Which way forwards in response to climate change?

Towards the conclusion of 2009 perhaps one of the most significant events of that decade was the failure of the Copenhagen conference on climate change to authorise a comprehensive and binding response to the climate crisis.

Given the virtually universal consensus across the entire body of global scientific opinion, with regards to the reality of human-induced climate change, resistance to action must be seen as being harder and harder to justify.

Apart from the threat of rising sea levels, other effects of continued global warming could include damage to eco-systems and biodiversity. Acidification of oceans may result in extinction of many species - with the consequences of the disruption to the food chain ultimately flowing to humans. And with extremes of weather, life for many would become more uncomfortable.

But while some from the conservative Opposition in Australia saw the failure of Copenhagen as a vindication of sorts, the potential consequences of this failure are such that none should be seeking to milk these developments for opportunistic political gain.

In Australia, with regards to the environment, the Rudd Labor is besieged on both sides.

Bipartisan support between the government and the Coalition Opposition for an Emissions Trading Scheme (ETS) in Australia has collapsed after the relatively liberal Opposition Leader, Malcolm Turnbull, was usurped by arch-Conservative, Tony Abbott.

Now, while the Australian Greens deplore the government’s target to reduce greenhouse emissions to somewhere between 5 per cent and 25 per cent of 2000 levels saying it is vague and insufficient, the conservative Coalition is generating fear about what their leader Tony Abbott derides as “Labor’s great big tax”.

But what is the proposed ETS anyway?

“In a nutshell”, the Emissions Trading Scheme advocated by the Australian Labor government comprises a “cap and trade” system whereby polluters are provided with a limit on greenhouse emissions. After this “cap”, polluters need to invest in emissions permits if they are to continue such activity. A market is effectively created: usually whereby polluters must buy permits from economic actors whose activity is not so intensive in carbon emissions.

Importantly, Labor claims the ETS does not comprise a tax in the commonly-accepted sense of the word. For the government this is important: as it is official Labor policy not to increase tax as a proportion of Gross Domestic Product (GDP).

Given the need for investment in social services, welfare and infrastructure, critics may well point to the short-sightedness of this policy. But advocates of the Labor ETS might believe it is a way to potentially “have one’s cake and eat it too”. Although after corporate compensation - and compensation for those on low and middle incomes - there is not much left over.

Ultimately, though, the proposed ETS would still comprise a system of “sticks and carrots”: impositions upon business and consumers to pressure them into changing their habits when it comes to investments and the purchasing of goods and services.

Achieving real change obviously cannot come without a cost. The question is who pays for reform and how.

Conservative Opposition leader, Tony Abbott has been quick to deride Labor’s ETS plans and the financial pain which will follow for many Australians. He has claimed that 50 per cent of middle class households will be worse off. In contrast, the government is claiming that 2.9 million low income Australian households will actually be better off as a consequence of the built-in compensatory mechanisms.

I will address this in greater detail further on in this essay.

Instead of an ETS or carbon tax Abbott has been spruiking the benefits of a more “direct” approach to reducing carbon emissions. The question hanging over such proclamations, however, is the same. Again: change cannot come about without cost: and someone will have to pay for “direct” change: or else perhaps there will be no change at all …

That said: there is a variation on the theme of “direct action” on climate that may have merit: although the author seriously doubts this approach would appeal to the Conservatives and neo-liberals - with their fetish for ever smaller government “no matter what”. I will also consider this later.

Into this “mix” we need to consider the human impact of action on climate change.

For all parties involved there was a concern with any ETS that it could have a negative impact on industry and jobs. As a consequence of cheap coal, benefits have historically “flowed on” to other export industries, and import-competing industries. With an increased cost for power, though, the reverse impact of this would flow on through the entire economy.

In response to this and other issues surrounding the competitiveness of Australian industry, the Australian government has included as part of the proposed ETS an “Emissions-Intensive Trade-Exposed Industry Assistance” (EITEIA) package.

The aims of this scheme are manyfold.

To begin with, the scheme aims to reduce the risks of investors simply relocating offshore to countries with more “carbon friendly” conditions. If the only impact of any ETS is that carbon intensive industries simply move offshore then obviously nothing is achieved.

Second, the program is aimed at enterprises which are “trade exposed”.

One test of this is if such enterprises “[demonstrate a] lack of capacity to pass through costs due to the potential for international competition.”

Under Malcolm Turnbull’s leadership, the Coalition had also secured through negotiation broader compensation for industries affected by the proposed ETS. Among these were coal-fired electricity generation and agriculture.

There are many who feel compensation goes too far. In March 2009 the Australian movement Friends of the Earth (FOE) condemned the inclusion of the EITEIA in the Carbon Pollution Reduction Scheme (CPRS) package.

FOE’s aim for the energy industry of “100 per cent renewable [energy] by 2020" seems especially ambitious. Nonetheless, the massive aid commitment for coal-fired energy providers - in the face of blackmail by those interests threatening continuity in energy supply - seems misplaced.

Properly such threats ought to have been stared down. Should these threats have come to fruition then, as Ken Davidson argues - in the case of Victoria: “the State Government has emergency powers that allow it to take over and run the assets.”

