Saturday, October 04, 2008

Congress no green house

There are two great myths perpetuated by Kevin Rudd and Climate Change Minister Penny Wong as a foundation for Australia introducing an emissions trading scheme.  Both are deceitful and misleading the public about the cost of an ETS.

The first myth appears in Wong's green paper, which argues Australia is "acting with the rest of the world" because other countries are supporting an ETS, in particular the US, where "both presidential candidates are committed to introducing schemes".

Wong is correct that Republican presidential candidate John McCain candidate and his Democratic rival, Barack Obama, support the introduction of a cap-and-trade system.  But their support doesn't guarantee anything and the $US700 billion ($895 billion) financial bailout package demonstrates why.  The bailout is one of the grandest bipartisan political measures taken in US history.  It was supported by Republicans President George W. Bush, Treasury Secretary Henry Paulson and McCain, and the Democrats' house Speaker Nancy Pelosi, Senate majority leader Harry Reid and Obama.

Yet the bill failed in the House ofRepresentatives.

A bill may yet pass, but it has nothing to do with bipartisan support.  There isn't similar party discipline as in Australia and therefore bipartisan support doesn't mean success.

Members of the House of Representatives are elected every two years and are highly accountable to their electorates.  Their allegiance is to their electorate first and their party second.  And US voters are very sensitive to thegovernment voting for legislation that will simply take money from their back pockets.

The present 110th Democrat-controlled Congress provides ample evidence.  To date there have been eight bills introduced to establish a cap-and-trade system.  None have passed.  Bush didn't even need to pull out his veto pen.

These failed bills are merely following in the footsteps of the Kyoto Protocol, which was voted down in the Senate 95-0.  Similarly, in 2003 McCain and then Democratic senator Joseph Lieberman proposed the Climate Stewardship Act.  The bill was defeated 55-43.

Both senators then proposed an amended version in 2005 that was defeated by an even wider margin.

Ultimately, the reason for each bill's demise has been the cost it would impose on American consumers and industry without corresponding costs on competitor nations.  The fallout from the financial crisis is just going to make negotiating an ETS harder.

And that leads to the second myth:  Australia needs to develop an ETS to participate in the forthcoming international trading scheme.  But there will not be a comprehensive international trading scheme.  Establishing one requires every major emitting country toparticipate.

At the G-8 meeting in Japan earlier this year Chinese President Hu Jintao reiterated what has long been the mantra of the Chinese Government:  "China's central task now is to develop the economy and make life better for the people".  The attitude of the Chinese Government is that "developed countries should make explicit commitments to continue to take the lead in emissions reduction".

China is not alone.  Indian Prime Minister Manmohan Singh said to the 63rd session of the UN General Assembly:  "The outcome must be fair and equitable ... we are committed to our per-capita emissions of greenhouse gases not exceeding those of the developed countries".  In short, India may only slow the growth of its emissions to correspond with developed country levels.

For the US to participate requires developing countries to take proportionate emissions cuts.  For developing countries to participate, developed countries need to shoulder most of the burden.  In this scenario the developed and developing world are caught in a game of climate chicken.  But outside Australia and the European Union no one appears interested in playing.

The final Garnaut report points out:  "The only realistic chance of achieving the depth, speed and breadth of action now required from all major emitters is allocation of internationally tradeable emissions rights across countries".  But it is simply not going to happen.  The likeliest outcome will be a voluntary international trading scheme.  Countries that participate will be guinea pigs.  Their role will be to iron out problems, such as developing an accounting system for an industry's carbon footprint, the equivalence of permits and how to respond to the nightmarish impacts on trade.

If we keep heading down this path, the myths will become clear, and it won't take long before Australians start to ask why we are harming our economy while achieving virtually no reduction in emissions.

It is an answer Rudd and Wong should think long and hard about.


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