rejection as a failure by the elected government.

The risk we face, however, is that those who are disappointed by Gillard’s policy will be so strident in their criticism that they drive voters to the Coalition, which has nothing more than a few token (and expensive) interventions to offer, and which is highly dependent on support from the National Party, which has made clear its attitude to climate change policy.

It is right that the disappointed should criticise Labor, but unless they also identify and criticise those who have so effectively blocked a response to global warming they are give Labor no room to expand their policies. Indeed, Gillard’s loudest critics run the risk of an even worse outcome: the election of a government headed by one who has described climate change as “absolute crap”.