Published by ABC’s The Drum.
In a speech to the National Press Club yesterday, Climate Minister Greg Combet announced that the government would devote half of the carbon tax revenue for compensating households.
By promising that the carbon price will be a financial boon for Australian households, Labor is attempting to counter Tony Abbott’s populist crusade against carbon pricing.
For weeks, Abbott and his Coalition allies backed by the polluting industries have mounted a fear-mongering campaign. The story the government wants to tell now is that while the Opposition leader is content to make exaggerated claims about economic ruin, Labor will make sure that you’re economically better off with a carbon price. Labor is determined to win the support of ‘hip-pocket voters’ to take the edge off Abbott’s mob.
The Gillard government is setting up another interesting dynamic. By announcing that householders will be ‘overcompensated’ for the impacts of carbon pricing, they have set a limit for calls for a low price and industry exemptions. The logic goes something like this: The higher the price on carbon, the more ‘overcompensation’ one will receive; conversely, the lower the price or narrower the coverage, the smaller the compensation.
Politics aside, the question now remains – what should they do with the remainder of the revenue? To cement its credibility on climate change the Gillard government must commit to investing the remaining share of the carbon price revenue to lay the foundations of a zero emissions economy. The government has a responsibility to protect low-income householders from carbon price impacts, but it also has a responsibility to invest in decarbonising Australia.
According to climate policy expert Professor Roger Pielke Jr ‘Australia emits almost 400 million tonnes* of carbon dioxide into the atmosphere every year.’ Extrapolating from Pielke Jr’s figures with Combet’s own hypothetical carbon tax of $20 per tonne, the fixed-price phase could generate $4 billion a year – between $12 and $20 billion over the fixed-price phase of three to five years. This is a reasonable pool of funds for encouraging renewable energy development and kick-starting Australia’s nascent clean technology industry.
Over the next few decades we will see the uptake of distributed renewable energy generation, super-efficient appliances, and electric vehicles. The transition to a zero-emissions economy means that these exciting new technologies will eventually become ubiquitous. Indeed, driving a ‘sweeping technological revolution’ to develop new industries and create jobs for Australia is the Prime Minister’s rationale for implementing a carbon price.
A carbon price is but one tool and should not undermine the important role of strategic public investment. Investing in industry development and clean technology deployment is a tool of choice for early movers like China, and South Korea. And it is increasingly being used by the United States in the form of loan guarantees, R&D incentives and government procurement (for example).
Decarbonising Australia requires large infrastructure like high-speed rail, smart grids, new transmission lines, electric vehicle recharge stations, and baseload solar power plants. Regardless of whether Australia gets a carbon price, public investment will still be needed to fund the infrastructure that is currently beyond the capacity of the private sector to deliver alone.
Unfortunately, the cleantech sector faces an uphill battle to get a decent slice of carbon price revenue. Powerful entrenched interests that have profited from their emissions for decades will do whatever it takes to protect themselves from future competitors. Machiavelli observed this problem centuries ago when he wrote:
There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. For the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new.
Those of us who understand the climate crisis are the best hope for securing investment in the clean energy economy. Lukewarm support is simply not good enough. Now is the time for Australia’s climate advocates, large and small, to unite and send a strong message to the government about how the remaining share should be spent.
The government too must stand firm against the greenhouse mafia. As I have said previously, every dollar that Gillard commits to compensating emissions intensive industry is one less for climate-friendly infrastructure and the clean economy.
There is still a way to go before the carbon price debate is settled once and for all. Many will keep a close eye on how the government allocates the remaining portion of carbon price revenue. It is, after all, one of the key indicators for how fast Australia’s technological and economic transformation will be.
* Update: This is a conservative estimate.