But worthy of closer consideration is FOE’s demand for “sector-by-sector transition plans for affected workers and communities”.

What, then, is the way forward?

Proposals for “transition plans” are refreshing, comprising a call for more direct government intervention than usually acceptable under the neo-liberal consensus that one way or the other everything must be “left to markets”. Indeed: the psychology behind such thinking - including the stigma associated with tax reform - is partly the reason why the ETS has been promoted without greater consideration of alternatives such as a simpler carbon tax.

Active industry policy must be applied to create new jobs (especially in affected regions), maintain good incomes and income support (including during the transition process), while also supporting re-skilling - at no expense to affected workers.

At this point, therefore, it might also be appropriate to consider another interpretation of “direct” action on climate change.

Instead of only “sticks and carrots” being applied to “prod” markets into reform, the alternative could be massive and direct public investment to renewable energy and sustainability.

In the Australian e-journal On Line Opinion, social commentator Leigh Ewbank proclaimed that: “A new nation-building project on the scale of the Snowy Mountains Scheme is needed.” Here, Ewbank was correct in observing that “our windy southern coast; our vast deserts; and our rich geothermal resources, are untapped”. Utilising these natural assets - with public investment in sustainable energy infrastructure - could be instrumental in the creation of “a renewable electricity grid”.

This program could also include micro-energy reforms: making the inclusion of solar panels and micro wind turbines compulsory for new constructions - supported with generous government subsidy for those on lower incomes. Also integral in this process could be extensive “Green building” regulations, so our homes and workplaces are “resource-efficient throughout a building's life-cycle”.

These and other measures could gradually ween Australia away from dependence upon coal between now and 2020.

Importantly, tax, social wage and welfare reform would have to be enacted to prevent the costs of such change “flowing on” to more vulnerable groups and individuals.

Progressive tax reform - combined with a progressively structured ETS (made possible through compensatory payments) - is also critical given that the debt from massive public investment in renewables would need to be serviced in as fair a manner as is possible.

If the Australian government does go ahead with some form of ETS, it must be so structured as to have a more progressive impact on wealth and income distribution, and access to necessities including energy.

Towards the end of 2009, Lindsay Tanner, the Australian Finance Minister, affirmed that “low-income households will be hit around $420 annually under the scheme but will be compensated on average by $610 per year”.

The question here is why the government is not using this opportunity to do more in the interests of distributive justice.

Given that the broader tax system in Australia is in need of radical reform for purposes of distributive justice, an ETS - while not a tax - could be levied at a higher rate. By this we infer regulation ensuring a higher rate for carbon permits issued by the Federal government - and also central regulation of permit values thereafter. This is an alternative to the wild speculation some suppose might otherwise follow with the scheme’s implementation.

If accompanied by greater compensation for those on low and middle incomes (especially lower incomes), though, such reform (as advocated in this article) would comprise a “step forward” for fairness.

As Ken Davidson, writing for The Age, has noted also, if emissions permits are too cheap then there will be no incentive for corporations to make “higher cost investments” anyway.

While Davidson rejects the prospect of an ETS altogether - and a carbon tax would be more simple and potentially less volatile - there are ways of improving the proposed system.

In the wake of Copenhagen international action is necessary

The failure of nations to arrive at a legally binding framework (via an international treaty) for emissions reduction at the Copenhagen conference shows a disturbing lack of resolve and good faith among what some call “the global community”.

Among the most pertinent of issues was the failure of the developed world to provide the necessary compensation for poorer nations to continue development in an environmentally and socially sustainable fashion. Writing for the Sydney Morning Herald, Andrew Hewitt lamented that: “The promised $US100 billion a year by 2020, aimed at helping poor countries reduce their emissions and adapt to a changing climate, is less than half the amount needed.”

The quest to eradicate poverty, here, need not be abandoned as the price of sustainability. Technology transfer is of central importance, as is funding tied to the construction of sustainable infrastructure in developing countries.

In the same spirit, international co-operation in key areas of research, such as renewable energy, is critical. The world would do better pooling its research efforts rather than individual research units competing against each other - and quite likely not sharing their progress and their breakthroughs.

Here - in the wake of Copenhagen’s failure - there is nevertheless still the option of Australia “leading by example”. This applies to other countries in the developed world also: including the United States.

A good start for Australia would be a radical expansion of foreign aid: with Australian contributions being raised from approximately 0.32 per cent of GDP (2009 figures) to 1 per cent: significantly beyond the “UN benchmark” of 0.7 per cent.

For Australia’s part, Hewitt was also correct in observing: “We must … contribute our fair share of climate finance, based on our historical responsibility for emissions and our capacity to pay.”

This additional expansion could be tied exclusively to the development of environmentally sustainable infrastructure and industry, with funds devoted to Foreign Aid from Australia alone rising to significantly over AU$10 billion annually.

With Labor in power in Australia we have the right to expect better. But accountability of governments is only ever secured at the cost of eternal vigilance on the part of citizens. We must hold Labor accountable now, for the stakes are too high and the costs of failure too great.