How Rudd sucked Turnbull into destroying the Opposition: Gottliebsen

The real reason why Malcolm Turnbull is in so much trouble is that he agreed to a bad emissions trading deal which pleased nobody, except the Rudd Government who used the legislation to drive their opponents into the dust.
The proposed scheme is so bad that there are circumstances that could arise where it will increase carbon emissions. No other major country in the world would do such a silly thing. But for the Rudd Government it was not silly because, by convincing Malcolm Turnbull to support a bad deal, the Government destroyed the opposition.

If we want to reduce our carbon emissions how do we do it?

While switching to energy-saving light bulbs and turning off lights will help, the only way to achieve sustainable carbon reduction on a large scale is to invest in plants that emit less carbon. The biggest item is electricity generation, but there are many other areas that require new plants.

China, our main trading partner, is engaged in a massive carbon reduction investment program and how we have fallen behind was underlined by Alan Kohler yesterday and Giles Parkinson today. So how does the Rudd/Turnbull emissions trading scheme measure up on this criteria?

Well, it fails completely. As I set out yesterday, the Rudd/Turnbull ETS is about redistributing wealth rather than erecting new plants. You can see this by following the money.

Rudd and Turnbull estimate that on the basis of a $26 per tonne carbon price (it could be closer to $35) the Government will raise around $114 billion between 2011 and 2020. That’s money that Rudd and Turnbull plan to extract from the business community which will give businesses less cashflow to erect carbon reduction plants.

Rudd and Turnbull will give about 47% of that $114 million or $54 billion, to 4.3 million Australian households who are on low or middle incomes. This huge proportion of the population will therefore have no incentive to reduce carbon because they are fully protected. Indeed 2.6 million of the households will receive assistance equal to around 120% of their overall cost increases so they are better off. In other words, Rudd and Turnbull are using the ETS legislation as a massive income redistribution exercise to boost the income of lower income people. Many in the community would say that boosting lower income levels is a good thing and that’s fair enough. But to make that a central part of the carbon legislation is just plain stupid.

The rest of the money is sprayed around industry in accordance with their lobbying influence over Rudd and Turnbull. Clearly the amount to be distributed is less than that which has been raised, so we have lots of losers. Exporters must buy permits, so making their products less competitive. Importers do not have to buy permits so it makes sense to make goods in countries that have no ETS laws.

Back to our new plant test. We can fund new power stations and other carbon reduction plants via taxpayers but, in fact, we need the private sector. However, the private sector has been drained of cash so it has less money to fund carbon reduction investment. Worse still, Rudd and Turnbull surgically attacked the major power generator investors based in Japan, China and India by changing the rules to reduce the value of their existing Australian power investments. These giants are telling the world that Australia is unsafe. Three superannuation funds were also minced and they are telling their mates how dangerous power investment has become in Australia.

Much of the losses, but not all, are in the Latrobe Valley and the Government appears to be planning to insulate Victoria for the resulting power chaos by guaranteeing $7 billion in Latrobe Valley bank loans and the agreements that protect retailers like Origin and AGL. The only way to repay those loans is to the belch out as much carbon as possible from the Latrobe Valley.

Rudd and Turnbull effectively blocked a plan to erect a gas fired generator that would have reduced carbon. Turnbull was conned by a political genius and it looks like costing him his job – as it should.

This article first appeared on Business Spectator.