Hot air will fill election year

THE carbon emissions debate has now become a competition of ideas.

THIS election year is likely to see a great deal of debate over the respective merits of the major parties' policies to address climate change. That debate will, pardon the inevitable pun, include a good amount of hot air as both sides try to spin the public towards favouring their scheme. Despite the intricacies of the debate, details could be light on the ground, with both sides fearing they will get caught up in John Hewson-style 1993 GST election complexities.

The government's policy is to legislate for a Carbon Pollution Reduction Scheme that would put a price on carbon and allow for permit trading. Businesses would be required to buy licences for every unit of production.

There would also be a national cap on emissions, which Australia would not be able to meet without purchasing overseas CO2 abatements. The 5 per cent emissions reduction target is set according to year 2000 levels.

The opposition's new policy announced on Tuesday is to establish an emissions reduction fund that would use taxpayers' money to support efforts to lower emissions, primarily through bio-sequestration (soil carbon), but also by purchasing CO2 abatements from businesses that manage to reduce their emissions. Businesses that increase emissions would be charged an as yet undisclosed penalty.

The Coalition's policy has set its 5 per cent emissions reduction target according to 1990 levels, not 2000 levels as the government has. This means that its goal is slightly harder to achieve, by some 6 million tonnes of carbon. But it also gives the Coalition the argument that if each system were able to achieve its goals, it is the Coalition's policy that would provide the more substantive cuts. Both schemes would start in 2011.

It is interesting that the great critic of neo-liberal free market fundamentalism, Kevin Rudd, is supporting a market mechanism to address climate change. In contrast, the new leader of the Liberal Party of Australia, the home of free enterprise and market-based solutions, is advocating a government slush fund to dole out money to green programs and businesses that reduce emissions.

In fairness to both leaders, Rudd would argue his market critique was directed at greed, not the market system, and Abbott would argue his new policy includes an incentive-based market mechanism for businesses. Nevertheless, some irony remains.

The politics of climate change looks as though it will hot up again this year just as it did late last year. The difference is that this time it will be a comparative fight between party models, rather than an internal dispute on the conservative side of the parliament over what its policy should be. And so far at least, Rudd is on the back foot as he is forced to try and explain complex details about an ETS with far-reaching implications.

In contrast, Abbott's scheme is simple and is not as lacking in environmental credibility as the government expected it to be. His challenge will be to convince the public (and many media commentators as well) that simply opposing Rudd's mechanism for dealing with climate change does not amount to climate-change scepticism.

Improved opinion polling for the opposition since Abbott took over the leadership and scrapped support for the government's ETS will ensure Coalition guns remain aimed at the other side of the chamber rather than each other. But that could change if Abbott's polling numbers fall away, as Malcolm Turnbull's did.

That Abbott is prepared to use $3.2 billion over the first four years to fund his climate change solution strategy (Rudd's ETS will cost $3.7bn for the same period), when he is on the record as having described climate change as absolute crap, demonstrates how politically crucial it is for the alternative government to look like it has a plan to address climate change.

That Rudd is prepared to put his faith in a market system to help address the greatest moral challenge of our generation - as he once called climate change - speaks volumes for his faith in the ETS, which will soon be rejected by parliament for a third time.

The task for both leaders in this election year will be to sell their schemes to a public interested in climate change action, albeit decreasingly so since the failure of the Copenhagen conference.

Despite interest in climate change action, most voters remain in the dark about how to achieve it, even after 10 years of debate on the subject. That means a scare campaign by both sides of politics about each other's policy is well and truly in the offing. At the heart of the new Coalition policy (it is worth noting this is truly a Coalition policy: support for the government's ETS last year was only ever considered by Liberals) for an Emissions Reduction Fund is the plan to support up to 85 million tonnes of CO2 abatements per annum through soil carbon by 2020. To achieve the 5 per cent reduction target the Coalition estimates it needs to support 140 million tonnes of abatements per annum overall. This makes soil carbon a significant 61 per cent of the Coalition's overall target strategy. The remainder is likely to be filled mostly by CO2 abatements purchased from businesses that have found a way to reduce their emissions. It is the setting of that price that creates something of a market mechanism.

