Ten years of backflips over emissions trading leave climate policy in the lurch

Ten years ago on Saturday (December 10) Prime Minister John Howard announced the Coalition government would investigate an emissions trading scheme to reduce greenhouse gas emissions.

It was a remarkable backflip after a decade of rejecting such a policy. But fast-forward ten years and we have seen a dizzying array of U-turns on climate, most of them bad news for the atmosphere.

In the latest turn of events, the Coalition government has ruled out an emissions intensity scheme (a form of carbon trading) ahead of a national review of climate policy.

So as Australia gears up to review both its electricity market, with an initial report to be released on Friday, and climate policies, what might the future hold?

Howard’s slow warming

Emissions trading and carbon taxes were considered as far back as the very early 1990s.

In August 2000 an emissions trading proposal from the Australian Greenhouse Office fell in Cabinet, a result ascribed by journalists to then-Senator Nick Minchin. A second proposal, in July 2003 from at least five ministers, was personally vetoed by John Howard.

However, the pressure became overwhelming as the Millennium Drought wore on and states proposed to knit together a national scheme from below. Federal bureaucrats forced Howard’s hand. In Triumph and Demise, journalist Paul Kelly describes the moment Howard realised he would need to consider emissions trading:

[Department of Prime Minister and Cabinet secretary Peter] Shergold reached the bullet point advocating an ETS [Emissions Trading Scheme], Howard asked: “What’s that doing there?” It was the decisive moment; the next exchange was a classic in the advisory art.

[Treasury secretary Ken] Henry said: “Prime Minister, I’m taking as my starting point that during your prime ministership you will want to commit us to a cap on national emissions. If my view on that is wrong, there is really nothing more I can say.” It was a threshold moment.

“Yes, that’s right,” Howard said cautiously. Henry continued: “If you want a cap on emissions then it stands to reason that you want the most cost-effective way of doing that. That brings us to emissions trading, unless you want a tax on carbon.”

Howard did not want a tax on carbon.

Kelly goes on to describe the shift in the business community as a “tipping point”.

So, on December 10 2006, John Howard put out a press release declaring that Peter Shergold and a panel would investigate an ETS. Shergold delivered his report in May 2007, and both the Coalition and Labor went to the 2007 election with an ETS policy.

Rudd’s great backflip

Kevin Rudd began auspiciously, receiving a standing ovation for ratifying the Kyoto Protocol, and famously declaring that:

climate change represents one of the greatest moral, economic and environmental challenges of our age.

But then Rudd and his inner circle began the tortuous process of formulating their own Carbon Pricing Reduction Scheme.

It quickly became bogged down in concessions to the mining and electricity sectors. The first attempt at legislation, in May 2009, had a higher emissions reduction target of up to 25% if international action materialised, but failed.

The second effort created an even more generous cushion for the miners (doubled to A$1.5 billion) , but also failed after the Liberals replaced Turnbull with Tony Abbott on December 1, and the Greens in the Senate refused to vote for the plan.

Fresh from the horror of the Copenhagen climate conference, Rudd could have triggered a double-dissolution election over the scheme, but didn’t. A Greens proposal for an interim carbon tax was ignored. Rudd toyed with a behaviour change package, but was overruled.

On April 27 2010, Lenore Taylor broke the story that Rudd was kicking an ETS into the long grass for at least three years. Rudd’s approval ratings plummeted.

The toxic tax

After Julia Gillard replaced Rudd in 2010, she negotiated a three-year fixed carbon price as part of an emissions trading scheme. It was quickly politicised as a “great big tax on everything”, and lasted two years after coming into effect.

Abbott proposed a different way of reaching the same emissions reduction target – a Direct Action scheme, which critics said simply subsidised polluters. Turnbull famously called it “bullshit” in 2009.

Turnbull didn’t change Abbott’s policy when he became prime minister in September 2015. It has been recently reported that the Direct Action scheme’s Emissions Reductions Fund is “running out of steam”.

What next?

Only the brave or ignorant would make any specific predictions about the absurd(ist) rollercoaster that is Australian climate change policy.

In the last few months we’ve seen the Climate Change Authority issue a majority and minority report.

On Tuesday, transmission companies called for a trading scheme at least for the electricity sector, but the right wing of Turnbull’s own party seems implacably opposed, as do commentators such as Andrew Bolt. Now the Turnbull government appears to have capitulated.

Business, industry and green groups have been crying out for policy consistency and an orderly transition away from coal.

Now we wait for the results of the two reviews into Australia’s electricity and climate policy.

There’s the Finkel Review into the reliability and stability of the National Electricity Market, which was commissioned in response to the South Australian blackout of September 28. That will presumably create new terrain in the debate on renewable energy for which there is currently no additional target beyond 2020.

Then there’s the review of Direct Action itself, and its safeguard mechanism. In 2015, under pressure from Nick Xenophon, the government promised it would begin the review on “30 June 2017, and complete it within five months”.

Meanwhile, the Labor Party will have to come up with its own specifics for how it would hit the Paris targets. It’s hard to see the Liberal and National parties changing their minds on this issue, having somewhat painted themselves into a corner (it was not always so).

Ten years ago, after successfully fending off action, John Howard finally had to do a U-turn, but it was too little too late. The pressures are now building again. It will be interesting to see if Labor is capable of capitalising on them, and if social movements are more able than they were to keep Labor to its rhetoric this time around.

Ten years from now, will we be charting another ten tempestuous and wasted years?