Australia needs to answer some big climate change questions: Gottliebsen

The decision by the government to propose a 5 per cent emissions reduction, but to offer more cuts if other key countries take that step, shows that the environmental debate in Australia is maturing. Australia, with no nuclear generation and a major coal-driven power sector, is in no position to lead the world. If we are going to significantly reduce our carbon we must develop a long-term action plan, but business should be ready for nasty surprises.

But nothing quite prepared Australian business for last year’s emissions trading compromise that Prime Minister Kevin Rudd and the then opposition leader Malcolm Turnbull agreed to.

Rudd and Turnbull planned that on the basis of a $26 per tonne carbon price (it could be closer to $35) the government would take around $114 billion from the business community between 2011 and 2020.

Under the revised scheme, about 47 per cent or $54 billion would be distributed to 4.3 million Australian households who are on low or middle incomes including 2.6 million low income households who would receive assistance equal to around 120 per cent of their costs indexed into the future. Those businesses that spoke up and grabbed political attention were protected – including a $7 billion possible guarantee to the banks funding Latrobe Valley power stations. Those businesses that did not attract the politicians’ attention faced higher power and water costs under the proposal as a result of desalination, higher interest rates due to inflation plus the emissions trading carbon levy.

If Rudd tries to debate that legislation in an election with current opposition leader Tony Abbott – and Abbott has a half creditable environmental policy – then Abbott will win the debate. It became clear at Copenhagen that the world is proceeding towards carbon restraint but just how it will be arranged remains to be seen.

What Australia needs to do is attack the low hanging fruit. For example two of the brown coal generators need to be replaced by gas which can be funded by China Light and Power provided appropriate rules are put in place to recover their existing investment in brown coal. But longer term we need to determine how we are going to generate the bulk of our base load power.

Do we go for renewables which would be very expensive on the basis of current technology? Do we go for gas or do we go nuclear? Australia is the only country in the G20 without nuclear power. Alternatively do we wait for clean carbon burning or new renewables technology including geo-power?

These are really important decisions that need to be made. If China and the US take the emissions trading route then we must follow but we really have to get off our tail and make hard decisions and not hide behind what became a crazy scheme that made politicians feel good but did harm to Australia, particularly as exporters who could not do a deal were to be taxed and imports would come in tax free.

Finally, the IPCC (intergovernmental panel on climate change) is plagued by scandals on its report presentation which is fuelling community doubts about the effect of carbon on climate. This will make it harder for global agreement.

This article first appeared on Business Spectator.