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John Passant believes that with carbon price at its current level and the availability of carbon permit for big polluters, the carbon tax will be insufficient to to stimulate the renewables sector such that Australia moves beyond fossil fuels.
MUCH of the commentary on the carbon tax seems a little overplayed. It’s either the end of civilisation as we know it or some first step on the path to salvation.
The faction of the bourgeoisie and their politicians who oppose the carbon tax have managed to hitch on to workers’ entirely rational fears about having to pay more because of the tax. At a time when the share of national income going to labour is at its lowest since records began to be kept, that fear is understandable.
However, the household compensation package – the tax cuts and increased Centrelink payments – in the short to medium term will, if the Government and NATSEM analyses are right, marginally improve the living standards of most workers. Treasury estimates that for most people the cost of the carbon tax will be $9.90 per week and the compensation package will deliver benefits of $10.10 a week. NATSEM estimates the benefits will be even greater.
But this is in the short to medium term. That’s the rub.
A carbon tax – or, from 1 July 2015, its market twin the emissions trading scheme – have as their logic imposing the cost of pricing carbon on workers. A pricing mechanism can only work if that happens. The carbon tax is effectively a consumption tax.
The whole basis of the neoliberalism of the last 30 years has been to implement policies that favour the one per cent and attack the rest of us in an attempt to restore profit rates.
The carbon tax is born of that logic. Remember the GST compensation package? No, didn’t think so. It was eaten up by bracket creep, inflation and changed government policies over time.
Much of the carbon tax compensation package is merely a return of the bracket creep of the last few years. Bracket creep arises when you go into a higher non-inflation indexed tax bracket. Even if that doesn’t happen your pay increase is eaten away because it is taxed at your marginal tax rate, not your (lower) average tax rate.
Further, the compensation package of up to 94.5 per cent of the cost of permits for the polluters means that the cost of the tax can effectively be not $23 per tonne but $1.30 per tonne.
The aim of the carbon tax is, over time, to increase the burden of pricing pollution on to workers, not the bosses and their system, which creates and profits from greenhouse gas emissions.
The carbon tax will lock in gas-fired power stations as ‘cleaner’ energy than coal at the expense of a move to a 100% renewable energy economy.
Don’t believe me? Here are the predictions from the Government’s Clean Energy Future Plan. It says (at page 71) that gas-fired power currently accounts for only 16 per cent of the Australia’s electricity.
Under the carbon tax and associated emissions trading scheme, Treasury predicts (at both pages xii and 24) that ‘total renewable generation (including hydro) will comprise around 40 per cent of electricity generation in 2050. Gas-fired electricity [will] increase by over 200 per cent by 2050.’
Combined with continued coal and petroleum use, this means that 60 per cent of Australia’s energy will come from fossil fuels in 2050, with most of that coming from gas, a fossil fuel which releases carbon dioxide and, in the case of coal seam gas, methane into the atmosphere.
The coal addicts in Treasury go so far as to say that ‘if we can combine coal-fired generation with new technologies such as carbon capture and storage, then our reserves of coal can continue to underpin cleaner electricity generation.’
The Government clearly has a transition in mind, not to the renewables that the Greens and others want, but to gas. This is the key point about the carbon tax. As the Minister for Resources and Energy, Martin Ferguson said:
‘During the period of transition, however, gas will play an important role as a cleaner transition fuel – from both a peaking and baseload perspective.’
The ‘transition period’ appears in Ferguson’s mind to be till 2100.
The price of permits – $23 a tonne, with prospects for some gradual but still minor rises over the coming years – does not make wind power cost effective, let alone solar power.
According to the Greens, that would require a tax of at least $40 a tonne and $100 a tonne respectively. Here’s how Christine Milne put it 2 years ago:
‘I certainly recognise that you are going to need a price at $40 or more to shift from coal to gas and then a higher price still from gas to the renewables.
‘The Greens are arguing for a combination of measures … because even at $40, it is not a high enough price to bring on renewable energy at large scale.’
