Both sides fudge climate debate

IN a political version of climate control, neither of the main parties is using the most compelling rationale for their respective climate change policies. They are holding back on their best long-term arguments for fear of losing the contest in the here and now.

Making a coherent case for either the Labor-Greens or Liberal-Nationals approach depends on how you assess the future of global action on climate change in the next 10 to 20 years. The present debate is stymied by the focus on Australia's bipartisan commitment to reduce our nation's carbon emissions by 5 per cent (from 2000 levels) by 2020.

This target is Australia's diplomatic downpayment on a post-Kyoto international agreement that still seems a long way off.

It is frightening to think about the implications of deeper action on climate change, especially the 80 per cent reduction by 2050 that Julia Gillard surprisingly adopted yesterday.

Our 5 per cent 2020 target requires a cut in emissions of about 160 million tonnes of carbon dioxide a year from "business as usual". It is the equivalent of shutting down one coal-fired power station such as Hazelwood in Victoria every year (without taking into account any emissions to replace that power) or converting two large coal-fired stations each year to gas. In reality it is likely to be done through a series of smaller activities, including energy efficiency and soil carbon measures, but these examples demonstrate the dimensions of the task.

Tony Abbott's direct action plan - his policy for government to directly purchase or subsidise the least cost abatement - is capable of handling this 160 million tonne task at a reasonable cost during the next decade (peaking at $3.7 billion annually at the carbon tax starting price of $23).

If you believe it is wise to wait for the climate science to become more definitive or to see if there will be concerted global action to reduce emissions, then direct action provides an interim scheme. It allows Australia to get a start and meet the 2020 target but without imposing a large and permanent restructuring on the economy and without impeding our export industries or reducing our standard of living.

Obviously, if the science downgrades the forecast problems, direct action can be dropped. Or if the rest of the world continues to be recalcitrant about taking action, Australia may halt direct action and start spending, instead, on adaptation.

But if concerted global action results in widespread mandatory targets and viable international emissions trading, we can implement an emissions trading scheme whenever we like. We will have the benefit of learning from what other countries are doing. And we would then, presumably, implement our scheme in a climate of political bipartisanship.

This is a compelling argument based on caution and common sense. Perhaps it would be better to do nothing while we wait. But this plan begins limited abatement while we wait to see whether the world decides to price carbon.

The Coalition tends to avoid this argument because it doesn't want to be accused of doubting the science or of planning to drop direct action in the future. And, most importantly, it doesn't want to concede that if the world does commit to large-scale, long-term emissions reductions, trading schemes will provide the most effective mechanism.

This leads us to what logic demands should be Labor's strongest argument.

The carbon tax, morphing into a trading scheme, is a lot of effort for a 5 per cent cut in emissions. It raises $24bn in the first three years, requires a new bureaucracy, extensive taxation and welfare churn to pay household compensation, and a range of industry exclusions, inclusions, permits, assistance and compensation. It will create permanent property rights over carbon permits, see the establishment of a new trading market that will be susceptible to rorting, and create compliance and cost pressures for business.

All this, just to do what the Coalition's direct plan could handle: abating 160 million tonnes. And all the while the rest of the world may do very little. It is hard to argue this is worth the effort.

Labor's most compelling argument for reform is that this is just the start. The real plan is to increase our emissions reductions targets to 20 per cent, 50 per cent and then to Gillard's 80 per cent target for 2050.

If this is what you believe needs to happen and if you think the world will take that action, Labor's scheme comes into its own. The trading system, running as an integrated part of the national economy, can be ratcheted up to deliver the required carbon abatement at the lowest prices in the most efficient manner, as decided by the emissions trading market, which will operate in concert with international markets.

Under the Coalition's direct action plan these increased targets would see a big growth in government expenditure, which would have to be raised through taxation.

Instead of an achievable government program to buy 160 million tonnes of annual abatement, the direct action plan morphs into an on-budget government behemoth. A target of 80 per cent of 2000 levels by 2050 would mean abatement of more than a billion tonnes, at least $25bn annually at today's starting price or, as economists expect, perhaps five times higher as the carbon price escalates.

If global carbon reductions reach these levels (one of those big ifs), direct action will never do.

So Labor's strongest argument is that its plan is a large reform that is worthwhile because together with the rest of the world we will be cutting much deeper than 5 per cent. Australia will make deeper cuts and, supposedly, help to save the planet.

Yet the Prime Minister does not make this argument prominently. She doesn't want to frighten voters and exacerbate the Coalition's cost of living scare campaign. The government talks about the economic advantages of being an early mover but avoids discussing the ramifications of making greater reductions. Deeper cuts mean higher costs. And already the Greens are pushing Labor to talk about deeper cuts, sooner.

The numbers involved in delivering the 80 per cent cut are difficult to comprehend. For Labor, discretion is the better part of valour when it comes to discussing cuts beyond the 5 per cent target. This leaves Abbott with an easy proposition: why impose a new tax and a big change to the economy to do what he can achieve with direct action? His position almost dares Labor to talk about the implications of its deeper cuts.