Gillard has no choice but to fight

JULIA Gillard is a classic conscript of history. She has no viable option but to press ahead with her carbon price policy that has triggered Labor's disastrous 30 per cent primary vote because to retreat would repeat the mistake that ruined Kevin Rudd's prime ministership.

Few leaders find themselves in such a dilemma. Gillard's supreme policy objective for 2011 confronts a potentially fatal voter response. Newspoll now shows the lowest primary vote in its history for Labor at the national level.

Yet the alternative of a tactical retreat would ruin Gillard's authority, destroy her government's credibility and betray the meaning of the September 1, 2010, agreement between the Australian Greens and the Australian Labor Party.

This climate change battle has a long way to run. Despite the twists and tactical turns under the Rudd and Gillard governments there has been one consistent principle from which Labor has not deviated: it believes pricing carbon is essential as its policy response.

Both Rudd and Gillard believe in this principle. It has been repeatedly backed by the Labor cabinet. It is the advice from the economic departments. It was Labor's policy at the 2007 election.

It was reflected in the Garnaut report, the green paper, the white paper, Rudd's carbon pollution reduction scheme, the formal Labor-Greens alliance after the 2010 election and Gillard's statements as a minority government PM. It is an article of faith for the modern ALP. While the critics of pricing carbon are mounting, the principle retains support among unions, industry and the environmental lobby.

Gillard, like Rudd before her, has now staked her prime ministership on this policy. It may be incredible but it's true. Gillard, having steered Rudd away from fighting on his CPRS in early 2010, is now in Rudd's previous position.

Many of the people demanding that Gillard retreat before the current polls are her enemies. What, pray, would they say if she obliged them? At that point they would demand her resignation or a new election. In truth, this is the real meaning of retreat. It is the reason Gillard cannot retreat. Do you think Tony Abbott has not made such calculations?

This is what makes the coming negotiations involving Labor, the Greens and the independents so fraught. Gillard's game plan is to legislate the scheme, have it begin with a modest carbon price on July 1, 2012, and trust its impact is far less than expected.

What happens if she fails to win support from the Greens or enough independents to legislate the policy? This would repeat Rudd's late 2009 failure to get his own scheme through the parliament. It would shatter Gillard's position.

At this point Abbott would say: "The Prime Minister has been repudiated by the parliament on her most important policy. She must either resign or return to the people and seek a mandate for Labor's carbon tax."

Neither option would be acceptable to Labor. Gillard, if she tried to remain in office, would face irresistible demands for an election. With the parliament deadlocked, the people must decide. If Gillard tried the disreputable course (she wouldn't) of ditching her carbon pricing principle then the Labor-Green alliance would be torn up.

In short, the carbon price issue will be resolved at the next election. Gillard's position will be stronger if she enters that election as PM with her scheme legislated rather than as a conquered PM unable to legislate, for whatever reason. Hence, she must press ahead despite the electoral cost and terrifying polls.

Labor, in fact, is plagued by history on this issue. Its problem is that Rudd didn't take his CPRS to the people in early 2010 after it was destroyed in the parliament by Abbott. It would have been a tight call. But many ALP figures think they would have won a February 2010 double dissolution that would have guaranteed the scheme.

Rudd's retreat meant the August 2010 election resolved nothing on pricing carbon. It constituted an uneasy deadlock that reflected two interim results.

First, Abbott had won the 2009-10 climate change battle over public opinion by intimidating Labor and forcing its retreat.

But, second, Labor's retreat was just tactical, with Gillard in the campaign standing by the carbon pricing principle but trying to minimise the election damage by ruling out a carbon tax.

It was the equivocal 2010 election result that drove the next move. Gillard abandoned the timidity of her campaign stance and, entering an alliance with the Greens, decided to go for the climate change jugular. Seeking to make a virtue from necessity, she aspired to mobilise her minority status to pass legislation this term to price carbon with the support of the Greens and independents.

The Labor-Greens agreement outlined in paragraph two the four principles governing this alliance, with 2 (d) being the pledge to address climate change. Under paragraph six the parties agreed that reducing carbon pollution by 2020 "will require a price on carbon".

To further this cause, it required creation of a new Climate Change Committee with representatives from the ALP, Greens, independents and Coalition (they declined involvement) to devise a carbon price policy.

It was the representatives from this committee that flanked Gillard in the PM's courtyard a fortnight ago for the announcement.

It had been obvious since last October the preferred model would be a fixed price (the de facto carbon tax) followed by transition to a flexible price and an emissions trading scheme.

In making her announcement, Gillard misjudged two immediate issues: Abbott's lethal exploitation of the policy as a broken promise; and the ability of Abbott and NSW Liberal leader Barry O'Farrell to inject the carbon tax into the state election campaign, thereby hurting Gillard en route to destroying the NSW government.

For Gillard, the alarming feature of this week's Newspoll is the structural trend. Since the 2007 election, through the 2010 election and into this week Labor is losing primary votes to the Coalition on the Right and the Greens on the Left. The crisis Labor faces is a political battle on two fronts. So far, it has singularly failed to construct a strategic response that works.

Newspoll showed Labor had lost eight percentage points of primary vote since the August 2010 poll with this going 3.4 per cent to undecided, 3.2 per cent to the Greens and 1.4 per cent to the Coalition. Of course, voters don't like a new tax. Beyond that, Labor's structural dilemma is obvious. Too often Labor looks as though it is following or accommodating the Greens. Such perception only encourages left spectrum voters to vote Green, not Labor.

On the other hand, mainstream voters, whatever their reservations about Abbott, are disenchanted enough to credit his attacks and bolster the Coalition primary vote.

The trust factor has hit Gillard with a sharp fall in her personal ratings. Her perceived broken promise comes not on a minor issue. It comes on carbon pricing, her frontline policy.

Labor optimists say the voters will get sick of Abbott's attacks. That's true. The point, however, is that Abbott's attacks are doing enduring damage to Gillard.

Labor has to reframe this debate. It needs the courage of its conviction to make this a test of climate change policy.

That demands focus on the question: who is best to manage climate change, Gillard or Abbott?

This is where comparisons with the GST are false.

With the GST, John Howard proposed and Labor opposed. With climate change, both sides are proposing. Australians believe climate change is a problem. They expect political action and, sooner or later, they will make a call.

Climate Change Minister Greg Combet sent two big signals this week. He believes Abbott's Direct Action plan is shot with holes and calls it "a subsidy allocated through a tendering process" that "provides absolutely no incentive to anyone outside those who receive the subsidy to do anything to reduce their carbon pollution". Down the track Labor must illuminate, target and destroy Abbott's plan.

Second, Combet said on ABC1's Lateline program that according to a report by Vivid Economics the effective carbon price in parts of China's economy was $14 a tonne compared with $1.68 a tonne in Australia.

What's this about? It's the coming contentious debate.

Labor has asked the Productivity Commission to calculate the carbon price equivalents of action taken by a range of nations.

The aim is to counter the argument that Australia is pricing carbon when China, India and the US have no such formal mechanism. The aim is to show that China and others have a de facto carbon price. And unless Labor can win this argument then its cause, overall, will be lost.

In a deeper sense Gillard's trouble lies in the new scepticism about climate change. It is on daily display but rarely remarked. It is not disbelief in climate change but disbelief that Gillard's carbon price can make any difference.

Australians are practical people. They connect solutions to problems. If they make sacrifices, they expect results. They are being told that pricing carbon in Australia and accepting higher power prices can make a tangible difference to the global problem.

But this proposition will need to be persuasive and, for Labor, it will be a daunting sell.