A grim carbon reality for Labor: Kohler

Funny how reality can mug even the best intentions.

In 2006, nine years after the Kyoto Protocols were signed, six corporate CEOs created the Australian Business Roundtable on Climate Change to advocate “early action” on global warming, including a “carbon price signal”. They commissioned research from the CSIRO and Allen Consulting that showed Australia is especially vulnerable to climate change and that significant reductions could be achieved in Australia at an affordable cost.

Since then forests have been slaughtered to print a succession of expert reports, the issue has destroyed leaders of both main political parties, and now the Business Roundtable has morphed into a powerful force against the Gillard Government’s plan for a carbon price signal.

Actually it’s a whole different Roundtable. The old one involved six greenie CEOs trying to do their bit, in partnership with the Australian Conservation Foundation. The new one is a government consultation body of 19 business representatives put together in October last year and chaired by Treasurer Wayne Swan and Climate Change Minister Greg Combet.

They met on Friday but it was not a good meeting: the ministers and bureaucrats present got fleas in their ears.

By all accounts it was hijacked by angry resource exporters and steel makers (BHP, Rio Tinto, Woodside and Bluescope) and now this morning, as week seven of the program to sell the 2012 carbon tax gets underway, the government has a real problem.

Agriculture (15% of total emissions) has been totally excluded so farmers don’t have to be pacified, but at the urging of the Greens, fugitive emissions from gas and coal exports (8% of emissions and rising fast) are in, as are industrial processes (6%). That means BHP, Rio, Woodside and Bluescope, along with other exporters and manufacturers, will have to buy permits for their emissions.

Those CEOs can see that there is only going to be so much compensation to go around, and with government ministers talking about compensating low to middle income earners directly with cash handouts, someone (them) is going to have to provide the cash.

The coal electricity generators (37% of emissions) complained loudest over Kevin Rudd and Penny Wong’s CPRS in 2008-09 but this time they are taking a back seat, happy to leave the running to the resource exporters.

And why not? They are the saviours of the nation, not belchers of horrible coal fumes into the atmosphere, and they won the campaign against the mining tax and therefore have solid form in defeating the Government on new taxes.

Research by the Grattan Institute’s John Daley, interviewed here on Friday, has found that the effect of a carbon price on exporters and manufacturers will be small and that governments are hopeless at achieving anything with direct action. But the first casualty of war is truth, and this is becoming a war.

If the Government allows the climate change debate to become total war between the resource exporters and the Greens it will be the loser itself because both sides of the argument have the power to bring down the Government.

The sensible thing to do would be to exempt exporters, along with agriculture, but the Greens won’t allow it: “big business” must be included.

Everyone knows Australia’s problem is that 70% or more of its electricity comes from coal and that even though it was clear in 1997 that this was a time bomb, nothing was done to defuse it – except producing reports and having meetings.

Direct action – paying the coal generators to switch to gas – might have worked 10 years ago but there’s now been a global credit crisis and recession that has soaked up the government surpluses from resource exports to China.

So there’s no longer enough money to do that without raising taxes – it has to be a carbon price. That will cost every household at least $1,000 a year if it’s to be effective and put important manufacturers out of business, not to mention retailers, transport companies, you name it.

There is simply no easy answer to climate change in Australia thanks to past procrastination. Whichever government is in power when it finally has to be dealt with won’t be in power for long.

This article first appeared on Business Spectator.