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.

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Hockey's truth target a long way off

PRIME Minister Julia Gillard says never mind the carbon tax: if you get the Coalition's direct action plan for tackling climate change, you'll end up paying $720 a year per household to finance it.

Rubbish, says shadow treasurer Joe Hockey: Treasury has costed our policy and endorsed its estimates of both the cost and the planned outcome to cut Australia's emissions by 2020 to 5 per cent below 2000 levels.

Who is right? Neither. In fact, the Coalition never submitted its direct action plan for costing by Treasury. It was one of the hundreds of policies it refused to have costed, arguing it could not trust Treasury because it works for the government.

In the immediate aftermath of the campaign, at the request of the three independents, Treasury costed the policies of both sides (the famous costing that estimated the Coalition had overstated its savings by $10 billion over four years). But that costing did not even mention the direct action plan.

There was no need to. It's pretty obvious that a plan to spend $3.2 billion over four years would cost $3.2 billion over four years. Treasury did not endorse the Coalition's claim that this would be enough to cut Australia's per capita emissions in 2020 by a third from their present trajectory which the 5 per cent target implies.

Quite the reverse. An undated Treasury note released in April under freedom of information laws warned that the Coalition plan as proposed presents a "significant budget risk relative to a carbon price". For the Coalition to achieve its target of cutting emissions to 5 per cent below 2000 levels, the note maker wrote, it would need to be "scaled up . . . [and would be] likely to have major fiscal costs".

But how much? When Labor talks of $720 per household, it is making it up. Like the Coalition, it makes assumptions that suit it about how much these projects would cost, how much carbon abatement they would deliver, and how much the Coalition would then have to spend to buy international permits to meet the target.

The reality is that it's impossible to say how much the Coalition's scheme would cost. Few observers believe it will deliver anything like a cut of 33 per cent in per capita emissions by 2020. They say Tony Abbott would then have to choose between spending far more than planned or scrapping the target.

If you think he would choose to honour the target, then you can make your own guess as to what he might make you pay. But I think he would scrap the target.

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Greens call for renewable energy funds boost

THE Greens are proposing that the federal government almost quadruple support for large-scale solar, geothermal and other forms of renewable energy by guaranteeing up to $5 billion of loans to new power stations.

Greens deputy leader Christine Milne said the existing program for $1.75 billion of renewable energy grants was too small to spark the full use of Australia's potential resources of "sun, wind, ocean, earth, and human ingenuity".

"If we are to make that a reality, we need a well-designed suite of policies to get us there a strategic plan, an ambitious renewable energy target, a feed-in tariff, a grants program and a loan guarantees scheme," Senator Milne said.

With banks' appetite for risky investments dried up by the global financial crisis, she said, "loan guarantees are essential to help renewable energy developers access the finance they need to build baseload power stations".

Senator Milne said a program of government guarantees to underwrite solar, geothermal and tidal power stations could trigger at least $8 billion in new investment.

She attacked Labor for ripping $370 million out of its renewable energy program to pay for its much-ridiculed cash-for-clunkers scheme. Coalition finance spokesman Andrew Robb has pledged to match Labor in cutting renewable energy funding. Labor's former climate change adviser, Ross Garnaut, warned last week that Australia must accelerate its investment in renewable energy research and development to bring on the development of new low-cost, low-emission technologies.

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A failure of leadership

LAST week, pollster Gary Morgan pulled out some old polls like, really old. In 1952, when the postwar immigration program was starting to transform Australia from an Anglo-Irish nation into a very diverse one, his dad, Roy Morgan, found 52 per cent of Australians wanted the immigration intake reduced while only 43 per cent wanted to maintain or increase it.

Did prime minister Robert Menzies change the policy to satisfy its opponents? No, he kept immigration rolling, and gradually Australians got used to it. By 1959, the Morgan poll found supporters outnumbered opponents 59-34 and, by 1969, 64-26.

Why didnt Menzies buckle? Because the Labor opposition supported the policy, which it had initiated in 1947. My father used to send the results to both Menzies and Arthur Calwell (then Labors deputy leader), Gary Morgan recalls. They were at one on this, so there was no political issue.

Fast forward to July 2010. The latest Morgan poll finds 58 per cent of Australians support the official immigration program of 170,000 or want it higher, while just 40 per cent want it lower. Yet our political leaders are doing backflips to appease them.

Why? Because Tony Abbott, after repeatedly supporting high immigration, swung his party behind a scare campaign against its own former policies. It is a failure of leadership. And its a classic demonstration of our inability to produce a bipartisan policy when it is needed.

Another, still more important, was our failure to agree on a policy to reduce carbon emissions as cheaply as possible. That means putting a price on them a carbon tax or an emissions trading scheme so business and households factor it into their investments and purchases to minimise their costs.

Instead, the latest in our dumbing down of policy is Julia Gillards plan to take $394 million out of programs to develop solar energy or carbon capture and storage so she can give $2000 each to people trading in pre-1995 cars for more fuel-efficient new ones. This, she says, will cut emissions by 1 million tonnes and save buyers $344 million in fuel costs.

Two points of basic arithmetic. First, $394 million spent to save $344 million? Thats $50 million wasted. Second, as prominent economist Warwick McKibbin points out, the scheme will cost us $394 per tonne of emissions saved. Weve been talking about carbon prices of $20 or $30 a tonne. A solar power plant or carbon capture and storage scheme would cost a fraction of this price.

