Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

The Australian Democrats are pleased the issue of climate change has finally hit the mainstream consciousness. The Democrats have been actively involved in highlighting matters of climate change and environmental threat for three decades. When media owners finally take an interest, their employees dutifully take note and change tack; and so over the last few months many newspaper articles have highlighted both the problem and the many and varied solutions.

The question of what is to be done has become very much a hot topic in political circles. With the release of the British government’s Stern Review on the Economics of Climate Change on Monday 30 October 2006, climate change truly catapulted into both mainstream public and political debate internationally. The Stern review’s findings and conclusions were reported all over the world and in many of Australia’s newspapers.

Two key policy responses to the climate change problem are carbon taxes and emissions trading. It was the Democrats who initiated the groundbreaking November 2000 report of the Senate Environment, Communications, Information Technology and the Arts References Committee The heat is on: Australia’s Greenhouse future. That report was largely ignored then by Australia’s media. Although now six years old, the report is still very relevant and has a whole chapter on emissions trading, including Democrat senators’ recommendations on a carbon tax and a joint Labor-Democrats recommendation on emissions trading.

It is going to be a massive task to reduce emissions by what scientists say is necessary—which appears to be 50 to 60 per cent by 2050—just to stabilise carbon dioxide levels. This will apparently still mean average temperature increases of up to three degrees by 2100. Apart from the devastating environmental, economic and social impacts this would have, the Stern review predicts that dire economic consequences across the world will be the price to pay if serious steps to address the issue of climate change are not taken now. All in public life have a duty to future generations. Action is required. In human terms climate change may be slow moving, but we do not have that much time.

Australia’s current stance towards emissions reduction is still uncoordinated and almost non-existent. In my political and parliamentary life I look after matters of finance, taxation and economics for my party. On my website is a discussion paper on carbon taxes and emissions trading from those perspectives. Climate change cannot be viewed from a purely environmental perspective. It is a significant social and economic issue. Because of its economic effects, climate change forces governments, businesses and communities to think seriously on these matters. The response from many in the business and community sectors is quite encouraging. It will be costly to address climate change. It will be far more costly if it is not addressed.

Although morality and altruism have obvious appeal, Australia reacts to hip-pocket stimuli. It seems people and business are more inclined to hear, agree with and react to arguments which appeal to their economic behaviour. Insights from economics have shown that what is needed to achieve substantial and effective action is to introduce an element of economic behaviour into the policy mix. Carbon taxes and emissions trading schemes are designed with just that purpose in mind—although they are but two policy tools that ideally would form part of a greater policy toolkit. Although both are indeed economic instruments, their fundamental goals are to achieve socially and environmentally, and economically, desirable goals.

In simple terms, the result of either a carbon tax or an emissions trading scheme is to introduce a price on carbon which is borne by those who produce it, and of course by those who consume their goods. Because it burdens carbon producers with an extra cost, there is a genuine economic incentive to alter behaviour so as to minimise or reduce that cost aspect of their activities. In doing so, a serious negative externality is internalised and polluters are forced to pay the full and total cost of their actions. It should be a concern for everyone that at the moment the only people liable to pay for our current actions with respect to greenhouse gas emissions are future generations, who are either too young to influence current policy or not yet even born.

Australia is well suited to either an emissions trading scheme or a carbon tax, or both, because it is a sophisticated market economy and has a highly developed legal and political system which is relatively corruption free and politically stable—in other words, such policies can be introduced as a result of a mature democratic process. The real difficulty lies in gaining widespread political, public and industry support. In general, people do not like to hear that they will be burdened with a new tax or higher cost of electricity, especially when they are accustomed to having paid low prices for such a long time. But, as a number of energy experts have said, the time for cheap power is over and we will have to face up to the reality of the situation. What is needed is a shift in public perceptions and acceptance of this reality by the public. As the Stern review notes:

Mitigation—taking strong action to reduce emissions—must be viewed as an investment, a cost incurred now and in the coming few decades to avoid the risks of very severe consequences in the future. If these investments are made wisely, the costs will be manageable, and there will be a wide range of opportunities for growth and development along the way.

I remember the first big energy shocks when the price of oil shot up. Human beings are wonderfully adaptable. They adjusted, with a huge investment in and consequent realisation of energy efficient vehicles.

Beyond public and political acceptance, however, lies the problem of Australia standing alone. Greenhouse gas emissions are a global problem, and the impacts are not confined within the borders of the country from which they are initially emitted. For Australia the ‘first mover problem’ has often been touted as a major obstacle, particularly by the Howard government. The problem in acting first and in a stand-alone fashion is that our economy is then expected to suffer the most. The argument goes that carbon-intensive industries will close down their operations and relocate them outside of Australia in countries where they do not face the operating constraints of a carbon price—in famous Australian terms, the ‘we’ll be rooned’ argument.

That type of argument is intuitively persuasive and it is an argument that is assumed to be true but, if it were true, why then, on a parallel example, did Australia unilaterally and massively reduce its tariffs? Surely it should have waited for other countries to move in concert. Australia did not, because, in exposing itself to the cold wind of international competition, it forced Australian industry to become more efficient and productive. There is a lesson there for the carbon price signal.

To wait for universal international agreement is to wait forever. I do not wish to advocate policies to tackle climate change that equate to harsh economic shocks for the Australian people, but nor do I wish for us to remain inactive on the issue of climate change until some mythical universal agreement can be reached. Gradual incremental but significant changes in Australia now will avoid drastic measures in the future, which would be to our greater detriment. Heavy investment in renewable energy now is in the national interest. I recognise that, whilst it is true that Australia contributes a relatively small proportion of global warming, we still have the potential to play a much bigger part in encouraging action both in the region and at a global level. As an advanced, industrialised economy it is up to Australia to help lead the way. We need to show that we are committed to dealing with the problem at hand and convince other regional governments that the only viable course of action is to start implementing appropriate policies.

The best way to do this is for the federal government to stop tiptoeing around the issue. Fortunately this year we have seen a shift in the Liberal Party from talking down the issue to accepting that the climate change problem is looming very large on the horizon and can no longer be ignored. Finally, with the Prime Minister wanting to be a champion of a new Kyoto and federal environment minister Ian Campbell saying that Australia could push for a regional carbon-trading scheme as part of the first step towards global action, we do have a chance to make better progress than to date. Coincidentally, this also lines up with one of the key findings of the Stern review, that:

Establishing a carbon price, through tax, trading or regulation, is an essential foundation for climate-change policy.

This conclusion is not new—if one reviews the literature over many years covering the most appropriate policy responses to climate change, the idea of introducing a carbon price signal is thoroughly discussed.

While I condemn the coalition for being so slow to wake up, it is not for me to attack the coalition on their awakening—not yet anyway. I welcome the signs that they might at last do something positive. (Time expired)