Andrew Leigh

My op-ed in the AFR looks at the Coalition's climate change dilemma - do they meet their pledge to reduce emissions by 5% by 2020, or do they spend the paltry underestimate that they say their climate policy will cost?

Abbott's no-go carbon plan, Australian Financial Review, 22 April 2013

Over the past few weeks we have seen the Coalition dip their toes in the water of policy debate. Amidst running around the nation shouting ‘no’, Tony Abbott has revealed that the Coalition’s plan for superannuation includes taxing 3.6 million of Australia’s lowest-paid workers to the tune of $4 billion. We have seen them outline their tin-can-and-string broadband strategy. We have learned that families and small businesses will be expected to cough up to $5000 to connect to a service Labor will provide for free.

This is the most information we have heard about the Coalition’s vision for the future of Australia, and while it may not be pretty, it is a marked improvement from their three-year tradition of providing no alternative at all.

It seems strange then, in light of their cautious new ventures into actual policy discussions, that Tony Abbott has remained almost silent on the one issue he has pegged the bulk of his negative rhetoric: climate change.

We are no longer hearing the Coalition claim that putting a price on carbon will ‘crush’ the Australian economy; time has proven the emptiness of this fear-mongering and the economy continues to go from strength to strength.  Given the vehemence with which Tony Abbott has promised to rescind the carbon price (despite strong contrary advice from key industry groups such as AIG) you would expect to have heard more about the ‘Direct Action’ plan that he would have as the replacement. But we have not, and this is in no small part due the Coalition’s unwillingness to provide costing information.

When asked by reporters last month what the ‘Direct Action’ plan would cost, Tony Abbott responded that ‘our policy will cost what we commit to it in the policy that we will announce before the election’. Take what you will from this garbled tautology, but you certainly cannot take an answer.

Perhaps aware of the unsatisfactory nature of this response, Tony Abbott further offered that ‘we will spend no more and no less on reducing emissions than we allocate’. Clearly, we need to look further afield for answers on costs. In the Liberal Party’s ‘A Strong Australia’ policy direction statement, they claim their emissions reduction fund would spend $1 billion a year on average. This lines up with the figure provided in 2010, which was an expenditure of $10.5 billion out to 2020. The emissions reduction target that the Liberal Party set then was a 5%  reduction by 2020 – an annual reduction of 155 million tonnes in 2020, which they have reaffirmed in their policy platform.

But therein lies the fundamental problem. If the ‘Direct Action’ plan is implemented, Tony Abbott will either have to break his promise to spend no more than allocated, or fail to meet his own reduction target.

Treasury analysis shows the Liberal projection of $10.5 billion is a woeful underestimation, with the real cost by 2020 totalling at least $48 billion. Treasury analysis attributes this dramatically different figure to two key factors: first, ‘direct domestic action would forgo opportunities for cheaper, internationally sourced abatement’, and second, ‘direct action programs are generally less effective at driving take up of all potential abatement opportunities’.

The Grattan Institute has estimated that reliance upon a grant-tendering scheme in an effort to meet the 5% target would mean at least $100 billion would need to be put towards an abatement purchasing fund. This would be equivalent to nearly one third of the entire Federal Government budget. And because the ‘Direct Action’ plan is funded by taxpayers (compared to the Labor Government’s carbon price, which is funded by the biggest polluters), that means everyday Australians are expected to foot the bill for this ineffective policy. It would cost each household at least $1,300 a year in new taxes.

That the Coalition is finally giving us some insight into their plan for Australia’s future is a good thing. But they are not giving us the full picture – at best they are confused about their costings, and at worst they are being intentionally deceptive. The question Tony Abbott needs to answer now is this: which aspect of the ‘Direct Action’ plan would change if he won government. Would he fail to meet his promised emissions target, or would he let the cost blow out?  In reality, as Malcolm Turnbull has said, Direct Action is a “fig leaf” and Mr Abbott will not unwind Labor’s carbon price.

Andrew Leigh is the federal member for Fraser, and Parliamentary Secretary to the Prime Minister. His website is www.andrewleigh.com.

Note: An abbreviated version of this piece appeared in the AFR print edition.