I was pleased to speak today on the government’s climate change bills (aka the Clean Energy Future plan package):

Clean Energy Bill 2011 and related bills
14 September 2011

Over the past few decades, as we in this place have debated solutions to climate change, climate science has become increasingly unequivocal: the world is warming and human beings are causing that warming. This parliament sits in a city that shares a close connection to the natural environment. The bush capital is particularly vulnerable to climate change. Unchecked climate change over the next five decades could subject Canberra to more high and extreme fire danger days, more frequent droughts, more scorching hot days when elderly people and young kids cannot go outside, and less water in our dams. We cannot blame climate change for any single extreme event but we know that more of them will impose a greater cost to households. Canberra’s devastating bushfires in 2003 delivered a damage bill of a third of a billion dollars to what was then just a $16 billion economy. If you increase the probability of extreme fire danger days then you increase the expected cost of bushfires.

One way of regarding climate change mitigation is as a form of insurance. I am not in the habit of regularly quoting Rupert Murdoch, but he says:

‘Climate change poses clear, catastrophic threats. We may not agree on the extent, but we certainly can’t afford the risk of inaction.’

If you accept that asbestos is very likely to cause malignant mesothelioma and that bad cholesterol is very likely to increase the risk of a heart attack then you should accept that our greenhouse gas emissions are very likely causing global warming.

The coalition likes to flirt with climate change deniers. Their Western Australian branch recently called for a royal commission into climate change science. But in their official policy the coalition have recently accepted the science and agreed to an emissions reduction of five per cent on 2000 levels by 2020, so the question we in this chamber have to think about is: what is the best way of getting to that bipartisan target? The choice is clear: ‘Direct Action’ or a market based approach.

The problem is that the coalition’s policy is indirect and it will not take action in the most effective way. When you reject a market based mechanism and place your faith in command-and-control you lose a lot of flexibility. You can see this if you look, for example, at Australia’s projections of renewable energy growth in the decade from 2000 till 2010. At the start of the decade experts projected that two-thirds of the renewables growth would come from bagasse and none from wind. By the end of the decade bagasse had contributed less than one-tenth of the renewables increase while wind had contributed nearly half.

When you reject the market based mechanism you do not tap the ingenuity of the market. You lock yourself into an inflexible system. We should never forget that a price on carbon pollution is not just a disincentive to polluters but also an incentive to investors and entrepreneurs looking to invest in renewables. Joshua Gans, one of Australia’s brightest economists, said about the two contrasting policies:

‘The point is that this game could go on and on with very little impact and possibly negative impact on total emissions. And there is example after example of this. Think of the taxes required to employ all the inspectors and personnel to ensure that regulations are doing what you wanted without unintended consequences. Sure, it can be done but you will need a government that would make Lenin blush to make it happen.

‘Contrast that with a carbon price—by tax or trade. That requires none of this because it hits directly on the problem: emissions create external costs so we need everyone to build that cost into their decision-making. The problem is, as right-wing economist Frederick Hayek pointed out, that no-one has the information required to plan out what individuals might do themselves. By placing the decisions of environmental management in the hands of the people, you can let things work themselves out in a way the heavy-handed Government involvement cannot.’

He went on to say:

‘I can’t parse the dual hypotheses that either the Coalition just deny economic evidence or that they actually want more emissions and handouts to business. Perhaps one of their number can enlighten us.’

Professor Gans is not alone in favour of an approach which prices carbon and allows business to innovate in their solution. A poll of members of the Economics Society of Australia, released at the July Australian Conference of Economists, found that 79 per cent agreed with carbon pricing and only 12 per cent supported direct regulation.

This is not some complicated economic theory. It is based on lessons from first-year economics. The best way of addressing a negative externality is to put a price on it. And it is not unproven theory either. In 1989 when US President George HW Bush proposed the use of a market based mechanism to deal with acid rain, the electricity generators warned that costs would skyrocket. Today, that market based emissions trading program is universally regarded as a success. It achieved its emissions targets at around one-third of the projected costs.

Why was it so successful? Researchers found that firms used a variety of approaches to reduce emissions. Some of them retrofitted emissions control equipment. A number switched to cleaner fuels. Others retired their dirtiest generators. Because each firm took the lowest cost approach to abatement, the social cost was minimised. Those opposite used to subscribe to such an approach. In 2007, their election manifesto said, ‘A re-elected coalition government will establish the world’s most comprehensive emissions trading scheme.’

Whenever I speak at schools and universities, I meet young Australians who are optimistic about a clean energy future and want us to get on with pricing carbon. They get the science and they want us to act. Young people can and do make a positive contribution on environmental debates.

Indeed, in 1990, one young person argued that a ‘pollution tax is both desirable, and, in some form, is inevitable’. That young person pointed out that the national interest must be favoured over sectional interests, saying ‘even if some of the Liberals’ constituents do respond negatively, a pollution tax does need to be introduced to properly serve the public interest’. Who was this young person? It was the member for Flinders [Greg Hunt], and his remarks were from his law honours thesis.

I cite his work not as some cheap political trick in this place but rather as demonstration that there are still some opposite who deep down know that the advice of experts and economists is right, that acting on climate change using the most efficient means possible is the right thing to do. As recently as 28 April 2008, the member for Flinders told a Sydney audience:

Perhaps the most important domestic policy was the decision of the Howard Government that Australia will implement a national carbon trading system.

