Carbon pricing & Mr Abbott's end game

Despite my best endeavours, it is actually quite hard to avoid getting caught to some degree in the on-going debate in this country on carbon pricing. So looking back at the points I made in Things to watch as the Australian carbon tax debate unfolds, what new things have emerged? It's only a few days since that post, but as people pick over the entrails in the Roman temple that Australian politics has become, new things do emerge. At least, they are new to me!

To start with something that's not new, political controversies of this type generate their own momentum. They acquire a life of their own, a shadow play that drags people along independent of the world around them. Sooner or later we have to leave the theatre, but it's very real while it lasts.

Adversarial Politics

In the Sydney Morning Herald, Phillip Coorey quotes Tony Abbott as follows:

TONY ABBOTT says he will call a double dissolution election if he wins power and Labor and the Greens combine in the Senate to stop him from repealing the carbon tax.

The Opposition Leader, who is sitting on a massive election-winning lead in the polls, issued the edict in front of a community forum in Brisbane last night.

He said if the government was ''walloped'' at the next election over the carbon tax, it would be unthinkable that a humiliated Labor would not allow an Abbott government to rescind it.

Mr Abbott said he would have a mandate to rescind the tax which would be equal to that of Labor when it repealed Work Choices after its 2007 victory.

''It's just not political commonsense,'' he said.

On the face of it, that's quite a remarkable statement.

I haven't done the maths properly, but it runs something like this. Assuming that no existing MP dies or resigns, it's a bit over two years to the next election. Then the repeal legislation has to be put to Parliament, rejected and then put again followed by an election. The practical effect is some three years of uncertainty.

Leaving aside the policy effects of Mr Abbott's position, so long as business regards the end price point as uncertain they will be reluctant to invest, three years is a very long time in political terms. A lot can happen.

Meanwhile in the short term, Mr Turnbull apparently continues to twitter along about Mr Abbott. Not happy, Jan, to use a phrase added to Australian English by an earlier advertisement. I do wonder how long Mr Turnbull can survive.

As an aside, politicians who fall in love with social media place themselves in a very dangerous position. Really, technophiles are their own worst enemies. But that's a story for another post.

Global Changes

In an opinion piece in the Australian, Henry Ergas points to the apparent dependence of Australian Treasury modelling on global changes. The cartoon is from that piece.

My old blogging friend Neil Whitfield's Google Reader carries a lot of pro climate change material. I tend not to read a lot of this stuff, it's all too adversarial for my liking, but looking at it there are two separate if linked issues.

One is the further evidence on the science itself. Over the next three years more evidence will accumulate. I, for one, hope that the sceptics are right, but we cannot assume that. The second is the nature of accumulating global effort on climate change, accumulating effort that creates its own momentum.

It seems to me that both Professor Ergas and especially Mr Abbott are in fact making some very courageous assumptions about both the science and the probable outcomes of the weight of accumulating current global efforts.

Mind you, the increasing risk of a perfect global economic storm could actually invalidate everything by stopping all action However, that strikes me as a lower probability outcome.

Differential Impacts & Price Effects

As you might expect, the continuing discussion is starting to draw out both the likely differential impacts of the proposals, as well as the likely price impacts. One of the Government's problems here is the existence of other price variables that affect the analysis such as the large existing rises in electricity prices.

Australians like their policy analysis simple, expressed in black and white terms. The world is not like that.

As a simple example, look at the this story Rooftop panels penalise poor by Dennis Shanahan in the Australian. Yes, I know that that paper has been running a very particular campaign, but Shanahan does make some valid points in terms of the differential impacts of apparently good ideas.

In fact, one of the biggest problems the Government faces in selling its ideas is that so much has been justified previously on climate change rhetoric that there is a now a deep distrust in the electorate.

Now here I want to introduce another story, again from the Australian, Michael Owen's piece Coal-fired power plants will be closed 'regardless of cost'. Leave aside the language used and look at the content. Look, first, at the time lines involved. Then look at the role of the Australian Energy Market Operator. Here I quote:

Under Labor's carbon tax, the Australian Energy Market Operator must sign off on any closure of power plants to ensure the security of electricity supplies.

