The Australian government’s upcoming productivity and tax summit is overshadowed by a notable silence on climate policy. As the event approaches, the Productivity Commission (PC) has emerged as a lone voice advocating for a carbon price, a critical yet neglected component of Australia’s productivity strategy.
With major political and business entities largely avoiding the topic, the PC highlights the potential of a carbon price as a straightforward solution to enhance productivity. The Labor government, wary of the Coalition’s stance, has shied away from robust emissions reduction policies. Meanwhile, businesses remain complacent, and unions like the CFMEU and AWU, known for their climate skepticism, dominate the labor movement. This collective silence on climate issues is palpable as the summit nears.
Breaking the Silence: Garnaut’s Critique
Renowned economist Ross Garnaut recently broke this silence, criticizing the government’s failure to meet renewable energy targets and advocating for a carbon price. His comments drew criticism from Energy Minister Chris Bowen, underscoring the contentious nature of climate policy in Australia.
The intersection of emissions abatement and productivity is evident in Labor’s reluctance to rectify nine years of Coalition-led climate denialism by reinstating a carbon pricing scheme. Instead, the government relies on a mix of less efficient measures, including regulations, subsidies, tax concessions, and the controversial Australian Carbon Credit Unit (ACCU) system. This approach risks a slower, costlier transition to a zero-carbon future, vulnerable to exploitation.
Productivity Commission’s Stance
The PC’s interim report subtly critiques the government’s emissions abatement policies, noting their inefficiencies. It points out the shortcomings of Labor’s Safeguard Mechanism, a policy slightly modified from the Coalition’s original version. This mechanism fails to cover a significant portion of heavy emitters, and its rules to prevent “carbon leakage” may hinder heavy industry’s contribution to emissions targets.
The report also questions the credibility of the ACCU system, emphasizing the need for genuine reductions in atmospheric carbon.
“It is important that, going forward, ACCUs represent genuine reductions in atmospheric carbon.”
The PC’s analysis suggests that the current system falls short of this standard.
The Case for a Virtual Carbon Price
While the PC stops short of recommending a return to an economy-wide carbon price, it proposes an alternative: a virtual carbon price. This concept involves tasking an independent agency with developing national carbon values, which would serve as benchmarks for policy evaluation. These values would estimate the implied carbon prices necessary to meet Australia’s emissions targets, providing a basis for comparing the cost-effectiveness of current policies.
This approach, though not as effective as an actual carbon price, offers transparency regarding the costs of existing policies. It mirrors the role of Infrastructure Australia, which, when independent, can critique the business case for major investments. Similarly, a virtual carbon price could illuminate the inefficiencies of current emissions abatement strategies.
Implications for Policy and Debate
The PC’s report underscores the need for a more informed debate on climate policy within the context of productivity. The current discourse is muddled with conflicting interests from business lobbyists, unions, and economists, each pushing their agendas. The absence of a robust discussion on emissions abatement is telling.
As the productivity summit approaches, the PC’s findings highlight the urgency of addressing climate policy as a key component of Australia’s economic strategy. The call for a carbon price, whether actual or virtual, represents a step towards a more coherent and effective approach to emissions reduction.
In conclusion, the PC’s intervention serves as a reminder of the critical role climate policy plays in shaping Australia’s economic future. As the summit convenes, the challenge remains to break the silence and prioritize climate action as a cornerstone of productivity enhancement.
