Clash of cultures, economics and ideology

THE updated 2011 Garnaut report on climate change affirms that Australia is heading into an ideological and political conflict of rare intensity with Gillard Labor sure to embrace the justification for pricing carbon that Ross Garnaut outlines.

Garnaut repudiates every basis on which Tony Abbott relies for his campaign against the expected multi-party compromise to put Australia on the historic path to a carbon price. At the same time this report seeks to assist Labor bridge the gulf with the Greens and revive the case for pricing carbon with the Australian people.

Reading Garnaut's report, the chasm dividing the Labor government and the Coalition opposition only becomes sharper. This is a conflict over the science, the scale of global action, Australia's "fair share" of mitigation and the method - Labor's market mechanism v Abbott's direct action. It constitutes a clash of culture, economics and ideology with huge consequences for Australia.

Garnaut rejects the political view that Gillard Labor is "weak and lacks long time horizons" and finds instead that it is cast in heroic mode and "has taken on the most difficult and long-dated policy reform that has ever been attempted". He brands part of the business campaign against Labor's scheme as evidence of intellectual failure and a reversion to spoiling and special interest pleading that once corrupted our public policy. Garnaut targets a range of business leaders, notably the chief of the Business Council of Australia, Graham Bradley, as part of a "new generation" that has reverted to "old type".

He says it would be a "mistake" to confuse the cost pressures arising from the resources boom that will result in job and investment losses in a range of industry sectors with the separate issue of pricing carbon that will have a much lesser impact.

Warning that Australia is now "in the middle of a great struggle", Garnaut says there is "no reason" why carbon pricing should be a partisan divide in Australia. Assaulting Abbott-dominated Australian conservatism, Garnaut says that avoiding dangerous climate change by a market-based mechanism "fits naturally within the conservative tradition".

"It may be rational for the radical to risk the institutions of human civilisation in a throw of the climate change dice, just as Lenin saw merit in inflation in the capitalist countries," Garnaut says. But it is "strange for the conservative to embrace such risk".

Not even Labor has found such language to strike at Abbott, though Garnaut avoids naming him. This entire report, by implication, involves an intellectual repudiation of Abbott's framework. Garnaut highlights conservative governments that have acted against global warming in Germany, Britain, France and South Korea, and points out that in the US "the most effective political leadership on climate change has come from a Republican governor of California and a Republican mayor of New York".

Once the scheme is legislated, he argues, the obligation on the conservative side should be to uphold it.

Garnaut believes Australia is now at a crossroads. He sees the current battle as involving not just carbon but reviving the lost momentum of the post-1983 reform era that is pivotal for Australia's future. He dates the end of the reform era with John Howard's GST-led tax package with its "overcompensation".

He argues the deeper significance of carbon pricing is about "breaking this great Australian complacency of the early 21st century", which has seen the demise of productivity growth.

Garnaut's conclusion is unmistakable - Gillard is advancing the national interest while Abbott is reviving a regressive past of sectional interests.

He says any 2011 failure to legislate the scheme will not end the debate: "It might, however, end the possibility of action at relatively low cost."

Garnaut predicts that inaction by Australia will invite "critical" trade retaliation against us by other nations. On the science, Garnaut insists there has been a firming of evidence in the mere three years since his 2008 report. As a consequence, he has shifted from believing the science right "on a balance of probability" to "beyond reasonable doubt".

His report is most contentious in its sustained optimism that the 2009 failure at Copenhagen has led to a "breakthrough new agreement" based on voluntary pledges for mitigation targets instead of Kyoto-type legal commitments. Such pledges seek to limit warning to below 2C, and, Garnaut argues, voluntary non-binding commitments have encouraged nations to even "greater ambition" in emissions reduction efforts.

He concludes the world "is on its way towards substantially reducing emissions growth". Garnaut argues that half a billion people are covered by the EU's trading scheme, that China's actions constitute "by far the largest contribution to reducing global emissions below what they would have been" and that senior US officials report its minus 17 per cent emissions reduction target "will be met" despite the absence of a carbon price.

Garnaut mocks the idea that Australia is moving ahead of others and brands this aspect of the current debate as "extraordinary". He says: "When you next hear someone say that he is worried that Australia might get ahead of the rest of the world in reducing greenhouse gases, take him by the hand and reassure him that he has no reason for fear."

Other nations are "already too far ahead" and Australia's risk, contrary to the popular debate, is being "a drag on the global mitigation effort". The carbon price, however, gives Australia the chance to catch up with other developed nations and reduce emissions at lower cost. He backs an initial price of $26 a tonne as consistent with Australia's bipartisan 5 per cent reduction target at 2020 and judges that by 2015 the shift can be effected to a floating price.

With Labor and the Greens split over future targets that will determine the future carbon price Garnaut seeks, in effect, to find a solution by removing this power from the political system. He proposes an independent committee (Reserve Bank style) to advise on future targets with government being able to override such independent view only by making a statement of its reasons to parliament. He says future targets should reflect the "weighted average" of other developed nations.

The government will decide on more generous industry assistance than proposed by Garnaut. He wants an independent agency (similar to the Productivity Commission) to advise on such assistance and he argues for full compensation for low and middle-income earners for the scheme's price effects.

In summary, Garnaut argues that events in both the science and global pledges have "strengthened the national interest cases for a stronger mitigation effort" from Australia. His report will give sustenance to the multi-party committee but most of his argument will be rejected by the Coalition.