Labor & Carbon Pricing - 29 Oct 2013

On ABC666, I spoke with host Adam Shirley about Labor's continued commitment to putting a price on carbon pollution through an emissions trading scheme. Here's a podcast. The transcript is below.
Adam Shirley: Andrew Leigh is the  Shadow Assistant Treasurer and also the Member for Fraser,  Dr Leigh good after afternoon to you this afternoon.

Andrew Leigh: Good afternoon, Adam, how are you?

Shirley: Very well thanks. You support removing the Carbon Tax and replacing it with a trading scheme.  If Labor helps remove the tax, the Government will not introduce a trading scheme, so no price on carbon in that scenario.  Correct?

Leigh: Well, Adam, you're talking about a hypothetical there my .....

Shirley: A likely hypothetical I would argue.

Leigh:  My view is that we should do after the election what we said we would do before the election.  Which is to move a year earlier from the fixed price period into the floating price period.  Now every emissions trading scheme typically has a fixed price period. The Carbon Pollution Reduction Scheme, the one the Greens voted down  in the Senate, that had a one-year fixed price period and the current scheme has a three-year fixed price period.  All we said in the election is let's make that fixed price period two years rather than three years.

Shirley: Mm

Leigh:  So there seems to be a little bit of a storm in a teacup going on today, because what's been reported is exactly what we said in the election.  We think the fixed price period should finish a year earlier. That's got some advantages: it allows Australia to get emissions abatement on the European market, to cap our pollution but to do so at a lower cost.

Shirley: But in effect Labor will assist the Government in removing a price on carbon.  Is that a fact because there will be no ETS under the Prime Minister, under Prime Minister Abbott?  He has said that pretty clearly.

Leigh: Adam, we will do in the Parliament what we said we would do in the election, which is to support moving from the fixed price to the floating price a year earlier.  We are not going to go out there and support getting rid of the cap on carbon pollution altogether.  That wouldn't make much sense, particularly when the alternative that Mr Abbott is putting up is a Direct Action plan that hardly any serious economist thinks will do the job.

Shirley: So is Labor's, I guess, want to remove the Carbon Tax conditional on an ETS staying in place?

Leigh: That's right.  We believe, we believe that we ought to move away from that fixed price period and go to the floating price.  But Labor has been committed to an Emissions Trading Scheme for the best part of the decade.

Shirley: We know the Government, the current Government will not support an ETS, so where is the way out here?

Leigh:  Well, I believe that they ought to see the light on that.  Their Direct Action Plan is being bagged left, right and centre, and justifiably.  If you want to do the job via Direct Action, the Grattan Institute thinks that you need $100 billion and as Malcolm Turnbull has pointed out, the greatest virtue Direct Action has to recommend it is that it is easily dismantled.  This isn't a good economic policy, it's not a good way of dealing with climate change.  If Mr Abbott wants to deliver what he pledged of getting rid of a ‘carbon tax’, then he should do that very precisely.  He should move away from the fixed price period and go to the floating price. But why would you get rid of the cap on carbon pollution when electricity emissions are already down 7%; when 4 out of 5 industrial energy users say that a carbon price has had a significant impact and when the Climate Institute says that the carbon price has had an ‘undetectable impact’ on the nation's overall economic performance.

Shirley: Andrew Leigh, regardless of whether you agree or disagree with Direct Action, the Government  has consistently said that's its plan - they said it in the lead-up to the election; they've continued that theme afterwards. Labor appears to again be modifying its position on the carbon price.  Is this because your party is more interested in focus groups and polls than maintaining a consistent policy on climate change?

Leigh:  Adam, the question as you have phrased it is misleading to your listeners.  You can do better than this.  What you need to be clear with your listeners is that Labor is saying nothing more now than we did before the election.

Shirley:  The effect of getting rid of the Carbon Tax will not be what you were saying prior to the election, because the Government will not support an ETS.  That is a fair point, is it not?

Leigh:  No, it's not, Adam.  What we've said is that if the Government wants to move away from the carbon tax and to an emissions trading scheme, then we are happy to support that.  But we have not said that we are happy to scrap the carbon pricing mechanism altogether - to get rid of the cap on carbon pollution.  Labor has been committed to emissions trading.  We have voted for it consistently in the Senate, including in 2009 when the Greens and the Liberals voted it down.  We will continue to be committed to carbon pricing because it's  the most efficient and effective way of dealing with climate change.

Shirley:  I guess my question is what will happen, what will happen if the Government is not committed to an ETS, as seems likely.

Leigh: Well that will be a matter for them to negotiate with other parties to try and find a majority for a scheme which is going to be much more expensive to households; and do much less for the environment; which runs out in 2020; and has no long-term plans for abatement;  which is best thought of as 'soil magic', ironically from a party which has already been committed to markets.  If you are committed to markets, if you are a small-l Liberal as the Libs claim to be, then you ought to be committed to an emissions trading scheme, because it is just the most effective and practical way of getting the job done.

Shirley: So as far as you can see, Dr Leigh, is it likely that Labor will push to remove the Carbon Tax and push for an ETS when it comes time for a vote in Parliament.

Leigh:  Adam, that is, that's always been our policy to move from a fixed price carbon price to an ETS in the long run.  We said we would do that after 1 year when we came up with the first plan.  When we came up with this plan, we said we'd do it after 3 years; and earlier this year we said we'd actually make that a 2 year period.  The precise time period, fixed price period is not a critical question.  What you want to do....

Shirley:  Why isn't it a critical question?

Leigh:  Because there's no great science over how long you want the fixed price period in place.  The fixed price period gives business certainty as you begin to introduce the emissions trading scheme.  But the floating price gives the critical cap on carbon pollution and allows you to link in with the international markets.  It allows you to achieve lowest-cost abatement because this is a global problem, and so a tonne of carbon abated anywhere in the world has the same impact on the environment.  But an emissions trading scheme is just the right way of dealing with carbon pollution.  That's why you are seeing cities like Shenzen in China moving to an emissions trading scheme.  In fact it's likely that by 2020, China will have nation-wide carbon trading markets.  It's kind of ironic, right,  you've got a nominally communist country moving towards emissions trading with a nominally free-market Liberal and National parties prefer a command and control system in Direct Action which is much less effective than what the Chinese Communist party is supporting.

Shirley:  Dr Andrew Leigh, I think it is the first time I've spoken to you since you got the Shadow Assistant Treasurer gong, one of my guesses, I think, if memory serves correct.  Thank you for speaking to us on 666 Drive this afternoon.

Leigh:  Thank you Adam.

Shirley: Thanks a lot.  Dr Andrew Leigh there, Shadow Assistant Treasurer and Member for Fraser on 666 Drive, this afternoon.

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