Living With The Carbon Tax

As Australia introduced a tax on carbon, from 1 July 2012, Australians – from commentators to taxpayers – were left to consider what lay ahead. To offer some informed thoughts on it all, Terry McCrann, Associate Editor Business for the Herald Sun and a columnist for the Herald Sun and The Weekend Australian and Miriam Lyons, Executive Director of the Centre for Policy Development, addressed The Sydney Institute on Tuesday 3 July 2012.

LIVING WITH THE CARBON TAX

TERRY McCRANN

In the closing days of the 2010 election, Julia Gillard promised not to have a carbon tax. It was a very deliberate, desperate, devious attempt to win the election. Within weeks, she promised the Greens – to have a carbon tax. Again, it was a very deliberate, desperate attempt to cling to power.

Such a birth does not speak convincingly to either the substance of the policy or the credibility and integrity of the policy-maker. It hardly announces a policy exhaustively developed, thoroughly thought through, and held with conviction and understanding. All this is bad enough, and it doesn’t even incorporate her earlier behaviour or her role in talking her predecessor out of his – and her – emissions trading scheme.

By such a process we have arrived at the world’s highest, and most comprehensive carbon tax. It is the single most bizarre, most destructive and pointless – literally pointless – policy that any government in our history has ever instituted.

I don’t say those words lightly. But this is a policy that is designed to hurt – quite deliberately, specifically, to hurt – and will succeed in hurting every single Australian. This is a policy that strikes directly at the foundation of our economy. It strikes at the very basis of our society – access to cheap, plentiful and reliable power.

It is a policy that directly attacks our core national comparative advantage which, to put it bluntly, is the making of carbon dioxide or the exporting of embedded carbon dioxide. To me, it is almost beyond comprehension that a government – any government – would embrace such a policy. Unless, reluctantly, forced to do so as part of a global commitment.

But that’s the critical, central point. This entire exercise is all to absolutely no point. The tax, and the subsequent continuing emissions trading scheme, can make absolutely no contribution to lowering the world’s temperature. It can have not the slightest impact on the world’s climate. It can have not the slightest impact on our local climate.

These are not the arguments of a climate sceptic. For the purposes of my comments tonight I am taking as gospel truth, that the global warming science is settled – totally settled – as claimed. Indeed, the tax fails on precisely that point.

If you believe – if you truly and totally believe – in the science of global warming, such a government and any competent advisor such as Treasury, would arrive at exactly the opposite conclusion to the one that they did. That the carbon tax is the answer.

How so? Because if you believe the causal link between increased emissions of Co2 and higher global temperatures, very simply, go short ski lodges and beachfront properties. Get in early on tomorrow’s new playgrounds in Greenland, Iceland and Kamchatka.

More seriously, such a believing, competently advised Australian government would be maximising the country’s ability to deal with a warmer world. Because if the science is settled, so is the world’s future temperature. It will be hotter.

This is the first and critical point. It is now beyond any denial – now there’s a word – that not only is there not going to be any comprehensive global agreement to reduce global Co2 emissions, those emissions are going to continue to increase.

Before the Copenhagen conference in 2009, it was possible to argue there would be a global agreement. I would actually deny – that word again – that such an outcome was even possible, far less likely. Because that expectation required a truly monumental belief that China and India would vote to stay in permanent poverty.

But for the purposes of discussion, I’ll concede that before Copenhagen, you could – just – close your eyes and ears, and just believe. But after Copenhagen, no way. And then after Copenhagen came Cancun. And Durban.

Whether or not the science was certain, we were not, repeat not, going to get any sort of binding global agreement to cap, far less reduce, global carbon dioxide emissions. And so we arrived last week at Rio +20, and heard only the briefest passing reference to the greatest moral challenge of our time.

They all increasingly confirmed that the caravan of tens of thousands of carbon dioxide belching main-chancers, reality deniers and rent-seekers would keep moving on. From one luxury resort to the next. But there would be no comprehensive, binding deal to reduce the world’s Co2 emissions.

Let me make a series of what should be blindingly obvious points.

1/ If we were to reduce our Co2 emissions to zero, it would have no measurable impact on global emissions. And outside the far reaches of Christine Milne’s mind, no sentient person is proposing to do anything remotely like that. We are proposing to cut them by 5 per cent. That’s four-fifths of five-eighths of ….very little.

2/ The world’s emissions are going to keep rising. Despite all that talk of China “leading the way” on alternative energy. Yes, it is happy to lead the way, by making wind turbines and solar panels, to sell to the West – in a twenty-first century variation of Lenin’s maxim about making the rope for westerners.

The reality is that global coal-fired power generation is projected to increase by a net 600,000 megawatts or so by 2020. That’s net, after including any closures. Most of that is in China and India. And that figure is about 12 times our total power generation capacity. And that’s only power. That does not include Co2 emissions from industry.

What exactly does Julia Gillard think China is doing and will continue to do with the hundreds of millions of tonnes of coking coal and iron ore we ship there every year? Doesn’t she realise what is going on “up there”, upstairs so to speak, when the two “get together”. That when coal and iron ore “get together” in the room upstairs, they “unite” to procreate Co2, amongst other things. So, what’s her response? Nothing to do with me; I’m just the piano player in the carbon brothel.

