Will the Emissions Trading Scheme be our next Republic?

Last month, John Warhurst, the senior deputy chairman of the Australian Republican Movement, admitted that the odds were against Australia becoming a Republic "in the short to medium term”, even though opinion polls consistently show that a majority of Australians support the republican cause. Kevin Rudd subsequently confirmed that the Republic was “not a priority”. 

The stalled Republic is a good example of what can go wrong when both left and right combine, from different perspectives, to stop a reform going through. In the case of the Republic, sections of the left disagreed with the specific constitutional model put to a Referendum in 1999 because they wanted an elected, rather than an appointed, Australian President. Meanwhile the right objected because they wanted to keep a constitutional monarchy. The result of this unholy alliance was that the Referendum was defeated.

It is now ten years later and we still don’t have a Republic. However, we do have another issue on which left and right are combining to oppose a particular model, namely the Rudd Government’s emissions trading scheme. Could we be facing a similarly disastrous outcome?

The Rudd Government was elected partly on the basis of its commitment to tackle climate change by introducing an emissions trading scheme. Yet both the Greens and the Liberals have stated that they may oppose passing the government’s scheme through the Senate. Indeed, they combined to draw up the terms of reference for the Senate Committee that would examine climate change policy and the government’s emissions trading scheme (the Carbon Pollution Reduction Scheme). Of course the grounds for their joint opposition to the Rudd Government scheme are totally different. The Greens think the proposed carbon reductions are pathetically inadequate and the current scheme simply rewards large polluters. The Liberals think that the scheme is premature, will cripple the Australian economy and impose unacceptable costs on trade-exposed industries that are emissions-intensive.

Needless to say, there are also fundamental philosophical differences underlying the Liberal and Green approaches. Malcolm Turnbull believes that Labor’s scheme interferes in the market too much and prefers measures such as embedding carbon in bio-char, mass tree planting and more energy efficient buildings. It is noticeable that, as with explaining the causes of the global financial crisis, Turnbull is loathe to identify market failure as a key issue in climate change, despite Sir Nicholas Stern being adamant that climate change represented the “greatest market failure the world has seen” (PDF 142KB).

By contrast, Christine Milne, who cut her political teeth in Tasmania where companies such as Gunns were seen to have excessive influence over both Liberal and Labor governments, seems convinced that the Rudd Government is simply selling out to big business.

There is much about the Labor scheme that can be legitimately questioned. Nonetheless, it does explicitly attempt to address issues of market failure. Basically, the Labor scheme uses government intervention to transform existing markets so that polluting companies have incentives to reduce or offset carbon emissions. Alternative industries, engaged in carbon trading, are encouraged. Underlying the scheme is an avowedly radical attempt to change corporate behaviour (PDF 43KB). The initial targets are only intended to be a start, in a transition period, with promises that the scheme will become much tougher in future. Labor argues that an ETS is preferable to other schemes, such as a carbon tax, that would involve imprecise guestimates of how to obtain specific emission reductions.

While many Australians (including the current author) may be disappointed regarding the currently low level of emission cuts targeted and the high degree of compensation offered, there are obvious explanations as to why this has happened. Those explanations are far less sinister than the Greens sometimes imply. The Rudd Government is attempting to manage the transition from being a carbon-intensive economy to a low pollution one, in the middle of a major global capitalist financial crisis that is the worst since the 1930s Depression.

Any Labor government in that situation is going to be concerned about the implications for jobs and the possibilities of capital flight overseas. Any Labor government in that position is also likely to be worried about the possibility of a major business campaign against them at the next election. After all, Labor governments have repeatedly lost office when faced with major business opposition (and one of the reasons is that such opposition raises questions regarding Labor’s ability to manage the economy, encourage investment and generate jobs). Consequently, Labor has made some transitional concessions, while still retaining the original intent of its scheme. It is still facing business criticism, even from more “progressive” organisations such as the Australian Industry Group (PDF 13KB). The mining industry remains vitriolic in its opposition.

In short, the Rudd Labor Government is genuinely trying to bring in a major economic reform while facing the real structural power of business in a capitalist economy. It is a dilemma that all Labor governments have encountered and one that I have explored in depth in my book, The Labor Legacy. Consequently, the Greens and other sections of the left also need to realise that this ETS scheme may essentially be the best one that they are able to get from a Labor government in the current circumstances, and that there may be relatively little room in which they can manoeuvre to improve it.

It may seem particularly perverse that a Labor government genuinely attempting to bring in a major economic reform, in the face of business opposition, is facing simplistic arguments that it has sold out to the rich and powerful. The Greens aren’t alone in their critique. A recent Get-Up newspaper advertisement labelled the Carbon Pollution Reduction Scheme a “cop-out” and demanded that Rudd “stand up to the big polluters”. However, such strangely inverted arguments do occur when left and right combine. During the 1999 Republic Referendum, the republicans were perversely branded as “elitist”, while the supporters of a British, feudal monarchy were depicted as standing up for ordinary Australians.

When John Howard defeated the Republic Referendum in 1999, Malcolm Turnbull, who was then a leader of the Republican Movement, accused him of being the man "who broke a nation's heart". After all, opinion polls showed that the majority of Australians supported some form of Republic. Yet, in 2007, a majority of Australians also voted for a Labor government determined to tackle climate change. The Rudd Government remains exceptionally popular. Malcolm Turnbull needs to consider whether he can afford to be the man who “breaks the nation’s heart” this time round.

For the alternative to the current Carbon Pollution Reduction Scheme may well be no meaningful policy at all for the foreseeable future. After all, this is not the first time that Labor has been discussing carbon reductions. Graham Richardson unsuccessfully took a scheme to cabinet 20 years ago during the Hawke government. Labor’s subsequent attempts to tackle global warming partly fell victim to pressure from emissions-intensive industries such as coal and also to media opposition, especially from The Australian newspaper (PDF 143KB) In the case of the environment, as elsewhere, perhaps the more things change, the more they stay the same.

Climate change poses a major threat to both the planet and the economy. However imperfect some politicians believe the current ETS model to be, we cannot afford another Republic-type fiasco.