Milne 1, Rudd 0

Mike Bolan Update, of Why not just reduce emissions?

The entire climate situation is far too complex to be corrected with a new tax and if I’m close to right about affordability, he’ll alienate many of his own voters very quickly with needless blows to their’ hip pockets. My analysis confirms that Christine Milne is absolutely correct to call for action now rather than vacillating about administrative schemes (5). We need decisive leadership not pusillanimous managerialism.
THE GOVERNMENT chose World Youth Day as the time to release their Green Paper (1) on their Emissions Trading Scheme (ETS) so the dodgier points didn’t really get any air play on TV.
The Green Paper’s case for an ETS is entirely disingenuous.

Indeed, the whole thing looks like the flawed ‘Sir Humphrey’ syllogism ‘we must do something…this is something….therefore we must do it’.

From a systems perspective I’ve identified 5 areas of major concern that I’ve loosely titled choice, culpability, affordability, uncertainty and leadership.

Let’s look at them in turn.

Choice

For the population to change its preferred behaviour (e.g. driving) there must exist a choice to replace that behaviour, some other way for the population to achieve its needs (e.g. trains).

The Green Paper says ‘Carbon pollution will remain too high unless businesses and individuals take responsibility for their consumption and production decisions’ (N.B. the government doesn’t appear in the list of those who need to take responsibility).

The implication here is that when businesses and individuals DO take that responsibility, emissions will somehow decrease.

This is false because alternatives need to exist BEFORE any change can take place.

We know that for practical alternatives to exist there needs to be substantial investment in R & D, and given the nature and scale of the industries involved, considerable time will be needed.

The R & D needed to replace coal and gas as generators of energy will be substantial and is unlikely to be accomplished before 2010. Given the myriad of uncertainties created by the government’s approach, any investments are likely to be deferred until the ‘scheme’ is fully operational – 2012 or later.

The government’s current approach penalises taxpayers for using high carbon emitting power without giving them any other choice. We’re to be punished for doing the only thing we can do.

Also, without alternatives power companies can just shut down in November to reduce annual emissions, or cause Australia-wide brown or black outs whenever their emissions get too high.
If Enron could do it, so can our power companies.

All of the rhetoric about penalising the heaviest polluters is meaningless because companies will simply pass on the new cost to consumers. What else can they do?

Can we trust them? We’re already reading about power companies that are supplying ‘Green’ power at a premium when that power is being produced from coal (2).

Decision makers should assure that suitable choice actually exists BEFORE applying disincentives otherwise we’ll pay the price but not get the benefit (i.e. increased taxation without CO2 reductions).

Culpability

Why has government left itself out of the list of those whose decisions are responsible for climate change?

Is it because government only means telling everyone else what to do?

A government that demands so much of our income and that creates the social and business framework for our society, is responsible for those theories, actions and decisions that increase CO2 emissions.

For a start, how about:-

• the choice to favour road infrastructures and nearly abandon rail
• the scale, design and location of our cities
• levels of investment in public transport
• the scale and distribution of our population
• globalisation that has radically increased ‘food and product miles’
• the constant push for growth
• purchasing decisions that favour emitting industries
• royalty and other arrangements for mining coal, oil etc (cost of supply)
• taxpayer subsidies to heavily polluting industries (e.g. smelting, coal)
• policies that encourage and authorise clear felling of native forests (destroy lungs)
• policies that discourage alternative technology industries (e.g. solar)

Just from this list, there are many immediate and direct opportunities for governments to act to reduce emissions.

The Green Paper says ‘because firms face no cost from increasing emissions, the level of emissions is too high’.

Why doesn’t it say ‘because government has failed to assist renewable energy companies to develop and grow, the level of emissions is too high’?…or ‘Because our major cities are designed around roads, emissions are too high’?…or ‘high emissions are because governments have made accessing our coal too cheap and easy’?

By leaving their own actions from the equation, the government is missing important options for short and medium term action that could make a real difference much sooner than a byzantine ETS.

