In July, the British Prime Minister, David Cameron, wrote to his Australian counterpart, Julia Gillard, supporting Labor’s legislation to introduce a carbon tax leading to an emissions trading scheme on July 1 next year.

Ostensibly, Cameron’s letter was one of praise for Gillard. However, the subliminal message was one of criticism of the Opposition Leader, Tony Abbott. Needless to say, the Cameron missive was much used by Labor to discredit the Coalition. Also the Canberra press gallery, which overwhelmingly supports Gillard and opposes Abbott on the carbon tax issue, made much of the letter.

Little mention was made of the fact that the climate change policy of the Conservative/Liberal Democrat government in Britain entailed a review in 2014. The message was that Britain would scale back its climate change abatement policies if it found itself to be out in front of other European Union nations. This reflected concern about the plight of Britain’s chemical, steel and manufacturing industries.

The review scheduled for 2014 has been brought forward in the light of the economic situation. This was made clear in the Autumn Statement delivered in the House of Commons by the Chancellor of the Exchequer, George Osborne, last month.

Osborne expressed considerable concern about the impact of ”green policies adopted not just in Britain, but also by the European Union, on some of our heavy, energy-intensive industries”. In an emphatic declaration, he added: ”We are not going to save the planet by shutting down our steel mills, aluminium smelters and paper manufacturers. All we will be doing is exporting valuable jobs out of Britain.” He added that such a policy will not achieve environmental goals and that ”businesses will fail, jobs will be lost and our country will be poorer”. As the saying goes: hear, hear.

Now, it is understandable that the likes of the Prime Minister, Wayne Swan and Greg Combet do not want to draw attention to the change in direction in Britain. But journalists and commentators using the Cameron letter against Abbott have no such excuse. They are supposed to be reporting news, not barracking for causes.

The reason for Britain’s change of direction on climate change is obvious. Osborne warned ”much of Europe now appears to be heading into a recession caused by a chronic lack of confidence in the ability of countries to deal with their debts”.

I have just returned from a series of meetings in Britain and the US. Without exaggeration, the mood about the world economy is one of deep pessimism. It is difficult to see how the economies of Europe can recover in the immediate to medium future. Moreover, the collapse of the euro remains a real possibility, since the existence of a single currency for a majority of EU nations has come into conflict with the fact that Europe is not a political entity.

A single currency works in such federations as Australia, Canada and the US. It does not – and cannot – work in such an entity as the EU.

Interviewed by Charles Moore in the London Telegraph this month, the former European Commission president Jacques Delors declared that the failure of the single currency turned on the fact that the EU had not created common economic policies ”founded on the co-operation of the member states”.

Delors is a retired bureaucrat. The fact is that, as Theodore Dalrymple has argued in his polemic The New Vichy Syndrome, the EU was established ”against the wishes of most of the populations involved”.

The economic disaster that is contemporary Europe will have knock-on effects on the global economy, including on such key players as the US and China. Another recession in Europe could imperil the re-election of the US President, Barack Obama, in November, even if the rival contender is the Republican Newt Gingrich. Advocates of action on climate change in Australia invariably point to California’s embrace of an ETS. They rarely state that California is bankrupt and that the Obama administration has effectively junked its own cap-and-trade proposal.

In the US and now Britain, grim economic news has led to a reassessment of climate change policies. Not so in Australia, where, by mid-2012, there will be a carbon tax – something none of our competitors will have in the foreseeable future.

Gillard presides over the first government in Australian history which has consciously decided to disadvantage the nation with respect to its competitors – in the short term, at least. In Britain, Cameron was once committed to such an agenda. This appears to be no longer the case. Perhaps Osborne should write a letter to Gillard or Swan explaining why.

Gerard Henderson is executive director of The Sydney Institute.

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