The fund includes a range of other ways to meet the emissions reduction target by 2020, such as planting more trees (20 million of them) and supporting research into renewable energy. But these are essentially insurance policies in case the twin pillars for meeting the target fall short of the goals that have been set.

Importantly, the Coalition's system has no reliance on the purchase of overseas carbon abatements, as does the government's scheme. It is from this footing that the Coalition will argue Rudd's scheme, unlike its own, requires global agreement to be effective.

According to the Coalition's 30-page policy document, it has received submissions from farmers that support the potential for a minimum of 150 million tonnes of CO2 to be captured in soil carbons by 2020. But the detail as to how has not been released and the veracity of the claims is questionable.

This will form part of the government's assault on the new Coalition policy, that it is not credible and fits within a script for dangerous economic management by an opposition not qualified to run the economy.

In the Liberal partyroom on Tuesday former leader Turnbull described the Abbott plan as unsustainable in the long term. He is right. The Coalition policy has a good chance of achieving the 2020 targets it has set, but what happens after that is unclear. Without a price on carbon there are no guarantees businesses will choose to reduce emissions and take advantage of government financial offers if they do.

But Abbott will be unapologetic about this as he campaigns for election. His scheme has two purposes. The first is to achieve the 5 per cent emissions target the Coalition had previously committed itself to. The second is to buy Australia time, while we wait and see what the rest of the world does; to see what technological developments in areas such algal synthesis, renewable energy and clean coal can achieve; and perhaps even to see whether the whole concept of climate change remains credible in the long term (don't expect Abbott to shout this final point from the rafters).

However, if the consensus of the majority of scientific opinion is correct and climate change is real and does require increasing global action, Abbott's scheme will need to be significantly improved in the years ahead, if not scrapped outright and replaced. This could be costly for business down the track, but the fact that it would be down the track removes the political imperative to worry about it.

The Coalition's new policy therefore means that if we don't belatedly move to an ETS scheme, other policy settings will need to be adjusted at some time in the future. That may include revisiting the nuclear option for energy provision (at present electricity generation produces about 36 per cent of Australia's CO2 emissions, most of which comes from dirty coal) or cutting immigration to keep our population at levels easier to sustain for emissions targets (the Intergenerational Report has predicted that by 2050, given present settings, Australia's population will rise to over 35 million).

These are debates the government will look to draw Abbott out on as it comes to terms with his new policy. The opposition leader may wish to avoid such debates, lest it complicates his message.

In contrast, the CPRS has genuine long-term credibility as a system which would set up Australia for a world in which global trading of carbon abatements was the way to achieve global emissions reductions. The big unanswered question is: will the global community ever reach that point? The signs from Copenhagen are that it won't, not if China and the US can't agree to terms for binding emissions cuts.

In the short term, without global agreement, Rudd's policy is a difficult sell, especially as to achieve the 5 per cent target Australia would be required to purchase 46 million tonnes of abatements from overseas come 2020. That may work in a global system of cap and trade. But without one it leaves Australia exporting its wealth overseas for potentially little environmental gain. That, at least, will be the opposition's line.

The other difficulty for Rudd's CPRS is that it is now a watered-down version of what it was when it was initially put before the parliament last year. In order to try to get the Liberal Party to vote for the scheme, the government accepted a range of amendments that benefited industry (trade-exposed sectors will get free permits, over $7bn for the coal industry to help adjust) and agriculture (permanently excluded from the permits system) by way of concessions and exemptions. It nibbled away at the environmental credibility of Rudd's scheme, but because Turnbull was defeated as Liberal leader it also left Rudd without an enacted policy.

That means the next election is now a referendum on the ETS, unless the Prime Minister is prepared to make a humiliating backdown, which appears unlikely. But will the election be a double dissolution? That is the only way Rudd can be certain that in an election aftermath he would get his ETS legislation passed.

The government wants a cap-and-trade system. Central to its argument is that without a cap how can any country ensure it will reduce emissions? That sounds simple enough. But at 1400 pages, the legislation is anything but simple.

The opposition now has an alternative policy. But even in that document released on Tuesday it referred to Rudd's ETS as "a great big new tax" no fewer than 14 times, a sure sign the Coalition wants the climate change debate to be about the government's plans, not its own.