Which is more dopey: this scheme or the citizens assembly Gillard proposes to debate what to do about climate change? Mmm, hard call.

I am one of millions of Australians angry that no political party at this election is offering a climate change policy that would reduce carbon emissions as quickly as possible, as cheaply as possible.

Abbott rules out ever having a carbon price, instead proposing a mix of expensive gimmicks which the Climate Institute estimates will fall far short of meeting the bipartisan target to reduce emissions to 5 per cent below 2000 levels by 2020.

Gillard says we should have a carbon price, but only when there is community consensus for it (that is, no political pain).

The Greens want to reduce emissions to 40 per cent below 1990 levels by 2020 that is, almost halving our emissions in the next 10 years. How could we do that? Wed have to shut down nearly all our power stations, find hundreds of billions of dollars to invest immediately to build energy-efficient but far more expensive ones, which would put energy-dependent industries out of business. Thats not a serious policy.

You see why we need bipartisan policies? The Garnaut report should have gone to all party leaders, who could then have thrashed out a policy they would all own, which would last for decades, and give investors the certainty to invest their money in low-emission technologies.

Back to immigration. The Howard government was the author of the high-immigration policy that Howards heirs are now campaigning against. It saw that Australia would need a lot more skilled workers, and that it was cheaper to attract migrants with the skills than to train Australians in the numbers needed. So it made three profound changes.

First, after an initial cut to the official migration program, it steadily lifted it from 67,100 to 158,630 in a decade. Second, in 2001 it made a momentous change by allowing foreign students with skills to stay here permanently if they could line up a job after graduating. And third, it introduced section 457 visas to allow businesses to bring in overseas workers in areas of skills shortages.

These were sensible moves, and won broad support. The only controversy was over rorting of section 457 visas by unscrupulous employers. But a crisis was building. Net overseas immigration which includes the movements of temporary workers and students, as well as permanent settlers, New Zealanders and Australians rose to 306,000 in the year to March 2009.

That number was swollen by rorts of student and section 457 visas, by a net 30,000 Australian workers returning home, and by a red-hot labour market.

Since then, Immigration Minister Chris Evans has ended the visa rorts, and there are fewer jobs for foreign workers to fill. Net arrivals so far this year are down 31 per cent.

Its not the immigration program thats out of control. Its Abbotts inability to distinguish between opposition and opportunism.

Immigration is one of Australias great success stories. Its a bipartisan success story. Why cant we keep it that way?

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ETS axing put budget in the black - scrapped scheme kept lid on costs

THE Rudd government would have broken its self-imposed cap on spending growth without the money it saved by scrapping its emissions trading scheme, the budget papers reveal.

Amid a patchwork of conflicting budget figures, definition changes, and the deliberate withholding of data, an Age analysis found that scrapping the ETS made the difference in the Rudd government meeting its spending cap.

The budget papers show that in 2012-13, even on the smaller of two very different sets of budget numbers, the emissions trading scheme would have added $7.1 billion to spending.

That would have lifted real spending growth in that year on the accruals measure in which all detailed budget information is given from 2 per cent to 2.9 per cent.

As the central pillar of its strategy to return the budget to balance as soon as possible, the government last year pledged to temporarily restrain growth in future outlays to 2 per cent in real terms.

But with spending on age pensions alone set to rise $3 billion in 2012-13, hospitals spending $2.1 billion, GST payments $2 billion, and infrastructure works by $1.7 billion, the government was clearly on track to blow that cap without big spending cuts.

The ETS eventually became that spending cut. When the government included the ETS in future budget estimates last year, its spending measure included the cost of free permits for electricity producers and what it called "emission-intensive trade-exposed industries". Its budget update last November said ETS spending in 2012-13 would be $11.8 billion.

A similar number was implied in a release on budget day by the Department of Climate Change and Energy Efficiency. It put the five-year saving in spending from scrapping the ETS at $30.6 billion.

But budget paper two, issued the same day, showed the saving in precisely the same period as just $18.3 billion. Sources say the difference was because it was decided that the cost of free permits by then, almost $5 billion a year should not be counted as spending.

Access Economics director Chris Richardson told a business luncheon yesterday that while the ETS was not scrapped for budgetary reasons, its abolition aided the budget.

"If they didn't get rid of the ETS, their spending would have bust the 2 per cent cap," Mr Richardson told the luncheon. "And if the ETS comes back, some spending needs to be junked to remain within its cap."

The government yesterday declined to respond. But officials noted that this year's budget papers defined the spending cap as applying to cash spending, rather than the accruals measure.

But the budget papers do not spell out the year-by-year cash savings from scrapping the ETS. Finance Minister Lindsay Tanner refused repeated requests from The Age this week to make the figures public.

Meanwhile, Tony Abbott's proposal to cut public service numbers through a two-year hiring freeze has outraged bureaucrats, who say staff reductions would affect essential services.

In his response to the budget, Mr Abbott this week said the coalition would save $4 billion by not replacing 12,000 public servants who retired or resigned. The Community and Public Sector Union's Nadine Flood said "every time someone leaves the public sector, their work stops getting done". And Andrew Podger, a former public service commissioner, warned the proposal would leave a staffing gap that would last up to a decade.


REAL GROWTH IN BUDGET SPENDING

WITH ETS WITHOUT ETS

2010-11 0.5% 0.5%

2011-12 0.3% 1.1%

2012-13 2.0% 2.9%

2013-14 1.9% 1.9%

BUDGET PAPERS

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