But the reluctance of conservatives to listen to the best advice is not new. We know that former Senator Minchin, political godfather for many of those opposite, did not accept the scientific evidence on the need to act on smoking or on climate change, which he believes to be some ‘vast left-wing conspiracy to de-industrialise the world’.

Former Liberal Premier of New South Wales Nick Greiner lamented this approach, saying in 1990:

‘Regrettably, too many people on the conservative side of politics still view environmental consciousness as some sort of left-wing conspiracy Amongst both the Liberal and National Parties there is still a cringe when the environment is mentioned, a subconscious aversion that arises, I believe, from a misconception that there is some fundamental philosophical inconsistency between environmental consciousness and democratic capitalism.’

More than 20 years on, those remarks have never been more relevant.

Recent history, including the Liberal Party’s leadership change in December 2009 by one vote—which is a great example of the fact that tipping points really do matter in climate change—lays bare this reality. Pricing carbon is in the traditions of capitalism. Business recognises this and has been calling for certainty in this policy area. For example, the Energy Supply Association of Australia called for a well-designed emissions trading scheme back in February 2007. Nathan Fabian of the Investor Group on Climate Change has said:

‘Delaying the introduction of a carbon price is a false economy. We know we must achieve lower domestic emissions, send clear investment signals and support a stronger international agreement. It’s time to get on with the job.’

Like the former Carbon Pollution Reduction Scheme, the Clean Energy Future Plan that we are debating today has a fixed-price period which, yes, operates like a tax, followed by a floating-price emissions trading scheme. For those who dislike fixed prices, also known as carbon taxes, I have good news for you. After 2015 there will be no carbon tax.

Under a carbon price, our economy will continue to grow. More than 1.6 million jobs will be created, jobs in clean and renewable industries, jobs in industries that are yet to develop.The revolution is already taking place. In my own electorate we have students in industries taking advantage of this. Earlier this year I was with the Minister for Resources and Energy—who I am pleased to see in the chamber today—at the Australian National University for a launch of a major project to increase the efficiency of photovoltaic solar cells. The project secured investment from Trina, a Chinese company that is a world leader in global energy.

Late last year – with my friend Andrew Barr, a member of the ACT Legislative Assembly – I opened the Sustainability Hub at the Canberra Institute of Technology. That facility allows Canberrans to get practical experience in the latest green building applications, materials and new products for residential and commercial sectors as well as in renewable technologies, like wind and solar. Canberra is already pioneering an electric car grid, with battery charge stations provided by Better Place—and I acknowledge the work my friends Evan Thornley and Macgregor Duncan do at that company.

The world is also harnessing these advantages and we cannot afford to be left behind. Reviews have been conducted for governments of both persuasions and they have been crystal clear on this fact. China’s wind energy industry is projected to top 150 gigawatts by 2020, up from earlier projections of 30 gigawatts. China is introducing emissions trading schemes in some of its largest cities—including Beijing and Shanghai—and is reported to be planning a nationwide trading scheme to commence in 2015. That is right: a nominally communist economy is more committed to the market than the Liberal Party of Australia.

In Canada, four provinces—British Columbia, Manitoba, Ontario, and Quebec—are partners in the Western Climate initiative which aims to introduce emissions trading in phases. British Columbia’s carbon price is already at $25. In the United States, a coalition of eastern states—with a combined population twice that of Australia’s—participate in an emissions trading scheme covering the power sector. California will start a carbon trading scheme in 2012 and is working with the four Canadian provinces to progressively establish a regional trading market from 2012 onward. International linkage makes economic sense. Climate change is a global problem and we want to get the lowest cost abatement.

Japan and South Korea are piloting voluntary emissions trading schemes. South Korea introduced economy wide mandatory emissions trading legislation into its parliament in April 2011 to commence in 2015 and it is seeking to pass the legislation this year. All European countries and Australia’s top six trading partners—China, Japan, the United States, Republic of Korea, the United Kingdom, and India—have implemented or are piloting emissions trading schemes, carbon taxes or coal taxes at the national, state or city level. The fact is the world is acting and Australia has a role to play in that action.

In December 2009, Christina Ora, a young person from the Solomon Islands stood up in front of the world at the United Nations Climate Change Conference in Copenhagen and said:

‘I am 17 years old. For my entire life, countries have been negotiating a climate agreement. My future is in front of me. In the year that I was born, amid an atmosphere of hope, the world formed the United Nations Framework Convention on Climate Change to solve the climate crisis.’

I am confident we can answer Ms Ora’s challenge, that a global solution can be found, that collectively we can stabilise our emissions while allowing economies to grow and, importantly, allowing development that will see millions of people brought out of poverty.

The Australian government has been debating acting on carbon pollution since Graham Richardson brought a submission to Bob Hawke’s cabinet in 1989 to reduce Australia’s greenhouse gas emissions. We have had 35 parliamentary reviews into climate change.

I am a proud supporter of this economic reform. This is economic reform that sets our nation up for the challenges of the future. It is the stuff of which Labor governments are made. Labor governments brought down the tariff walls in Australia, Labor governments floated the dollar, Labor governments put in place Medicare and Labor governments implemented universal superannuation. For each of these reforms it has taken a Labor government to harness the prosperity of the future. None of these reforms were uncontroversial at the time of their enactment but all of them have increased our nation’s prosperity. I am confident this reform will stand the test of time and secure our clean energy future in the low-pollution world of tomorrow.