Emissions trading died in Nopenhagen last Friday and its death will have a huge impact on Australia.
Over coming months business and community support for the Rudd government’s CPRS will collapse – it now stands as a pointless cost burden on Australian businesses because not only was there no agreement on meaningful cuts in greenhouse gas emissions in Jokenhagen but there will be no international trading in emissions permits to help achieve said non-cuts.
That means any cut in Australia’s emissions – including the current minimum of 5 per cent – will now be much more expensive, because it can’t be achieved by companies importing permits created from not clearing Indonesian rainforests or paying for wind power in the Philippines, as planned under the CPRS.
And any increase in the target to get the legislation through the Senate with the Greens’ vote would lead to a coalition victory at the next election.
A 25 per cent reduction target, say, with only local action and no ability to import permits would impose such an horrendous cost burden on Australian industry, and cost so many jobs, that the ALP would definitely lose.
So Kevin Rudd’s summer project will be to neutralise the CPRS as an issue and come up with something else on which to campaign at the next election.
Unless the CPRS’s neck is quietly wrung in a side room and the government’s spin doctors go to work pretending it never existed, the scheme will have to be modified so it involves less emissions trading and more regulation, such as vehicle and home appliance standards.
That is something Australia should have been doing for ten years, but couldn’t be bothered.
Yes, it would take the government’s policy more towards what Tony Abbott has been on about and it would be more expensive than the proposed ETS, but there is no choice. An entirely local ETS designed to achieve even a 5% target would be even worse.
And it might even result in a bipartisan climate change policy once again, this time with Tony Abbott. It’s true that the leader of the opposition would crow about the government stealing his ideas, but that would not win Abbott the election – he’ll need an economic policy for that.
Climate change is now being described as analogous to trade negotiations, in which the collapse of GATT resulted in many smaller deals between countries.
That could theoretically happen with bilateral deals on greenhouse gas reductions except for one big difference: whereas bilateral free trade deals are worth doing for each party, there is no point in, say, Australia and Indonesia doing a deal if the big emitters – America and China – don’t.
The temperature would rise anyway because climate change is entirely global whereas trade is both global and local.
So why did Hopenhagen become Nopenhagen? Because America was “Can’t” and China was “Won’t”. That is, President Obama couldn’t deliver anything meaningful because it would fail in Congress, and Wen Jiabao wouldn’t because China either hasn’t figured out that it’s a superpower now and has responsibilities, or doesn’t care.
It doesn’t really matter which it is – the effect is the same. China is probably doing more in renewable energy than any other country but given its refusal to even stop increasing its greenhouse gas emissions, let alone reduce them in absolute terms, you’d have to say the renewables strategy is about something else – perhaps creating an industry that exports the gear, like wind turbines and solar panels, to other countries that are mandating renewable energy, like Australia.
So after two years of fruitless negotiations, Brokenhagen is described as the “beginning”. It’s possible to do that because everyone agrees that climate change is bad and that something “oughta be done”, but that they’ll meet again in a year’s time to have another talk.
Will that meeting in Mexico result in international emissions trading? Don’t hold your carbon dioxide in.
This article first appeared on Business Spectator.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
