Either the government has been playing out a masterful, well-thought-through PR strategy, with planned-in vagueness upfront, in order to draw the opposition into their own tax elephant trap. Or they are making it up as they go along and the offer of tax rebates just seemed like a great tactical opportunity to win the publics support in the short term?
I would love to find out but I am sure we will never quite know what is going on in the corridors of power on the subject of carbon pricing. However, we can say that from a public communications perspective, the subject is not been communicated well.
It's certainly true that the subject is complicated and not an easy one to explain quickly. Somehow though it needs to be explained. So over the weekend I tried to get my head around the key issues and make some sense of why we all might need a new price on carbon.
The media and politicians have talked about it so much over the last few weeks that it might seem like we already have the answers on why or why not. Yet it seems to me that the jury is still out, certainly as far as the 'Aussie Battler' is concerned. So here goes my attempt to clarify the issue in my mind. I would love to hear your thoughts.
1. Assuming we accept the premise that environmental (and social) responsibility plays an important role in the future real economy. I see the first hurdle on the subject of pricing carbon as being that without a market mechanism, business and society most often fail to respond to these kinds of challenges, even when it is accepted as the right thing to do.
2. The economy thinks it operates outside of the environment, or despite it, which is why we have degradation and pollution of it. Most people miss or ignore the inherent role that a healthy environment plays in sustaining the economy in the first place. We are so removed from it that we have forgotten that this is where all the critical resources (e.g. coal and ore) come from, not to mention the critical resources for life itself like air, water, fertile soil, fish etc etc.
3. So the only way to get balance back and a truly sustainable economy is to put a price on carbon. As carbon is a key tangible (admittedly invisible) measurable/tradeable unit of currency. We know that by being more efficient in our carbon use we also change energy use, resource use and waste to landfill, which ultimately has a nice positive additional outcome for us humans.
4. There is a question doing the rounds as to whether, even if man is making the climate change through carbon emissions, we need a whole new economy built around the carbon market. The concern is that a whole new generation of bankers will end up being winners out of what is an environmental crisis. Fair enough. However, I would argue that if this is the only way to efficiently embed sustainable practice into our (global) society and economy (which it is, because modeling suggest that the alternative of government intervention, in the form of tax payer handouts to farmers and business owners to make their operations more efficient, would effectively create a carbon price many times higher than the market mechanism will) then I am prepared to let them (the bankers) increase their personal net wealth.
5. Having lived through a few major economic revolutions over the last 20 years, I suspect the pricing in of carbon will in the future be seen as just another major social and economic reform that was well overdue. People doubted the role the wheel, the steam engine, the car, the plane, the phone, the internet, GST, income tax, universal health care and education would have on our societies and economies before they happened - now they are central components in generating wealth and well being.
6. Somehow Australia has convinced itself that it would be a leader in the world if it priced in carbon today and that because we represent only 1% of global emissions that it is irrelevant anyway. The reality is we would at best be the 33rd country in the world to commence carbon trading. Even NZ has had a market in place since 2008. 540 million people in Europe operate in a carbon-constrained economy. Ten states in the USA have implemented one. The results are that not one job has been lost to pricing carbon. In fact Germany became the world's biggest manufacturer of Solar PV for a while (before it got taken over by China who last year invested $38bn into renewables and energy efficiency). In addition we know that economies like the UK created hundreds of thousands of green collar jobs over the last decade and yet they represent just 2% of global emissions.
7. The biggest frustration on the pro-side of the debate is that the skeptics and vested interest groups seem to get all the mainstream media airtime on the subject, confusing the issue by referencing spurious science and debating the mechanics of a tax or cap and trade instead of thinking about the real issue. As someone said the other day, "We're talking about the carburetor instead of the car". The car, in this odd analogy for the subject, is of course how we are going to sustain our economy, our society and our environment into the future in a way that is sustainable, i.e. with less storms, floods, fires, inundations, top soil degradation and sea acidity.
8. The downside of pricing in carbon is that we have to get used to a new cost on stuff that is proven (by decades of peer reviewed and undeniably balanced science) to pollute our environment. The upside is that we are forced to seek out and invest in alternatives that fundamentally are better suited to a more equitable and enjoyable way of life in the long term anyway.
9. The key to success is to bring along all the developing countries too, who if they follow our current lead, will further destroy the ecosystems we are trying to preserve, in order to keep up with the Jones' of the west and get their arguable 'right' to the same middle class lifestyle we in the west have enjoyed. However, the only way to lead is to take positive action. The truth is if you look at what the BRIC economies are doing closely, you can see that they have already worked out how they need to uncouple growth and development from carbon emissions. They are making significant investments in renewables (alongside fossil fuels/nuclear in the short term) because they can see that any kind of turmoil in the oil producing states (not to mention peak oil) will leave them at massive energy insecurity anyway, so they are building Plan B while we argue about whether we will export our jobs and our carbon to them if we add an impost on old and inefficient factories here in Australia.
10. The other point to note here (and I do not know the answer so it's really more of a question) is that if their factories and industries are going to be built 30 or 40 years newer, more advanced, and more efficient than ours are currently, the reality must be that surely they could not only make steel and aluminum cheaper, but they would do it with less emissions than us anyway. So this argument about carbon leakage could well be a furphy.
11. The other upside of a price on carbon is that Australia has the potential to be the Saudi Arabia of solar. We can create the technology, skills and IP to export to the developing world plus power our economy cleanly. There is a growing body of well-researched evidence out there that demonstrate how Australia can transition to base load power via renewables and through greater efficiencies. So why would we not want to give these kinds of future orientated industries a head start? Seems to make sense to me?
So brain dump over. Keen to hear your thoughts.
Brand Grab: Responsibility makes sense to me
22 March 2011