Political grenade defused by morphing into an economic debate

THE government's decision to fix a price on carbon by July next year ahead of establishing an emissions trading scheme in three to five years is designed to position Labor between the Coalition on the Right and the Greens on the Left.

The approach is also a deliberate attempt to turn the debate into an economic one, so that climate change action is seen by voters as one part of the government's economic reform agenda. In this respect business support will be crucial, but before business commits it will need to see more details than are presently available.

Yesterday's announcement presents an immediate challenge for the opposition as well. By opposing the plan it risks feeding into the perception that Tony Abbott is too negative, only certain of what he opposes rather than what he supports.

It also has the potential to bring Coalition disunity on climate change action back to the fore, as it did at the end of 2009, when Malcolm Turnbull lost his leadership because he refused to back down on his commitment to back the government's ETS legislation.

The politics of climate change require Labor to capture the middle ground: showing that it is more serious about addressing climate change than the conservatives are but in a way which conservatively avoids the pitfalls of radicalising the need for action.

Kevin Rudd's problem was always that he rhetorically overstated his case, describing climate change as "the greatest moral and economic challenge of our time". , Yesterday's press release on the government's intentions was more measured: "This is an essential economic reform, and it is the right thing to do."

Julia Gillard will rightly be dogged by her election campaign commitment that "there will be no carbon tax under the government I lead". And Abbott's "great big new tax" line will be used to condemn yesterday's announcement. These twin realities are sure to turn the carbon tax debate into one of the most fiery issues of 2011.

The government will be hoping cautious action on climate change wins back the support of younger voters who supported the Kevin 07 campaign but deserted Labor in 2010. Such voters won't have the same hopes for Prime Minister Gillard that they had for prime minister Rudd, but all Labor needs them to do is preference the government above the opposition.

The main political target of the two-step move towards an ETS is swinging voters in the Queensland electorates Labor lost last year, either by neutralising the issue or better still wedging the opposition. These voters aren't climate change activists, far from it, but Labor strategists believe they are willing to embrace limited action so long as it doesn't significantly affect their daily lives.

By incrementally moving to an ETS by first putting a low fixed price on carbon with significant compensation for households the government hopes to hit three distinct targets: appear economically cautious, environmentally conscious and not frighten mainstream voters in key seats. It's a difficult balancing act but the only one Labor realistically had open to it.