Monday 15 July 2013

Could leadership change save the Australian Carbon Market?

26th June saw the latest chapter in the see-sawing power struggle within the Australian Labor Party (ALP).

After a land-slide victory in 2008, spearheaded by Kevin Rudd, the party’s popularity began to slide year on year, resulting in Julia Gillard staging a successful ‘coup’ in 2010 and ending in Kevin Rudd’s reinstatement as leader of the party and ultimately Prime Minister in 2013.

Often referred to as unpopular within the party, but a hit with the electorate, Rudd has a strong history on environmental issues, having described global warming as "the greatest moral challenge of our time". Mr Rudd's popularity nose-dived when he decided to shelve his original emissions trading scheme, a decision he later described as a “mistake”.

It is hoped Rudd’s reinstatement will stem the consistent loss of voters, and if not secure another term, at least minimise the impact of what polls suggested would be a resounding defeat.

Environmentalists the world over will be hoping this is so, as running throughout all of this is the issue of Carbon Pricing, enshrined in the Clean Energy Future Act (CEFA).

Although seen as unpopular by many at the time, and despite the criticisms aimed at the scheme, Carbon Pricing has brought about significant change.

In fact through a fixed price of around $25 AUS per tonne of carbon, Australian carbon emissions are at a 10 year low. Coal generation is down, and cleaner alternatives are up; wind generation is at 3.8 per cent, hydro 8.7 per cent and gas at 12.7 per cent of the National Electricity Market. [1]

Public opinion is also supportive of the scheme. Fewer voters want to see the carbon tax removed now than before it took effect on July 1 last year. Nearly half, or 48%, wanted the tax scrapped a year ago, compared to only 37% of respondents in a recent Climate Institute poll.[2]

In spite of all this, waiting in the wings to become the next PM of Australia is Tony Abbott, leader of the Liberal Party who recently swore:
"I am giving you the most definite commitment any politician can give that this tax will go. This is a pledge in blood."[3]
If things remained as indicated by polls at the beginning of the month, Tony Abbott would face little resistance in his bid to claim head office in September, insisting that this election is a ''referendum on the carbon tax'[4]'. So once there, even though he would be unlikely to control the Senate outright, it is thought repealing the carbon price will be enthusiastically supported by conservative’s allies.

Any repeal of the pricing system will facilitate a rapid reversal in electricity through coal’s fall from prominence and severely undermine investment in the renewables industry.

Already its long-term validity is in question as beyond 2015, as carbon moves from a fixed to a floating price mechanism, the price per tonne could be as low as $8 AUS.

The long-term aspiration of the CEFA has been to link up with the EU ETS.

The hope is a multi-national cap-and-trade platform will encourage other nations to implement schemes and resultantly reduce the anti-competitive nature of unilateral implementation of domestic schemes.

Additionally, closer to home, it has often been suggested that combining the EU ETS with similar global schemes will provide a solution to the issue of carbon price volatility, which has hindered the success of its first two phases.

Encouraging signs for the Rudd government have begun to appear in recent weeks. The Newspoll survey of 9th July showed Labor are now tied with the Liberal Nationals; today’s Fairfax/Nielsen poll echoing this saying the two major parties each have 50 per cent of the two-party preferred vote - a seven-point gain for Labor on last month's result; and even the Roy Morgan Research of Monday 8th put Labor in front with 55% of the two-party preferred vote, compared with 45% support for the coalition.

Such a considerable swing in momentum, over such a short period of time, shows Rudd’s popularity with the electorate – an electorate who increasingly support the carbon tax. Should Rudd maintain this momentum to the polls a secure a miraculous new term for Labor, let’s hope he has learned from 2010 when his change of heart on the extent of the carbon pricing scheme spelled the end of his first term in office.  

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