Error to stray from Howard's way

OPPOSITION Leader Brendan Nelson suffered a humiliating defeat yesterday because he misread the policy and politics of climate change, a serious flaw in any contemporary leader. Nelson forgot the reason Australia pledged to an emissions trading regime: it is because the longer the delay, the greater the economic penalty mitigation will impose on the Australian people and business community.

In short, there is no economic case for delay, there is no environmental case for delay. This means there is no viable political case for delay. John Howard reluctantly worked this out in late 2006. Nelson's folly was to ignore the lesson that Howard learned. Nelson should have stuck with Howard.

After the shadow cabinet yesterday, a vanquished Nelson returned to the established Coalition stance. His bid to change this policy lies in ruins.

The situation now is that if the rest of the world is slow to combat climate change, then Coalition policy is that Australia must make the adjustment on price - by having a low carbon price - not by delaying our emissions trading scheme. This was the radical switch that Nelson wanted.

One lesson from this event is that Nelson does not understand business. Australia's business community in late 2006 reached a consensus for action on climate change. It decided that inaction was the greater folly for Australia, its economy and its corporate sector. Many business leaders endorsed the view of Rupert Murdoch that "the planet deserves the benefit of the doubt".

That is, the prudent political decision is to act. This is the rock on which Ross Garnaut based his report. "Delaying now will eliminate attractive lower-cost options," Garnaut says. "Delaying now is postponing a decision." Howard as PM was pledged to a carbon pollution reduction scheme with a "no later than 2012" timetable.

One of the 2007 election myths is that of a great policy contest between Howard and Kevin Rudd over climate change. There was no such policy contest, a truth concealed by Howard's symbolic blunder in refusing to ratify the Kyoto Protocol.

The idea of emissions trading was bipartisan. The bureaucrats who drafted Howard's policy are the same as those drafting Rudd's policy. When Howard said in mid-2007 that he wanted a national, comprehensive scheme based on a long-term carbon reduction goal with Australia being a global leader, he warned that it would be foolish to ignore "accumulated scientific evidence" that mankind had contributed to global warming.

Howard's scepticism on climate change ensured that he lost the politics. In the end, however, he saw the wise path was to take out policy insurance rather than gamble the majority scientific position was wrong. The reality is that no Australian political leader can qualify or reverse the scientific debate.

The essence of emissions trading also seems to be forgotten: its justification is that trading allows for the reduction of emissions at the lowest cost to the economy.

It is important to implement it to stop Australia from sinking into large-scale policy corruption through new forms of green-justified regulation, rent-seeking and central economic planning.

The politics of emissions trading is dominated by four events.

First, emissions trading is a de facto new tax that arises from pricing carbon. The notion that you can de-carbonise the economy without pain is ludicrous. New taxes are usually unpopular. But this will be presented as a "saving your planet" tax and many people will buy such a polemic.

Others will lose their enthusiasm when they comprehend that the entire Al Gore big picture means higher energy costs when inflation is running at a 12-year peak and hurting most households.

So, the implementing leader must win the hard political debate over the new tax.

Second, those who think the economics are on the side of delay are wrong. While action now has a price, action later means the final price gets higher. As Howard learned, any leader branded a delayer will be ruined. With Newspoll showing 84per cent of people believe in climate change and 96 per cent of these believe it is partly or entirely induced by human activity, Australia is a nation of believers. Rudd's skill in the politics of symbols means he would brand any Coalition stance of delay as proof of irredeemable climate change denial.

Third, climate change requires national action but a global solution. This is a serious political problem for the Rudd Government. It is a rare public policy dilemma. It means Australian action alone cannot solve the problem: it cannot save the Barrier Reef, it cannot stop the rising oceans, it cannot halt the limitless list of other disasters supposed to occur.

This weakens the case for action. So Rudd must argue that Australia has a responsibility as a global citizen to contribute to the solution. But he is trapped in the prisoners' dilemma: each nation benefits from having the problem solved while minimising its own share of mitigation.

Nelson was playing prisoners' dilemma politics this past week. This appeal is potent and populist, with an edge into Australia's fair-go culture in the sense that Australians don't like being played for mugs.

Nelson was saying: "Let's not act until the big boys, America, China and India, act; and let's not ask Australians to make a sacrifice when most of the world isn't making this same sacrifice."

It is a tactic for Opposition that doesn't work in government. This is the reason it was so dangerous. It gave Nelson an electoral weapon but no Australian government would embrace such a policy.

It would marginalise Australia in diplomatic terms. It would court retaliatory trade action. It is inconsistent with Australia accepting and achieving its post-2012 new target in the next round of global negotiations. It overlooks Australia's role as a leader working at home and in global talks to address climate change.

The fourth event, revealed in Rudd's green paper, is that Labor lacks the nerve for a pure system of emissions trading. It is drawn to political fixes and carve-outs from the carbon price. It plans to offer 30per cent of pollution permits for free, give assistance to generators and cap the carbon price in the early phase.

The risk was highlighted by Garnaut: a hybrid system inviting endless political negotiations and compromises, weakening economic competitiveness for little gain on emissions. The moral is that implementing an emissions trading scheme is an epic task. The Opposition didn't need to change its policy to hold Rudd to account.