Life under Gillard could be an expensive business

If Julia Gillard holds government, the alliance she will have cobbled together will speak in one voice on one major issue – climate change.

Andrew Wilkie’s addition to the Gillard side on Thursday afternoon confirms this. The new independent from Tasmania had ”a price on carbon” prominent among his 20-point list of priorities for action.

Despite many Greens being uneasy with a quasi-market approach to climate change, Melbourne MP Adam Bandt and his party have embraced an emissions trading scheme.

And Gillard will be looking to keep the nine Greens holding the Senate balance of power in her government’s tent – a task made much easier by the lower house agreement she signed with Bob Brown this week.

Let’s say Rob Oakeshott and Tony Windsor fill up seats 75 and 76 in favour of the Labor government.

Oakeshott is clearly for climate action. In February, when the government’s Climate Pollution Reduction Scheme was looking ever more hapless, Oakeshott called its collapse ”a pox on both the major parties” and a ”disgraceful failure of so-called leaders in this country to tell the story of climate change and energy security”.

Tony Windsor has said that a price on carbon is inevitable, that he supports it, and doesn’t believe it will be a disaster for the bush.

Anyway, that’s the maths. Bob Katter may end up supporting Gillard, but does Bob Katter strike anyone as a team player? The member for Kennedy thinks Sir Nicholas Stern and Ross Garnaut are ”lightweights”, so it’s unlikely the government could count on his support for climate legislation any time soon.

Assuming the Labor alliance can survive the next three years – and that Gillard’s leadership will too – the precariousness of minority government will leave the prime minister looking for a policy win. An emissions trading scheme is an obvious candidate.

And not just any ETS. The 2009 model reflected the need to negotiate with the Liberals in the Senate. A new ETS would reflect a deal with the Greens, who rejected the last one as too weak, and the independents – Oakeshott has shown a reverence for Garnaut’s original, ”pure” emissions trading scheme.

Hung parliaments can be funny things. Despite the low profile of climate change in the 2010 campaign, and despite not gaining government in its own right, the ALP may now be more able to enact the policy it most wanted to last term.

But the debate over climate change policy has regressed badly. In 2009, Parliament was discussing the mechanics of the government’s elaborate cap and trade scheme. But in 2010, we’re stuck on this simple phrase: ”price on carbon”. It makes it all sound so simple.

But what would its target emissions level be? When would it start? How should trade-exposed energy-intensive industries be compensated, if at all? Should low-income earners be compensated?

Not to say anything of the main policy crunch of November and December 2009 – the failure of the Copenhagen summit. An emissions trading scheme cannot achieve its goal without being part of a global agreement.

The notion of putting a price on carbon is popular. Around 50 per cent of Australians believe climate change is a serious problem that should be tackled by government.

Yet actually paying that price is substantially less popular.

A poll by the Lowy Institute has tracked the willingness of Australians to pay extra for electricity. The number of people who refused to pay anything to tackle climate change has increased from 21 per cent in 2008 to 32 per cent in 2010. And less than a third of those who believe that there should be a significant price on carbon report themselves willing to pay a significant price for energy.

Even if the federal government manages to get an ETS through Parliament, the key to emissions reduction is to slowly but perceptibly increase the cost of emitting.

Recent elections have shown us Australians are inordinately sensitive to real or imagined cost-of-living increases. Few governments would be eager to deliberately ratchet up the price of electricity every single year.

Supporters of emissions reduction argue that new technologies will fill the gap and keep prices down. To a degree, that’s true. But the pace of technological change is not guaranteed. There’s no reason to believe that the price of wind power will drop in concert with a rise in the carbon price.

In her deal with the Greens, Gillard ditched the much-ridiculed citizens’ assembly. Instead, she plans a climate change committee, formed under the auspices of Parliament, and including only those committed to a price on carbon.

Her alliance may help Labor get emissions trading through Parliament. But the emissions trading model the climate change committee devises may create more political problems than it solves.

Chris Berg is a research fellow with the Institute of Public Affairs. Follow him at