Any proposed tax will initially concern people. Markets and the prospect of competition often scare people.
Sacrifice is always attractive and acceptable in the abstract and gets less appealing once defined. These are hurdles that any reform government must face, but reason and logic eventually prevail.
Global warming is an existential threat that the world must face up to. All nations can find an excuse to delay citing the alleged lack of action by others. Delay and denial are arguments that go hand in hand. Eventually the scientists will be proved right, and you won’t be able to find those who preach denial with such conviction.
The combined effects of climate change, resource depletion, food security and energy security will ensure global cooperation and diplomacy because the alternative is too horrible to contemplate. Policy makers must trust the scientific consensus, must commit to diplomacy, and must take domestic action in order to pressure other countries to take action.
The public and political commentators have quite fairly concentrated on examining the Government’s proposals to transition to a low carbon economy - but the Liberal’s policy of Direct Action has barely been examined in the public mind.
Direct Action has so far been a dream for the Liberals’ marketing team. An attractive slogan that sounds both plausible and attractive in recycled sound bites. The Liberals are praying that this is all the attention that Direct Action receives, hoping that people glance at the policy but don’t examine it.
Direct Action is a direct handout to the worst polluters in Australian industry.
The more carbon dioxide you pump into the atmosphere and the more technologically backward an industry is the greater the handout you can receive under the Liberals’ policy. It is policy that will hand at least $1.2 billion per annum to polluting industries until 2020.
It is a direct handout, a direct subsidy and a direct windfall to the very industries that create the problem in the first place.
There won’t be a dollar for those companies who are doing the right thing and reducing their carbon footprint. Companies like News Corporation won’t receive a brass razoo under the Liberals because they have already acted to become a zero emissions company. The Liberals Direct Action has no capacity to recognise positive action the way a market mechanism does.
The Liberals rhetoric asserts that Direct Action is a based on market mechanisms when in fact it’s based on crony capitalism. The impact of massive subsidies will distort and retard markets, especially energy markets. Market distortions will be created as a Liberal Government hands some companies massive financial assistance, thus creating both winners who get assistance and losers who don’t get assistance.
No prudent company will invest millions of dollars in shareholders’ capital if their competitors might receive massive financial windfalls from a Liberal Government. Direct Action is sure to create, foster and encourage corporate rent seeking as companies work out they have a financial incentive to link future investment to government subsidy.
In short Direct Action will cost a fortune, up to $30 billion, and it will be very inefficient in reducing carbon dioxide emissions. This lack of effectiveness will fuel uncertainty within the corporate world about the intentions of future governments.
Corporate titans know that eventually governments will turn to a price on carbon through a market because it’s the most efficient way of making the transition to a low carbon economy. It is a certainty that Australia will end up with a price on emitting carbon dioxide even under the Liberals; it is a certainty that the longer we leave it the higher that price will be.
The distortions and uncertainties that Direct Action will create will delay energy producers making large long-term investments in energy markets. Direct Action will create a policy-induced investment strike while a future Liberal government prevaricates and doles out public monies to big polluters.
Energy producers will opt for lower cost, small and less efficient energy production under the Liberals and this ultimately will mean higher costs for consumers and higher carbon emissions in the economy. Direct Action under the Liberals will bring the worst of both worlds.
The final flaw in the Liberals’ Direct Action plan is that there is very little protection of taxpayer interest built into the policy. We have no guarantee that our money will be well spent, efficiently allocated or fairly distributed. The policy briefly refers to an ‘expert panel’ who will manage the fund and who will penalise companies who don’t comply with the terms of the grants allocated.
No mention of who might be on the expert panel and what qualifications they might need to have, no mention of oversight and accountability, no mention on how many climate change sceptics they might appoint to the expert panel. In terms of accountability Direct Action is an accident waiting to happen, an accident Australia should well avoid.
If Australia turns its back on scientific expertise, rational thought and market mechanisms we will all be the poorer for it. The Liberals under Abbott have turned their backs on Howard’s market reform legacy and embraced the economics of B.A Santamaria. Direct Action would be a disaster for Australia and only delay the inevitability of carbon pricing.
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