Things to watch as the Australian carbon tax debate unfolds

As you might expect, today's Australian newspapers are dominated by the Gillard Government's announcement on the carbon tax package. I set out my broad position in Saturday morning musings - climate change thread, while yesterday's post The Gillard carbon tax plan gave a link to the Government's official policy paper.

I still don't want to comment on the detail of the package - that will take some time to work through. Instead, in my own somewhat odd-ball way I want to point to some of the things that I will be watching.

Adversarial and Issues Politics

By way of background for readers outside Australia, Australian politics is presently very adversarial, remarkably so. Opposition leader Abbott's ability at one-liners, his willingness to go for the jugular, plays to and has helped create a very particular political climate.

Outside and overlapping the political mainstream are a series of evolving political movements attempting to marshal support for particular issues. For a number of reasons, attitudes to "green" issues has become one of the political flash points. I have put 'green" in inverted commas not as a criticism, but to signify the way in which certain issues have become symbolic.

In GetUp's mistletoe role I spoke critically of one of the new bodies in the current climate. However, it is much more than this.

GetUp attacks and in part feeds from the populist anti-climate change movements that have emerged over recent time. In turn, these movements draw from a feeling of discontent in the broader community. These movements began below the media radar in the country where the impact of social and economic change has been greatest. I charted some of this earlier on.

Things are never clear cut.

Over the last year or so I have written on the environmental wars raging across New England. Drawing from the same sense of discontent as the anti-climate change movement including the differential effects of change, the wars have turned local grievances into new movements. I spoke a little of this in Round the New England blogging traps 24 - land, mining & the environment. For those who are interested, the Lock the Gate website provides an entry point to the latest group.

I said that things were never clear cut. I phrased it this way because the agitation actually combines things that are apparently inconsistent. So we have New England independents Windsor and Oakshott playing a key role in getting the climate change package through when the opposition and the Nationals in particular are attempting to marshal anti-climate change feeling against them in their electorates. On-ground views spray in a variety of directions, but are also united by a feeling of discontent, of disconnect between Government and people.

Mr Abbott is trying to play to all this, but the very confusion in views creates a difficulty for him.

Differential Policy Impacts

One of the things that I have tried to focus on in this blog is the way in which public policy based on averages, on uniformities, has quite differential on-ground effects. It is very hard to convince people that something is in the interest of the nation or state if they are losing their jobs (or their farms) as a consequence. Apparently sensible national measures dissolve in the face of fierce localised opposition.

Now this brings me to the first thing that I will be watching, the potential differential on-ground affects of the Gillard proposals. The Government has attempted to manage this though its compensation packages. By their very nature, these will be imperfect. Too imperfect, and things may dissolve.

This issue is already being picked up be the Australian media in terms of differences between areas, but it goes beyond this. We simply don't know yet our things will work out in practice. Again, Mr Abbott is trying to play to this by targeting traditional Labor industrial and coal mining seats.

Global Changes

In a very real sense, the Government is betting on likely global changes in attitudes and policies. If other countries move towards action, then this will cushion some of the domestic impacts.

I noted with interest a comment from one of the Bloomberg reporters, I did not keep the link, that Australia would end up with the world's largest carbon market. I am not in a position to make a judgement here, but it is an apparent indication of scale.

Australia will also be affected by other global changes including moves in the exchange rate and the global economy. If things go sour internationally, then this will compound woes.

Price Effects

The Government faces two problems on the price side.

The first is simply a modelling problem. Has Treasury got it right? I would have thought that this was a more complicated exercise than the GST modelling because of the flow-through effects. This includes potential actions by business to use the new tax to justify price increases imposed for other reasons.

The second is the nature of existing price increases in areas such as electricity and food, increases partially concealed by the way CPI increases are calculated. People are already quite sensitive here. There is a real risk that people will blame all sorts of price increases on the new tax.

Murphy's Law

Murphy's Law simply states that what can go wrong, will go wrong. The second part of Murphy's Law states that Murphy was an optimist!

I suppose that the thing that I am watching most closely here is the power sector. I may be wrong, I no longer pretend to have expertise in this sector, but I think that Australia faces a looming shortage in base load power because of under investment in the immediate past.

The problems and lead times involved in getting alternative power sources up are substantial. As I have written about in a New England context, localised opposition to wind farms, for example, is quite strong. It's  not possible to just go out and build a wind farm. With the exception of one small operating plant, geothermal is still in its early days, with key sites some distance from the grid. I don't know enough about solar possibilities to comment.

I guess my point is don't hold your breath on new possibilities. There are a lot of things that can go wrong.

Conclusion

I make no claims to special expertise. This post is a purely personal exploration of issues.