Sarah Hansen-Young has said you would need somewhere around at least $100 a tonne to drive investment in solar generated electricity.
Beyond Zero Emissions (BZE) estimates even larger costs. BZE says the cost effective figures are more like $70 a tonne for wind power and $200 a tonne for solar thermal. In fact, BZE used to argue for the focus to be not on pricing mechanisms but on action, with a tax of about $10 a tonne as complementary to large scale investment in solar thermal, for example. In the same report BZE said:
‘A low carbon price of $10-20/tonne is somewhat useful, as it will still create a disincentive to build new coal-fired power stations, and will ensure that coal is more likely to be displaced by renewables than gas. However, a carbon price which is greater than $25/tonne will ensure a mass rollout of gas-fired power stations, while renewables are left out in the cold.’
As BZE argued as recently as June last year:
‘We believe that seeing a “price on carbon” as central to a low-emissions future, whether in the form of a carbon tax or trading scheme, is both inadequate to the task at hand and a dangerous distraction from effective climate action.
‘Furthermore, while many people who want serious climate action have understandably thrown their weight behind the current carbon tax proposal being formulated in Canberra because at least “something” is being done, we believe this represents a political dead end for the climate movement which will constrain the possibilities for demanding more serious action in the future.’
They estimated the cost of moving to a totally renewable energy economy by 2020 as about $370 billion over ten years — a big cost but, in perspective and annualised, only about three per cent of Australia’s current GDP, and one that could be easily paid for by taxing big business and cutting defence spending.
A full rent tax applying to all minerals and monopoly profits (think banks, for example) might approach that funding level. Add in an annual wealth tax on the likes of Rinehart, Palmer and so on and we may well have enough tax to pay for it. Increasing company tax and the marginal tax rates on the wealthy offers more opportunities to fund a move to renewables.
Let’s go back to Labor’s carbon tax. When (or more likely, if) the move to an emissions trading scheme begins in 2015, then the pricing mechanism might begin to bite.
Let’s look at the European scheme as a guide. The main beneficiaries of that scheme have been the banks, who have manipulated the market and price to make easy money.
In the first two years of operation, the European trading scheme saw emissions increase. In later years emissions did fall, but mainly because the Global Financial Crisis cut production. The scheme arguably had some, but not a major, impact.
The Gillard Government’s plan is to move to an ETS. It hopes this will produce a price on carbon that will really affect consumers — i.e. hit workers.
However, the carbon tax will continue if there is not a significant international trading scheme or capacity to trade internationally in place by 2015.
The Treasury modelling shows that without an international trading scheme, emissions in Australia will rise 2 per cent by 2050. With such international trading Treasury predicts that emissions will be cut by 80 per cent. Good guess? Who knows.
The US, China and India do not have and will not have any carbon pricing mechanisms in place by then or have any plans to introduce such schemes. So the international trading market will rely on major players like Europe but not the other major players.
The European ETS might survive till then. Might. The price has collapsed.
The carbon tax and, in three years’ time, the ETS may well be spurring all that Coal Seam Gas exploration of late.
I really want to side with those who think that the carbon tax will actually address climate change. But reality gets in the way.
To imagine the market will fix the problems intrinsic to the market is to live in a fool’s paradise.
The profit motive will trump people’s needs for a safe and clean environment every time. It is the relentless logic of the system to pollute, to treat natural resources as nothing more than a factor in production and hence something now with a price on it.
Global warming threatens the future of humanity. Tinkering with the price of carbon won’t change that.
It was Australian National University earth and paleo-scientist Andrew Glikson who wrote in The Conversation that the consequence of the dumbing down of the debate was that ‘an irrelevant discourse ensues between those willing to undertake symbolic action and those who deny the science altogether’.
Symbolic action. That’s the carbon tax.
Maybe I am wrong and capitalism can plan ahead and see the necessity to save the system rather than make an immediate profit. Maybe, although every time I write that I am reminded of Lenin’s aphorism: The Capitalists will sell us the rope with which we will hang them.
