Wednesday, October 12, 2011

Today, we start the heavy lifting on climate change

WHAT do you do when the world has a problem that can be solved only by global action but we have no global government to solve it?

Should each nation make itself pay its share of the cost, knowing that some others won't? Or should we try to shield ourselves from the pain until every other nation we want to compare ourselves with has already started the heavy lifting?

Today, after almost 20 years of debate, the House of Representatives will decide Australia's answer. Assuming no last-minute twists, assuming the Senate numbers hold, it will commit Australians to start paying their share of the global cost of reducing greenhouse gas emissions.

In effect, Australia will join Europe and New Zealand as the first countries to start the heavy lifting needed to reverse global warming. In the past century, average temperatures worldwide have risen by almost a degree most of it in the past 40 years.

Back in 1992, in Rio de Janeiro, the world's governments agreed that the risks of man-made global warming required them to find ways to reduce greenhouse gas emissions. You have to admit, we've been a bit slow to get going.

Even since 1992, global temperatures (on the rolling 10-year average) have risen by a third of a degree. Australia and other countries have tried to tackle the problem in light-handed ways. Big emitters have been required to monitor and publish their emissions. Governments of left and right have moved to ban the sale of filament light globes, limit new appliances to using 1 watt of electricity in standby mode, and to ban new electric water heaters where gas is available.

The one tough change we made was to cut the land clearing which had been one key reason for Australia's high greenhouse emissions. That reduced our emissions for a while, but they've rebounded since, and the experts say they are on track to rise 24 per cent from 2000 to 2020.

There are lots of political reasons why each party is where it is in this debate. But the main reason why Labor, the Greens and most of the independents have united to introduce a carbon tax is that the light-touch stuff is not slowing emissions enough. We need to start the heavy lifting, in the cheapest way.

Economists tell us this is the way. Start charging people for their carbon emissions, and you instantly get them thinking about how to reduce them. Put an economy-wide price on carbon and everyone has an incentive to find ways to avoid emitting carbon.

We've seen it before. When petrol prices rise, we use less petrol. With electricity prices rising, households are using less electricity. It'll be the same with carbon.

For households, Treasury forecasts, there will be very little impact on the prices of most things we buy. It will contribute marginally to higher prices in the supermarket and the department store, but far less than the GST did. Overall, Treasury estimates the impact on household budgets will be 0.7 per cent, less than a third that of the GST.

The biggest whack will be on power bills. Treasury says the tax will lift them 10 per cent. That will hurt just as the 70 per cent rise in Melbourne power bills over the past four years has hurt. If that hasn't changed your use of electricity, the carbon tax probably won't either.

But that's the aim of this tax: not so much to raise revenue, as to drive changes in the way we live. Its goal is for us to find ways of living with less. If Treasury is right, most households will actually be made better off, receiving more compensation than they pay in higher prices.

Those worse off will be the higher-income households, whom Labor assumes will be able to cope.