Affordability

More Australian consumers are on the borderline of poverty than ever before. 350,000 households have been reported to be close to losing their homes, bankruptcies are on the rise and credit card defaults stand at $7.2 billion for the year (3). My analysis of PAYE income at $50,000 shows 47% going as direct payments to government, plus up to an estimated 13% more in increased costs of goods and services attributable to government, a notional total of 60% of income to keep our three massive and ponderous tiers of government going.

If that’s close to right, then Australians do not have the capacity to pay for the proposed cost increases created by a carbon tax.

Uncertainty

No-one can know how this ‘scheme’ will play out nor what ‘collateral damage’ it will create. These uncertainties are likely to continue until some final version is enacted. As a direct consequence business investment is likely to be deferred. This is already causing groups like Woodside (4) to consider shelving their projects until the final details are clear. The Prime Minister’s unhelpful dismissal of these huge uncertainties as ‘argy bargy’ in no way introduces any more certainty into the situation.

Over time, governments have placed critical aspects of our survival outside public control. The result is that we are now dependent on private sector organisations to supply all, or most of our energy needs. The energy companies hold the whip hand and they know it.

This means that the government is not really in any position to demand anything from power providers – a few major ETS inspired blackouts in Canberra and Sydney and the government itself would fall into line very quickly.

When governments starts to play at controlling energy providers, we can be pretty sure about who will prevail but the possible list of compromises just creates more uncertainty.

To create certainty, reliable alternatives to carbon emitting industrial methods need to be developed and trialled, but that is a matter of leadership, my final concern.

Leadership

Let’s just pretend for a bit that were real leaders in Canberra, and that they were serious about reducing emissions in order to get some international creds and, at the same time, stay in power. What might they do? I’d suggest that they lead by example and;

1) Identify the full panoply of root causes of high carbon emissions
2) Stop pointless wastes of energy (e.g. night lights in government buildings)
3) Phase in policies to reduce carbon emissions (e.g. stop clearfelling/burning)
4) Invest in research to create low emission technologies (e.g. solar/thermal)
5) Facilitate local supply/distribution networks (e.g. via broadband)
6) Stimulate creation of smaller, self sustaining satellite town to take the load off cities
7) Make significant investments in public transport systems

Do we really need a government that just tells us what to do and punishes us for using high carbon energy systems without providing an alternative while taking no responsibility itself for our overall situation?

As it stands, the Green Paper takes for granted that an emissions trading scheme is the best way to reduce emissions without presenting any coherent arguments for that conclusion.

The evidence is that the key architect of the Australian business and trading framework – the federal government – is avoiding taking effective action itself while simultaneously exposing the country to unnecessary economic risk by choosing a complex taxation scheme as the main way to reduce planetary temperatures.

Punishing taxpayers for using high carbon emitting services like power, when they have no other choice will create a massive backlash, particulary given voters’ current financial insecurity.
It still looks as if Kevin Rudd is being hustled into making a serious mistake with this ETS.

The entire climate situation is far too complex to be corrected with a new tax and if I’m close to right about affordability, he’ll alienate many of his own voters very quickly with needless blows to their’ hip pockets.

My analysis confirms that Christine Milne is absolutely correct to call for action now rather than vacillating about administrative schemes (5). We need decisive leadership not pusillanimous managerialism.

I don’t know how this mess will play out but…

Watch this space.

Mike Bolan
www.abetteraustralia.com

Mike is a complex systems consultant, change facilitator and executive and management coach.

1. http://www.greenhouse.gov.au/greenpaper/index.html
2. http://www.news.com.au/couriermail/story/0,23739,24043875-953,00.html
3. http://www.news.com.au/dailytelegraph/money/story/0,26860,24035325-5015795,00.html
4. http://news.smh.com.au/national/emissions-scheme-to-hurt-lng-projects-20080718-3h6m.html
5. http://www.smh.com.au/news/environment/climate-wont-wait-mr-rudd/2008/07/19/1216163231976.html