Credibility cuts both ways on carbon

NEXT month's introduction of the carbon tax is almost upon us. At one level it will give Tony Abbott more opportunities to spruik the dire impact that it will have on the Australian economy at just the wrong time. The global financial system is wobbling.

However, it will also give the government the chance to test the Opposition Leader's inflated rhetoric about the tax. It will need to do this quickly, however, because if nervous Labor backbenchers don't see improvements in the polls (as promised) leadership speculation is likely to overshadow efforts to sell the tax and the compensation package.

Labor has a long way to go to even up the debate about the carbon tax, and it most likely will fail to do so. Its political failure started the moment Julia Gillard conceded it was a carbon tax that she was introducing. This set the tone for the narrative in the media and the public discourse more generally that she had broken her election commitment that "there will be no carbon tax under a government I lead".

That line was delivered on the eve of the 2010 election, despite numerous previous commitments to price carbon. At first glance the statements appear to be contradictory.

Technically, what will be introduced next month isn't a carbon tax at all; it is a fixed price on carbon before transitioning to a floating price under an emissions trading scheme. The model the Prime Minister is introducing is essentially the same as that which Kevin Rudd and John Howard before him had committed to introducing.

But Gillard got caught conceding that it was a carbon tax because that was the rhetoric the Greens wanted used because of their previous opposition to Rudd's ETS. It was another example of Bob Brown cleverly outmanoeuvring the Labor Party.

Privately, Labor MPs admit they never should have agreed to the terminology of a carbon tax, and no one in the government refers to it that way any more.

There are plenty of good reasons to challenge the climate change action this government is embarking on. The starting price at $23 a tonne is very high. The timing, as mentioned, is poor given the state of the global economy. And Gillard and Wayne Swan were the key people who convinced Rudd to dump his ETS back in 2009, which stretches the credibility of claims that the leadership team is passionate about climate change action.

But calling the PM a liar for her pre-election pledge because of the action now being taken is plainly wrong, even if conceding the backflip maximised the credibility of the accusation.

Whatever the difficulties Labor has with credibility on pricing carbon, the lack of credibility in Abbott's scare campaign deserves unpicking. He has used the past 18 months to traverse the nation making wildly inflated claims about the impact it will have. Even though the opposition had ample material to work with by sticking to the facts, Abbott has put the credibility of his campaign against the carbon tax in jeopardy with some of the claims he has made, and the government is on to it.

For example, last June Abbott declared: "Let there be no doubt about the intentions of the authors of this carbon tax legislation. They want to kill manufacturing industry in this country."

Those authors, the federal government, have, in fact, put in place a multi-billion-dollar package to prop up the manufacturing industry which the Coalition opposed.

While the carbon price will certainly hit the manufacturing sector, given Labor's union links and the PM's reliance on the support of union leaders for her leadership, self-interest dictated that government support for the sector would be forthcoming.

But Abbott's remarks continued to inflate. On June 9 last year he boldly declared: "A carbon tax ultimately means death to the coal industry." Never mind that Treasury modelling shows that between now and 2050 output by the Australian coal industry is expected to double, and there is at present nearly $100 billion of investment in the pipeline.

These sort of overstatements by Abbott have continued this year. He has called almost daily doorstops at businesses across the country predicting their demise once the carbon price is operational. You can bet Labor will be revisiting those same businesses to see how they are travelling in the months ahead.

Then there is the small matter of the alternative scheme Abbott is putting forward to reduce emissions by 5 per cent by 2020. It's easy to forget that both main parties have the same target.

Abbott claims that his direct-action plan will be much cheaper, but that can be the case only if the Coalition doesn't expect to achieve the target (which privately pretty well every Coalition MP, except climate spokesman Greg Hunt, expects to happen).

You can't rely on a scheme predicated on government handouts, and panned by market economists as inefficient, and expect to achieve climate change action more efficiently than pricing carbon, whatever the faults with Gillard's ETS model. Abbott's political success has been in capturing the support of voters sceptical about climate change at the same time as pledging to achieve the cuts the government is aiming for.

The Coalition will also benefit politically from rising electricity prices, even though they have little to do with carbon pricing and everything to do the the bipartisan 20 per cent Renewable Energy Target for 2020.

Nationals senator Ron Boswell told the joint Coalition partyroom this week that it should consider dumping the target because of the impact on energy prices of trying to achieve it.

It kind of undermines Abbott's efforts to neatly couple significant energy price rises to the carbon tax, yet if he does move to dump the commitment to the RET the Coalition may face unwanted attacks on its environmental credibility and it will undermine contracts businesses have to meet renewable energy targets.

Ultimately, Labor is unlikely to succeed in calling Abbott to account for his overblown rhetoric on the carbon price, and the failures of his alternative plan. Anger at the government over a raft of issues and a misunderstanding of Gillard's own making look like being entrenched.

Peter van Onselen is a Winthrop professor at the University of Western Australia.