But AEMO is limited to ensuring the timeframes for closure are "realistic" and "give enough time for replacement capacity to be built". AEMO executive general manager David Swift said the central brief was a "smooth transition to secure energy supplies" and not the cost to consumers.

"I shouldn't say this, but it's no secret the price of energy is going to go up out of all this," he told The Australian. "The new technology is more expensive and it's cheaper to run the coal-fired power stations.

"Do I have to take into consideration the impact of all this on prices for consumers?

"I'll get in trouble answering a question like that but, to be honest, the decision to approve closures are limited to whether the new technology works and is able to maintain the security of supply.

"There would be no consideration of what it would do to prices for consumers."

In NSW, country electricity prices have just risen by a bit over 17 per cent, city prices a little less so. Part of the rise is due to previous network under investment, the Government in Sydney used the electricity system as something of a cash cow, but a not inconsiderable part is also due to a miss designed solar electricity program.

Yes, I know that the previous government had a tendency to opt for "progressive" causes for easy immediate political gains, but the costs now make people very cautious about new things.

Murphy's Law

Murphy's law is already hitting the Government.

Australian department store David Jones has been forced to announce a significant profit downgrade because of collapsing retail sales. In radio interviews, I don't have a link, CEO Paul Zahra attributed the fall to a combination of the flood levy with the proposed carbon tax.       

David Jones is not alone.

All sorts of things have contributed to the fall in retail sales including fundamental structural change in retailing, something that I want to return to in a later post. However, it is adding to the growing sense of unease fed by current partisan politics.

Conclusion

In all this, I have no real idea as to how things will work out. Given that I work alone much of the time, and out of curiosity, I asked eldest what she thought.

As you might expect given her family background, she is generally in favour of a carbon tax. However, she also commented that the patrons at the pub where she works are generally anti to the point that it has become a no-go conversation area.

I think in terms of my own thinking I keep coming back to the time question. It will be months before the legislation is finalised, while the tax itself will not come into effect until July next year. That allows plenty of time for people to work issues through. It also allows lots of time for other things to happen. Here the difficulty for the Government is that it has other contentious legislation to come, including the mining tax.

Tactically, I think that Mr Abbott probably wants to keep this one on the boil until he has a new issue and especially the mining tax to add to his armoury. Yes, I know that the mining tax has been bubbling away, but he really needs the legislation to go into full attack mode.

In geographic terms, the mining and carbon taxes have somewhat similar distributional effects. As, in fact, do the poker machine proposals. I haven't attempted to map this, but it might be interesting to try at some point.

This muse is starting to take me in new directions. I need to pause here, for I am well over the time I allowed for this post.

Postscript

Thomas pointed me to a useful post by ABC election analyst Antony Green, What Chance a Double Dissolution in the Next Three Years?, explaining the mechanics involved in a double dissolution election. It reinforces the point I was making about time.

In a post in the Australian's Mumble blog (Abbott’s long and short games) Peter Brent struggles to understand Opposition Leader Abbott's tactics. He says in part:

If the carbon package is brought in in twelve months time, and the next election is held in 2013, it is very difficult to imagine the Coalition taking a promise to totally undo it to that election.

It is even less likely that they would threaten a double dissolution if they formed government but didn’t get their way on the package.

Yes this is what the opposition leader is saying he will do.

Abbott’s game plan is probably short term. His leadership of the Liberal Party is dependent on the opinion polls. He needs to keep those walloping voting intention leads rolling in because they keep him secure in his job and prime minister Julia Gillard insecure.

While the government remains toxic there is a chance, however small, that its one seat House of Representatives majority will vanish. In some way or other. You never know your luck.

Like Peter, I struggled to make sense of Mr Abbott's position. However, as I wrote the above post, I found my ideas changing a little. It wasn't that Mr Abbott's statement on double dissolution itself became any more practical. Rather, in looking at the whole carbon tax question as part of a broader pattern, I formed a view on Mr Abbott's tactics that was a little different from my previous view.

Mr Abbott's game plan may, as Peter suggests, be short term poll driven. My feeling is that it's more complicated than that, something that I alluded to in my conclusion. Mr Abbott is playing a high stakes game centred on fissures in Australian views. He is actually attempting to create a new majority coalition of interests while continuing to do his best to destabilise the Government. He may well succeed.