Gillard’s climate change citizen’s assembly won’t work: Gottliebsen

Let me explain why Julia Gillard’s plan to bring together people from the Australian community to sort out a carbon policy can never work. Although the number of people questioning the whole carbon-climate notion is rising sharply, we will assume that such a group selected and briefed by an ALP government would conclude that Australia needed to curb carbon and that carbon pricing was the best way to do it.

The Gillard plan is that a community groundswell of support towards emissions trading would result, enabling the government’s legislation to go forward.

But overall policy is not the problem. Emissions trading is arguably a good way to price carbon, but the previous attempt at emissions trading legislation completely mismanaged the implementation. There is no way a community group could rectify the gaps in Canberra’s knowledge.

Here are some of the complex problems that require a solution:

– The previous emissions trading scheme taxed carbon exports and left imports untaxed. It was designed to curb our exports and encourage businesses to avoid carbon pricing by shutting down Australian operations and importing from countries that did not tax carbon. It could have actually increased carbon emissions.

– About 20 to 25% of Australia’s power comes from high carbon-emitting brown coal generators, mainly in the Latrobe Valley in Victoria. At this stage, the brown coal power stations have about $7 billion worth of debt and are unsaleable, but some of the world’s biggest power-generating groups own them. Penny Wong’s policy was to guarantee the debt and let the major power companies lose the billions they have invested – a kind of retrospective tax. This was a key pillar of the ill-fated scheme which was not widely understood.

The trouble is that we need these companies to build the energy-efficient base load power stations we will require to replace the brown coal. In addition, having an emissions trading scheme depending on government-guaranteed brown coal debt is not a good start.

– There is a complex web of relationships between the power generation and distribution arms in each state, which any pricing scheme must cope with.

– Then, of course, there is the question of how much of the revenue raised goes back to consumers, how much goes to industry and how much is pocketed by Canberra.

These are complex issues for which Penny Wong’s climate change department has not been able to find a solution. How can we expect the community to do it?

What’s needed is a highly-skilled group outside Penny Wong’s department and Treasury, which has a better understanding of what the problems are. Victorian Premier John Brumby would head the list because he is way ahead of Canberra in understanding the issues that must be addressed.

But even Brumby has trouble. He wants to curb the output of the worst polluting station, Hazelwood. But Hazelwood has over $1 billion of debt, much of which is due to be paid this year. The global giant International Power controls the station, but the CBA has an 8% stake and holds a swag of the debt. That has to be tackled.

As things now stand, we need a solution quickly because we need to generate more base-load power to avoid brownouts and blackouts, although Warwick McKibbin says the rise in power charges in the next few years will be so steep that consumption will fall, so delaying the need for new base load power. A carbon price comes on top of that.

This article first appeared on Business Spectator.