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Cap and Trade Going Under Down Undah

In a preview of the coming fight over cap and trade in Congress, Australian Prime Minister Kevin Rudd's carbon pricing plans are under fire from both Right and Left. He's stuck in a political dilemma that should be familiar to carbon pricing proponents everywhere: weaken his plan to secure passage but sacrifice environmental objectives, or strengthen it in line with Green demands and guarantee the plan's political failure. If only there were a way out of this dilemma...

Posted by Jesse Jenkins on March 19, 2009 at 6:15 PM
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It was with much fanfare and bravado that then-newly-elected Prime Minister Kevin Rudd of Australia announced at the 2007 Bali climate talks that his nation would abandon opposition to climate action and ratify the Kyoto Protocol. Better late than never, Rudd said and bravely declared, "I can unite the world on climate."

To deliver on that bold promise, Rudd directed his ministers to put together a cap and trade program to limit greenhouse gas emissions and put a price on CO2. The outline of an Australian "Emissions Trading Scheme" was rolled out last week with plans to implement a cap and trade program in June 2010 aimed at cutting emissions 5 to 15 percent below 2000 levels by 2020.

Now, the Australian Prime Minister's efforts to put a price on carbon and cap emissions are under fire from both Right and Left, and cap and trade is going under Down Undah.

The pro-climate action blog SolveClimate has an honest report on the political opposition to Prime Minister Kevin Rudd's carbon pricing plans. [Editor's note: keep in mind as you read this that the Australian "Liberal" Party is the nation's major conservative, center-right party and the "Labor" Party is the real liberal, center-left party.]

The battle offers a window into the complexity of making climate laws in a coal-fired country.
Federal opposition leader Malcolm Turnbull is leading the charge on behalf of his center-right Liberal party, stepping up attacks on a scheme he once favored. He wants to delay ETS until at least 2012, and pile on extra industry hand outs. And he's employing a familiar weapon to win over Australians, the threat of job loss.

It's a particularly cynical ploy on Turnbull's part in a drowning economy. Said Turnbull to Rudd this week:

"Why are you putting people out of work?"

There is no evidence that the ETS will "put people out of work," even in mining towns. But the story caught fire in the Australian media.

And now it's clear that a majority of senators will vote against the ruling government's ETS, complicating all prospects for legislation that has yet to be introduced into Parliament.

Rudd's in trouble. His center-left Labor party doesn't have a majority in the upper-house Senate. If the opposition blocks the bill, then he will need the support of Australia's swing-vote Greens.

But the Greens now say they won't endorse the ETS, unless it is substantially "greened up."

Specifically, they want the industry-friendly legislation to auction 100 percent of the emission permits -- a vital aspect of any effective cap and trade scheme -- rather than giving polluters a free ride, as the bill now does. They also want a strong reduction goal of 40 percent by 2020, not the current 5 percent target, or up to 15 percent in the event of a new global climate pact.

SolveClimate's reporter chocks the failure of the Australian ETS plan up to "lobbying, partisan politics and the usual suspects (i.e., big coal)." The implication being, "Those darned knuckle-dragging champions of the status quo got the best of us again." Of there's truth to that. But it's also all to easy to dismiss the challenges facing Rudd's plans and conclude, "We've just got to battle harder and overcome the industry opposition next time."

But that kind of response dismisses this story without grappling with the real lesson behind it. After all, this is the exact same situation facing cap and trade or carbon pricing plans in Canada, the EU and of course, the good old USofA.

The story is fundamentally the same everywhere carbon pricing programs have been attempted. Carbon pricing plans run smack dab into an unshakable reality of the political economy of climate and energy: the public and policymakers (not to mention industry) are resistant to efforts to significantly increasing the price of dirty energy. That resistance is clearly even stronger in the midst of the worst global economic crisis in decades.

The result: even when shot through with loopholes and industry giveaways, cap and trade and carbon pricing schemes are still not able to pass political muster, especially in coal-heavy economies like Australia (or much of the United States... or Eastern Europe... or China or India... or just about everywhere we need to reduce emissions most!).

Kevin Rudd is thus stuck in a political dilemma that should be familiar by now to champions of carbon pricing proposals everywhere (a dilemma we call the Gordian Knot of climate policy): he must either further weaken the proposal (as the Liberal Party opposition calls for) in order to win passage while ensuring that the carbon price is insufficient to drive the major emissions reductions needed; or he can strengthen the proposal (as Australia's Green Party is calling for) and guarantee the bill's political failure.

