Keeping polluters sweet at the expense of the community sector

A recent research paper by David Richardson of the Australia Institute, “Who are the (un)intended losers from emissions trading?” (PDF 84KB), highlights yet again the way in which all aspects of climate change threaten to have a disproportionate impact on the less advantaged members of society. Not only are they more affected by the changes themselves, as I have previously argued on this site, they stand to be even more disadvantaged by the measures we take to counter those changes.

The principle behind compensation for the Carbon Pollution Reduction Scheme (CPRS) is that even if all the costs to emitters are fully passed on, there should be sufficient to compensate the final users. The pertinent question is: which groups should be compensated?

To date, the federal government has flagged reparation only to business and households. Mr Richardson’s paper considers the likely costs to the four groups that were overlooked in the Green Paper: the Commonwealth itself, state and local governments and the community sector. I am concerned here with the implications for the last group.

Using Australian Bureau of Statistics data for 2007, Richardson notes that the community sector accounts for 7 per cent of GDP, employing 884,000 people and incurring total expenses of $68.3 billion. He estimates the cost of the CPRS at between $822 million and $1.191 million, “depending on the willingness and ability of the sector to maintain the real wages of their employees”.

Put another way, the CPRS will see the cost of providing services rise between 0.9 and 1.4 per cent, “depending on the extent to which community sector workers are willing to take a real reduction in their incomes”.

Unlike business, community organisations are in no position to pass on increased costs to their “consumers”. Hence, unless donations rise proportionately with the impact of the CPRS, “services to the most vulnerable members of society will be cut unless compensation is provided by the Commonwealth”.

Probable consequences of the CPRS (from the Green Paper itself) include a 16 per cent increase in energy costs associated with water heating, space heating and air conditioning; an average increase of 0.9 per cent in food prices; and a 0.9 per cent rise in labour costs if real wages are maintained.

As Richardson says: “Australia needs emissions trading to tackle climate change, but we also need a well designed compensation package to make sure the groups who need the greatest assistance are looked after. Some of the big polluters are making a lot of noise, but our research shows that it is the community sector which is more likely to miss out on adequate compensation.”

Of the several lessons we might draw from this, the most important is that it provides an exemplary test of the seriousness with which the federal government takes its own social inclusion agenda.

To state the obvious: when it comes to lobbying government, community groups do not have the same financial and political clout as business and trade unions. Worse, the majority are directly or indirectly dependent on government funding.

This does not, however, make us supplicants. The sector is critical for the well-being of society. While reliance on government financial support may seem to put it at a structural disadvantage in comparison with business and unions, it provides essential services of a quality and at a price government itself would be quite unable to match (as demonstrated in the annual Productivity Commission Reports on the cost of government services). Government is therefore also reliant on the sector. If not exactly a relationship of equals, it is certainly one of co-dependents.

The Rudd Administration has recognised this and sought to repair the somewhat dysfunctional association that prevailed under its predecessor. It has, for example, removed the “gag clauses” in service contracts that, among other things, inhibited advocacy.