Immediate profit rules over everything else.
OK, say I am wrong. Say Australian capitalism does try to address climate change in a meaningful way.
As I mentioned BZE estimates that it would cost $370 billion over the next ten years to make Australia a completely renewable economy. That is on average $37 billion a year. A fully fledged resource rent tax would have bought in $12 billion a year on very, very, conservative estimates. Other estimates put it over $20 billion.
Notice how the mining industry destroyed that tax and Kevin Rudd’s prime ministership with it — and that was when the money was going to go, in the main, as tax cuts for all of industry.
Any attempt to properly fund turning Australia into a renewable economy (for example a rent tax on all monopoly, including mining companies, banks, supermarkets and so on) would have to overcome the hostility not just of the miners but most of the capitalist class.
As the ‘debate’ about the Resource Super Profits Tax shows that overcoming of capital isn’t going to happen through Parliament or reasoned argument.
If the Greens are serious, then the fight for real action on climate change will have to go outside Parliament and onto the streets as a counterbalance to Clive Palmer, Gina Rinehart and the like. I don’t get any sense the Greens intend to leave the safety of their warm, safe, parliamentary nest to confront the vultures of capital.
Maybe the answer is a democratic revolution to challenge the rule of capital and its greenhouse gas emissions and to develop, in Glikson words, ‘a plan for the future’ and – quoting Professor Hans Joachim Schellnhuber, chief climate science advisor of the German Government – save ‘the very life support system of this planet.’
I do not believe capitalism can and will plan for the future survival of the planet. We workers can. But to do that we have to democratically organise production to satisfy human need, not to make a polluting profit. That’s a revolution.
(You can read more by John Passant on his blog Enpassant.)
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License
5 Comments
A persuasive critique of the #carbonprice. Would be good if #Greens people took up the challenge of responding. http://t.co/5PbzeR9e #auspol
As a single male with no kids or any claim in the future I find it so hypocritical that so many people say the most important part of their life is their children, the legacy of their life.
Then in the next breath most(if the polls are to be believed)have the personal attitude that they don’t give a crap about their kids future in the slightest. Anyone that does not think climate change is a problem should tell their kids what they think about the subject, I dare you too!!
One day they will be at your bedside as your time comes to an end, no matter how old they are now they will grow up & they will remember what you said. So when they push you outside in your wheelchair to bake in the midday sun as your just deserts because “why should they share the air conditioner with you when you didn’t give a shit about them”, maybe the coin will drop.
Revenge is coming so please everyone make your opinion well know as one day we will be held to account, well those with kids will be. My estate was going to the RSPCA until they jumped onto the mad monks anti climate change band wagon, pity.
Given the bleating and hyperbole from vested interests and denialists over the current modest carbon prices I agree with the pessimistic analysis that more meaningful action here is not likely to happen unless the sky does really fall in.
The title of JPs piece is ‘Renewables need more than this carbon price’
1. Within the legislation itself renewables have been given considerably more than the carbon price. In the lead up to the Clean Energy Future legislation while the multi-party committee was still thrashing it out it was well understood and fairly widely discussed that a price of $23/tonne would not be enough to drive the transition from coal fired power to renewables. Most estimates seemed to hold that it was not even enough to drive the transition from coal to to gas.
The Greens wanted a much higher carbon price I seem to recall $70/tonne being bandied around. Half of the Gillard government were not interested in going down this path at all – remember Gillard and Swan were the two who talked Rudd into backflipping and without the hung Parliament with The Greens, Windsor and Oakeshott in the balance of power all we would have got was Gillard’s silly Citizen’s assembly.$23/tonne was simply the figure the horse trading turned up. Labor wouldn’t try for higher and the Greens would only accept it with a swag of other concessions
The price of getting the Greens on board included the fixed price period, the $15/tonne floor price and most importantly the $10 billion for the Clean Energy Finance Corporation to seed fund renewable energy projects. Leaving aside Fossil Fuel Ferguson’s idiot determination to get as much of this money as possible directed towards emissions reduction technology for coal combustion, it is this fund, not the Carbon tax ETS which it is hoped and expected will drive the shift in the early years. The Greens on the multi party committee were very clear about this.
