Which way forwards in response to climate change?

Achieving real change obviously cannot come without a cost. The question is who pays for reform and how.

Conservative Opposition leader, Tony Abbott has been quick to deride Labor’s ETS plans and the financial pain which will follow for many Australians. He has claimed that 50 per cent of middle class households will be worse off. In contrast, the government is claiming that 2.9 million low income Australian households will actually be better off as a consequence of the built-in compensatory mechanisms.

I will address this in greater detail further on in this essay.

Instead of an ETS or carbon tax Abbott has been spruiking the benefits of a more “direct” approach to reducing carbon emissions. The question hanging over such proclamations, however, is the same. Again: change cannot come about without cost: and someone will have to pay for “direct” change: or else perhaps there will be no change at all …

That said: there is a variation on the theme of “direct action” on climate that may have merit: although the author seriously doubts this approach would appeal to the Conservatives and neo-liberals - with their fetish for ever smaller government “no matter what”. I will also consider this later.

Into this “mix” we need to consider the human impact of action on climate change.

For all parties involved there was a concern with any ETS that it could have a negative impact on industry and jobs. As a consequence of cheap coal, benefits have historically “flowed on” to other export industries, and import-competing industries. With an increased cost for power, though, the reverse impact of this would flow on through the entire economy.

In response to this and other issues surrounding the competitiveness of Australian industry, the Australian government has included as part of the proposed ETS an “Emissions-Intensive Trade-Exposed Industry Assistance” (EITEIA) package.

The aims of this scheme are manyfold.

To begin with, the scheme aims to reduce the risks of investors simply relocating offshore to countries with more “carbon friendly” conditions. If the only impact of any ETS is that carbon intensive industries simply move offshore then obviously nothing is achieved.

Second, the program is aimed at enterprises which are “trade exposed”.

One test of this is if such enterprises “[demonstrate a] lack of capacity to pass through costs due to the potential for international competition.”