This comes back to two very basic points. We need to take the world as it is, not as some fantasy would have it. And we need to maximise our national income, to best deal with the consequences of whatever that reality imposes on us.

The sceptical Danish environmentalist, Bjorn Lomberg, makes a parallel point. The trillions, yes trillions, of dollars aimed at promoting alternative energy will – even if successful, and accepting the science, the computer models and all the arithmetic – only postpone the calculated warming by a matter of months. It makes the most basic sense to redirect that money – those trillions of dollars – to solving other environmental problems like access to clean water and reliable electricity. And to also deal with the warming that will arrive anyway. That’s if you believe the science. That’s if the science “is settled”.

3/ This exercise has utterly debased Treasury as an institution of credible tough-minded policy analysis and advice. What you want from Treasury is cool, quality analysis – and tough-minded advice that cautions political government against embarking on frolics and good ideas at the time.  What we got is a Treasury that drank the climate change kool-aid and piped it into its computers.

For heavens sake, that Treasury could actually purport to model the economy out to 2050 – indeed to 2100 – on the basis of a proposal that completely overturns the foundation of the economy – hydro-carbon energy. And purport to be able to conclude it would reduce the per annum growth rate by just one-tenth of one per cent.

All that announces something seriously disturbing about the governance of this country. In essence, all that detailed modelling rested on one assumption – the analytical equivalent of, let us assume, a can-opener. You know the old joke about the economist on the desert island with all the cans of baked beans. How do we open them? Easy. Let’s just assume the can opener in this context is that we will invent non-hydrocarbon forms of base-load power – well, because we want to.

This reached its apogee in the recent Budget with the most absurd graphic i would suggest has ever been produced by an Australian government. One that purported to show where our power would come from in 2050. Zero from brown coal. Ten per cent from black coal. Forty per cent from renewables. That’s more windmills than we have kangaroos. And 30 per cent from CCS – carbon capture and storage, a process which only requires we re-write those laws of physics we thought were, well, settled.

This does not only announce we have a government and a policy advisory elite which is not comprised of serious people. But a group which in the privacy of their delusions has taken up residence on the planet zongo. At its simplest, we have a Treasury endorsing what it claims is the equivalent of removing tariffs, which is actually the equivalent of imposing a reverse tariff.

4/ Business and its desperate, and desperately inane, call for “certainty”. That we know the carbon tax/ETS is both pointless and extremely damaging. But just give us “certainty” so we can make the appropriate investments.

Well, such a demand is simply incapable of being met. You cannot have certainty with something (the whole carbon pricing ambition) that denies two realities –  a) what’s really happening in the world which is a combination of countries “promising” to do something about their Co2 emissions and then, not really delivering, because of b) the laws of physics. that we use carbon-based energy, and especially coal, to generate electricity because, well, it works.

The world has not chosen coal/oil etc over water/wind to generate power on a whim. But because the one works and the other doesn’t. So the business demand for certainty is actually the most basic and pervasive of delusions.

5/ the delusion of business “opportunity”. Yes, the government’s $10 billion slush fund, otherwise known as the clean energy fund, will provide opportunities. For main chancers, shysters and starry-eyed fantasists. But at a cost to consumers and business, as wee pour $10 billion down a clean energy plug-hole.

The second great “opportunity” is even more disturbing. The explosion in new climate financial instruments to be bought and sold. To be traded. To be invested in. After the events of the past two decades, leading up to the sub-prime debacle and the global financial crisis, does anyone think anything good will come from inflating a new species of derivatives? All of this adds up to no certainty for anyone, but a massive coalition of interests, sucking at the carbon tit.

As if we needed to discover that. Just look at the thousands that are already doing that, flying from one pointless luxury conference to the next. Again, do you really see salvation of any sort in this cocktail of politicians, bureaucrats, academics and NGOs?

What happens next? Well, the Liberals are equally compromised. The real insanity is not the carbon tax/ETS, but the bi-partisan commitment to the 5 per cent reduction in emissions by 2020 and the 20 per cent RET – renewable energy target.

The saving grace of the Liberals’ direct action plan is that it can be more easily abandoned when we get mugged by the reality of what the rest of the world is not doing to reduce global Co2 emissions. The default position is that we end up fixing the carbon price, relatively low, so that it operates like a perverted addition to the GST.

Finally I am, and so should everyone be, personally offended by the lies that are pumped out. The descriptions of Co2 as pollution; references to the dirtiest power stations; the trashing of something – coal-fired power – and real people that build and operated those stations, that have served us proud.

The lies, the lies the lies. The big ones described above. The small ones – fantasies actually – about China embracing wind and solar. The claims made for those useless forms of generation. And the sheer inanity of it all. That coal going into an Australian power station is killing the planet; but sending it to China to go into one of theirs is nation-building.

The rhetoric adds up to one all-encompassing belief. That the greatest mistake made by mankind was the discovery of fire.