For a nation that is globalised and has one of the best economies in the Western world, domestic debate in Australia is surprisingly insular. Political discussion is focused almost exclusively on the proposed carbon tax and asylum seekers.
As followers of the US media know, there is almost no debate on climate change there. Moreover, the conservative government in Canada, led by Stephen Harper, has let it be known that it will not introduce a cap-and-trade system (or emissions trading scheme) ahead of its closest neighbour.
Last November, the Gillard government drew up terms of reference which instructed the Productivity Commission to “examine and detail emission reduction policies, either in place or committed in Australia and in other key economies such as Britain, the US, Germany, New Zealand, China, India, Japan and South Korea”.
In other words, the Productivity Commission was asked to examine real and planned carbon abatement in Australia with respect to some of its major trading partners. It received no mandate to compare Australia with its competitors in the energy export industry – including Canada, Brazil, South Africa, Indonesia and Russia.
The Productivity Commission’s report, titled Carbon Emission Policies in Key Economies, contains findings which can be used by those who are for or against a carbon tax leading to an emissions trading scheme. However, the report demolishes the assertion that Australia is at the end of the field in abating carbon emissions. It found Australia was in the “mid-range” – along with the US and China – with respect to the electricity generation sector. Germany and Britain are out in front of Australia, but the likes of India, Japan and South Korea are behind.
Then there is the matter of policy. The Productivity Commission’s report did not identify any nation with an all-embracing carbon tax. Nor could it locate one country with an unlimited scheme. The report refers to Britain and Germany as “part of the European Union’s cap-and-trade ETS” and points out that New Zealand “introduced its own scheme in 2008”.
The EU’s scheme does not cover road transport fuels but is scheduled to cover aviation and petrochemicals in 2012 and 2013 respectively. Under the New Zealand scheme, emissions are uncapped but a cap may be introduced, conditional on the actions of other countries.
Japan and South Korea have announced that they will introduce a scheme, but in both cases implementation has been delayed. China is considering a pilot ETS in some provinces, sometime in the future. That’s all. In the US, California is the only state that is committed to implementing a scheme by next year. At the national level, Barack Obama no longer talks much about climate change. There is no scheme on the agenda in India.
And they are just our major trading partners. Australia’s competitors – including Canada, Brazil, South Africa, Indonesia and Russia – have no intention of implementing a carbon tax or an emissions trading scheme in the foreseeable future.
The facts indicate that it is a myth to maintain that Australia lags the world in abating carbon emissions or that it will be treated as a pariah if it does not immediately introduce a carbon tax leading to a scheme. There is intensive debate over climate change but insufficient attention is focused on the implications for Australia of real events on the international and domestic stage.
First, there is a possibility that the US will experience a second, or double dip, recession. Recent figures suggest American unemployment may be rising. It is certainly not decreasing at an acceptable rate. The indications are that Obama’s borrow-and-spend policies are not working.
Second, western Europe is still facing a banking and sovereign debt crisis. The dire state of the economies of Greece, Ireland, Portugal and Spain is placing pressure on the euro if not the health of the euro zone itself. Britain, Europe’s second biggest economy, is not out of its difficulties and the German banks are holding much of the debt of the poorly performing banks in Greece and elsewhere.
Third, the Middle East remains in disarray with evident civil insurrections in Libya and Syria. Egypt remains the leading Arab nation and no one knows where it will end up after the coming election. It’s possible that a genuine democratic government will emerge. But it’s also possible that the Islamist Muslim Brotherhood will increase its influence. It is unfashionable to say this, but Israel and, to a lesser extent, Iraq are the only two democracies in the Middle East. Continuing instability in the region could lead to continuing high oil prices which will have a deleterious effect on the US economy.
And then there is Australia. Unemployment remains low but recent statistics indicate a worrying decline in full-time employment. This is taking place at a time when Fair Work Australia seems intent on re-regulating the labour market, which would be bad enough at any time but most unwise during the existence of a two-speed economy centring essentially on the mining and non-mining sectors.
The times indicate a need for consolidation. But, instead, Labor, with the encouragement of the Greens and some independents, plans to introduce a carbon tax that would impose a greater burden on Australian businesses in relation to most of our competitors and some of our trading partners. It doesn’t make sense.
Gerard Henderson is executive director of the Sydney Institute