SolveClimate's reporter worries, "Any way you slice it, there will be a disappointing end to this cantankerous process," and concludes, "Let's just hope it's not a preview of what's to come in America, in the nation's own congressional battle over global warming legislation." But of course, this is exactly what will happen in the United States if President Obama and his green allies continue to push cap and trade and carbon pricing as the centerpiece of climate action. The Gordian Knot is most certainly not a uniquely Australian phenomenon, and it will inevitably ensnare U.S. carbon pricing plans as well.

But there's a way out of this dilemma, a way to cut free of the Gordian Knot.

If only at least one world leader (*cough*Obama*cough*) was willing to break from the carbon pricing orthodoxy and start leading a new emerging climate consensus, a strategy centered on the critical effort to make clean energy cheap, a strategy driven by innovation and investment, one finally able to overcome the fundamental constraints of the political economy of climate and energy and the powerful resistance to efforts to price our way to a clean energy future... If only...

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Filed under: Australia , Barack Obama , Cap-and-trade , Economy , Energy , Environment , Global Warming , New Energy Politics , Policy , politics

TrackBacks (0) 5 COMMENTS:

And already we can see the resistance emerging and taking shape, and not just from the Republicans. This was a story posted on SolveClimate, also.

http://www.detnews.com/apps/pbcs.dll/article?AID=/20090319/POLITICS/903190367/1148/AUTO01

Michigan Senators? Hardly a minor threat.

Posted by: Alex Park at March 19, 2009 8:15 PM

And already we can see that the resistance is mounting, and taking shape, and it's not just the Republicans who are mounting it. This was a story also posted on SolveClimate:

http://www.detnews.com/apps/pbcs.dll/article?AID=/20090319/POLITICS/903190367/1148/AUTO01

Michigan Senators? Hardly a minor threat.

Posted by: Alex Park at March 19, 2009 8:17 PM

Your take on Australia is straight from the Rudd and Labor Party songbook, and as such has little to do with the true situation.
The real story of what happened in Australia, is that a cynical and opportunist Rudd saw climate change as a useful vehicle to power----and to world-wide attention------attention he craves like he craves oxygen to breathe---a need that�s evidenced by the statement you quoted from the Bali Conference----�I can unite the world on climate�---which was illustrative not of bravery, but of delusions of grandeur and massive conceit---attributes of character he exhibits almost every single day.
To hear your characterisation of him, you�d think he was a great leader, but in his only past experience in governance [ as a public service control freak], he was notoriously an abject, but ruthless failure.
During our 07 election campaign, Rudd enlisted the propaganda talents of Al Gore and other celebrities, to tell Australians what they must do if they wanted to be seen as saviours of the planet.
The real agenda for Rudd was getting himself and Labor into power on the back of bogus climate change credentials.
The Liberal Party [ Conservatives, not the Left as in the US]also proposed an ETS, but their focus was to do it without endangering industry and jobs, and Australia�s economy itself.
All the renewable energy research to this point has been funded by that reviled [ by the Left] Liberal/National government---the government that cleaned up the massive economic mess , and the twice downgraded international credit ratings left by the last Labor government, and ultimately brought Australia to a position of unprecedented prosperity---an economy functioning better than any other in the world.
That reviled government had , twelve years earlier, [and before any other government anywhere], set up an Australian Greenhouse Office, which began the funding of a whole range of renewable technologies----solar---wave---geothermal---wind etc---as well as CCS technology for clean coal.
They also suggested that Australia should investigate the possibility of starting a nuclear power industry---something Australia has never had.
One of their main initiatives was to establish , with $200 million initial funding, a Global Forest Initiative to foster the reforestation of tropical rainforest sinks, especially in Indonesia [ where clearing and burning of forests and peatlands goes on apace but is never mentioned by Rudd] and in PNG---along with incentives to curtail clearing of forests around the world.
Rudd gained power because the almost 100% Left wing Australian media made it impossible for the Liberal Party and its coalition partners to win---with a juggernaut of demonisation of and lies about the then government, along with a pandering lovefest of propaganda for Rudd and Labor , that no alternative party---especially a realist one that wasn�t prepared to con the Australian people ---could possibly win.
And, for good measure, Gore lobbed in one last time, just before the election day, to tell the Australian people once more that they should vote for Rudd if they wanted to �save the planet�.
It was more a virtual media coup than an election.
Rudd�s passion isn�t for saving the planet, as you imply----it�s all for the aggrandisement of Rudd---and nothing must stand in the way of that---not the jobs of ordinary Australians [ an impact that you just dismiss with callous disregard]---nor the overall health of the Australian economy, if they succeed in implementing their ETS as our exports become much less competitive compared with those of our trade competitors.
What do you care if Australia takes a huge hit to its economy and standard of living---zilch.
And it would surely be all for nothing, because , as Cal Tech�s Nate Lewis has said, �It�s not true that all the technologies are available and we just need the political will to deploy them�---� We are too focused on cutting emissions 20% by 2020�---�By focusing on easy, near-term cuts, we may miss the boat on what�s needed by 2050�----and he went on to spell out the gargantuan task of reaching 2050 targets---if it�s possible at all.
What you�re all coming up against---what causes all the chest-beating----is reality.
It�s all very well for Rudd and Obama to roll out all the self-serving , vote-catching, celebrity-seducing fear-mongering and �solution�-peddling to suck the voters in-----but when it comes down to actually doing something, you all must surely know that you have to be open with your populations---credit all the science and scientists, not just the AGW consensus proponents----and make it possible for our economies to survive and thrive---and the latter means that business has to have all the facts[ not just the Leftist view].
What�s happening in Australia now is that businesses and industries are belatedly coming to realise the impacts on Australia of all the increased prices of inputs, that have the potential to price them out of markets.
And if they read the truth about renewables, they�ll find out that the technologies are many years away from being able to supply base load power---if ever----and some need scarce materials that makes them not really renewable in their present forms anyway.
By the way Australia�s Liberal Party is a party in the true meaning of the word �liberal�---a party of small government and judicious regulation, and freedom for individuals----while Labor, and your �liberals�, the Democrats, are parties of big nanny governments, interfering unnecessarily in citizens� lives, and mostly getting it wrong----always seeking to make their fellow-citizens dependent on and beholden to, big overarching government---anything but truly liberal.

