The latest turn in the twisty history of Labor's climate policies

Developing and effectively implementing a response to the “great moral challenge of our time” has so far beaten two Labor Prime Ministers and looks challenging for the current alternative prime minister, Bill Shorten.

Whatever the status of this week’s leaked policy document, a reflection on the Labor Party’s gyrations on climate change policy over the past decade may provide some insight into what we might see next. The political drama will be heightened next month, when the government announces its post-2020 emissions reduction target and then its own policy to meet that target.

In the latter days of the Howard government, there was mounting pressure from Labor state governments to move on climate change, with the real prospect of a national scheme built from a patchwork of state-based emissions trading schemes (ETSs). It was about this time that the concept of a firm emissions cap, combined with trading of entitlements or emissions permits, emerged as the climate change policy preferred by economists and modelled on the scheme adopted in Europe.

To that end, Ross Garnaut was enlisted by the states as the economic guru to put meat on the bones. Meanwhile, the Coalition government developed its own commitment to emissions trading courtesy of a review led by Peter Shergold, the head of the Department of the Prime Minister and Cabinet. He chaired the task force that designed the ETS the government took to the 2007 election.

As victorious Labor leader, Kevin Rudd embraced the Garnaut Climate Change Review process and adopted an ETS approach. He also extended the renewable energy target designed by the Howard Government to deliver 20% of the country’s energy from renewable sources by 2020.

After extensive policy design work and economic analysis, Rudd’s government developed the legislation for an ETS, naming it the Carbon Pollution Reduction Scheme (CPRS). Although the intention was to introduce the scheme in July 2010, it was twice rejected by the Senate when the then opposition leader Malcom Turnbull lost his position to Tony Abbott, mainly over Turnbull’s support for the CPRS, and the Greens failed to support the legislation.

Rather than take up the trigger of a double dissolution election, the Rudd government instead opted, in April 2010, to defer the CPRS.

Julia Gillard deposed Rudd as prime minister in June 2010, and went to the 2010 election having infamously declared “there will be no carbon tax under the government I lead”. Once elected, Gillard worked diligently with a Multi-Party Committee on Climate Change comprising the government and its parliamentary supporters, including independents and the Greens. The result was the Clean Energy Future package, consisting of a successor to the CPRS (inevitably branded the carbon tax), as well as other complementary mechanisms and new agencies such as the Clean Energy Finance Corporation. This was passed into law in 2011 with the support of the Greens.

The central element of the new ETS was that it would begin with a fixed permit price of A$23 per tonne of CO₂ from July 1, 2012, and would move to a market-based pricing scheme three years later. This fixed price was a compromise between extreme views, but broadly consistent with existing projections for the European carbon price. It came badly unstuck.

First, the European carbon price collapsed, leaving Australia’s price open to being labelled as unreasonably high and likely to deliver more economic damage than environmental benefit.

Second, it opened the door for Tony Abbott to label the scheme as nothing more than a “great big tax”.

Worse followed for Labor as a result of Gillard’s decision not to play semantics and to allow the “carbon tax” label to stick. She subsequently acknowledged the terrible political price she paid for not arguing against a fixed carbon price being labelled a tax.

Not only was the government unable to sell the benefit of its policy, it failed to overcome the accusation that Gillard had misled the electorate in the election campaign. Abbott was then elected in 2013, with the axing of the tax as a key commitment. He executed that task in July 2014.

The Abbott government has, to date, relied on an auction process using a A$2.5 billion budget allocation to buy emissions reductions, and may get close to achieving the 2020 objective of reducing emissions by 5% below 2000 levels. This policy will need substantial re-engineering or replacement to achieve more substantial post-2020 targets. On the surface, this would seem to open an opportunity for the ALP.

Yet the ALP has so far failed to produce a compelling alternative. Having been reasonably non-specific since the last election, Shorten and the shadow environment minister Mark Butler have been steadily indicating a commitment to a firm cap on emissions and to an ETS. It is clear that Shorten’s first task will be to secure his party’s commitment to key policy planks, without getting locked into too much detail. How that will be achieved, and whether any form of ETS can be sold to Australian voters at the next election, is a task to test the boldest and bravest of leaders.

Tony Wood owns shares in several companies in the energy and resources sector through his superannuation fund.