Although the carbon tax ETS has the potential supposedly to contribute more and more as the free permits are wound back and the targets are increased it is the CEFC which is expected to do the heavy lifting in driving the transition in the early years.
No-one talks about the CEFC but, although once embedded the ETS will be hard and slow to unpick, it is fairly easy for Abbott to trash the effective bit of the CEF legislation and claw back a handy $10 billion to fund some of his promises. You can bet this is near the top of Hockey’s list of spending waste to be re-directed.
2. JP should remember that BZEs work has been heavily slanted from the beginning towards the promotion of one particular solar technology – Concentrating solar thermal with storage. Since the BZE Stationary Energy report was completed a couple of years ago now we have seen solar PV rapidly descending the cost curve so that it has according to many experts already reached grid parity with fossil fuel powered generators under a wide range of circumstances.
JP might find that other more recent sources can provide a more balanced assessment of future energy mix and a different timeline for achieving it than BZE. Mark Diesendorf is one who springs to mind and Giles Parkinson’s many articles might be another.
Should the $9 billion or so p. a. in unconscionable subsidies to fossil fuel use be removed (as they certainly should be) and redirected into renewables and energy efficiencies (as they certainly should be) grid parity is probably already passed for wind and distributed solar.
3. BZE position on gas has been correct from the start. As the IEA has warned us the world seems just about to enter a ‘Golden Age of Gas’ which as they also acknowledge will drive the global temperature up by more than 4ºC this century. At this point the possibility of controlling global warming will have been long since lost. The move to gas is an intractable problem and JP is right to highlight the dangers that lie down that path.
4. JP is very gung ho about the possibilities of confronting ‘the vultures of capital’ outside parliament. His site describes him as a long-term political activist but gives no hint about the extent of his involvement in the community climate action movement or with any of the eNGOs. If he has been involved he will know that the last five years of effort from ‘civil society’ have been a hard slog for very little direct return. If he hasn’t had much direct involvement I recommend he studies the essays on this topic that David Spratt has begun to post on his blog Climate Code Red.
5. As a Socialist JP takes the mandatory swipe at The Greens for conducting the battle from their cosy Parliamentary nest. JP is Canberra based and the Canberra experience must be different from the Melbourne one. In my years of involvement in community climate action in Melbourne the Greens have been a constant presence at demonstrations and as participants in actions. When my climate action group conducted a weekly picket of our local State Labor member’s office every Wednesday afternoon for a year our numbers were swollen by the participation of Greens members who did not belong to the group but saw the action as worthwhile. Perhaps JP needs to get out more.
The kind of serious questions about the #carbontax that everybody should be asking http://t.co/530mhzLu #LeftTurn #auspol
Nobody wants Global Warming to happen, yet nobody wants to do anything about it. We are screwed, if Aussies are so self entitled they can’t even get over paying LESS THAN 1% increase in certain bills, which will be dwarfed by other standard price increases that happen day after day, and are completely unrelated to the carbon tax.
Selfish, short sighted, idiotic electorate. Of course the price rises are supposed to filter down to us, what else is going to drive behavioural change? Problem is, now the dopey voting fools believe that every price rise is because of the carbon tax.
A stranger to our land might be forgiven for concluding that, judging by the behaviour of the politicians and public and media, we apparently lived in a price rise free zone before this ‘carbon tax’, the mere mention of which(years out from being implemented) was enough to cause electricity prices to rise 50%(every week if you read the Tele, must be like $50.00 a kWh by now).
I’m sick of producers copping all the blame. Production is driven by consumption demand. It is a partnership in pollution. Typical selfish irresponsible Aussies looking for someone else to blame and pay their bill.