Posted by: truth at March 22, 2009 2:01 PM

Your analysis is spot on Jessie. I hope the Obama Administration and US climate change advocates learn from the Australian experience with carbon emissions trading before its too late. I must say that as an Aussie it is great to see a blog exploring the challenges facing the Rudd Government�s climate change policy�the centerpiece of which is a carbon emissions trading scheme, or ETS as it is known down here. Given that Australian examples rarely appear on the Breakthrough blog, I will to take this opportunity to say a few additional things about the matter.

Firstly, we should consider the title of the Rudd Government's emissions trading bill. The �Carbon Pollution Reduction Scheme� is a perfect example of the �pollution paradigm� that Ted and Michael write about in their 2007 book, Break Through. By accepting the framing of climate change as a pollution problem, our Government, policy makers, and even climate change advocates (!) falsely believe that the capping and trading of carbon is THE solution to climate change. When framed as a problem of energy production, however, vastly different solutions emerge. As advocated by Ted, Michael, and Breakthrough Institute, an investment-centered approach to renewable energy is needed to help move us toward a clean energy economy as soon as possible. If climate change were framed this way in Australia, then perhaps our Senate would now be considering an investment and R&D bill, or a swathe of other measures to lay the foundations for a clean energy economy, opposed to the politically challenging and potentially ineffective emissions trading scheme.

Unfortunately, even if Rudd is able to get his Government�s bill through the Senate, its issue framing and political trade-offs has resulted in missed opportunity for investing in energy innovation, and laying the foundations for a clean energy economy in Australia. The Government will direct one hundred percent of the revenue generated by the scheme to compensating householders for increases in the cost of living. This is the price that the Rudd Government has had to pay to assuage the public (excluding petrol/gasoline from the scheme in another example, but that is another story).

Posted by: Leigh E at March 23, 2009 1:55 PM

"Truth" and Leigh, thanks for the perspectives from Australia. It's great to hear things from an 'native' perspective. While I lived in Canberra for six months and observe the situation in Australia with interest, it's definitely from an outsider's perspective.

Leigh, Rudd's take on climate policy is definitely a prime example of the pollution paradigm at work. And as such, it invariably runs smack dab into the political conundrum the Australian ETS is now ensnared by.

"Truth," if you read our blog regularly, you know we are in complete agreement about the scale of the energy technology/innovation challenge (and we recently spotlighted Nate Lewis on our blog here: http://thebreakthrough.org/blog/2009/03/newsweek_nails_the_energy_chal.shtml). It is indeed the reality of the price gap between clean energy and dirty conventional fuels that drives the political challenges facing efforts to price or regulate our way to a clean energy economy.

Thanks both of you for your perspectives on Australia. Feel free to ping me with future developments from Down Undah (jesse[at]thebreakthrough[dot]org).

Jesse Jenkins
Director of Energy and Climate Policy
Breakthrough Institutute

Posted by: Jesse Jenkins at March 23, 2009 7:53 PM

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