There’s No ‘War On Wind’, Just MPs Doing Their Job

There was a lot of heat in the debate about the Clean Energy Finance Corporation over the weekend, but not much light.

On Sunday, Fairfax papers reported the Abbott Government had directed the CEFC to stop funding new wind farm projects.

Social media was livid. Tony Abbott was waging a “war on wind power”. How dare the Abbott Government presume to interfere with such a virtuous independent market program to tackle climate change?

That reaction was, to put it mildly, a load of nonsense. The Government’s direction to the CEFC is not unprecedented interference in an independent body. Nor is the CEFC a “market” mechanism. The CEFC is a government program whose funding policies are set by the executive.

Yes, the Coalition wants to abolish the CEFC outright. But it can’t. So the Government says it would rather the CEFC focus on funding innovation rather than established technology. There are a lot of objectionable things in Australian politics. This doesn’t rate.

The CEFC’s enabling legislation – which was written and introduced by the Gillard government and passed without Coalition support – allows the sitting government to do exactly what the Coalition is doing now. As noted in an explanatory memorandum authored by the Gillard government:

It is appropriate that the Government, as manager of the economy and owner of the Corporation, have a mechanism for articulating its broad expectations for how the Corporation’s funds will be invested and managed by the Board.

So each year the government is required to provide the CEFC with an investment mandate direction.

The memorandum specifically nominated “allocation of investments between different types of clean energy technologies” as one of the areas in which ministers might issue a direction.

What independence is provided by the CEFC Act is a requirement that ministerial directions not be contrary to the CEFC’s statutory obligations, and that ministers must not direct or prevent CEFC investments in specific companies. All fair enough.

With these provisions, the Gillard government gave itself the statutory leeway to direct the CEFC’s investment direction. If it didn’t want an Abbott Government to have the same leeway, it should have written the legislation differently. It knew the Coalition was opposed to the CEFC.

Anyway, that discretion is entirely proper. The CEFC is not an ethereal, non-political part of the Australian social fabric. It is the result of a four-year-old political compromise, designed to funnel money into one particular sector of the economy as part of the quid pro quo for theGreens’ carbon tax support.

So it’s a little bit silly to hear (as we did over the weekend) that by changing the CEFC’s mandate the Abbott Government is “picking winners”. That’s exactly what the CEFC was designed to do. The CEFC was designed to pick winners. It was designed to choose investments that it felt were not being adequately funded by open capital markets.

And the CEFC legislation already favours specific technologies. The body is not allowed to invest in carbon capture and storage or nuclear power. Nor can it invest in non-Australian projects. This last constraint seems a little peculiar if you think the CEFC’s ultimate goal is to reduce carbon emissions – a global, not a national, problem. But foreigners can’t vote.

Because it is not driven by the profit motive in a competitive market, the CEFC has to rely on non-market criteria on which to evaluate alternative investments. Right now that is done by these folk – the board of the CEFC. All the Abbott Government’s no-wind mandate does is constrain their criteria some more.

The idea that the CEFC is a “commercial” operation is nonsense. If it makes a profit consistently then it is a good candidate for privatisation. Why should the government own a profit-making financier? Why would it need to?

The CEFC got upset earlier this year when the Abbott Government asked it to lift its investment returns, asking it to “consistently outperform the market by a large margin”. But if the CEFC can’t beat the market with its government support, then the case for its continued existence is pretty weak.

Australia has a long history of government-owned banks like the CEFC – banks designed to push money into politically favoured sectors.

Who now remembers the Commonwealth Development Bank or the Australian Industry Development Corporation? Or the Commonwealth Bank’s Mortgage Bank Department and Industrial Finance Department? Or the joint public-private ventures of the Australian Resources Development Bank, the Primary Industry Bank of Australia, or the Australian Banks’ Export Refinance Corporation?

These banks were abolished or privatised because Australia came to recognise that markets allocate capital better than bureaucrats.

Right now there is a majority in the Senate preventing the abolition of the CEFC.

But it is almost inevitable that one day parliament will end the CEFC. Just as it ended all its other special development banks.

The repeal of the carbon tax

‘What a complete and catastrophic failure of the political system’, wrote the Guardian’s Lenore Taylor a few hours after the carbon tax repeal bill finally passed the Australian Senate. ‘As eight years’ work by thousands of people disappears with the Senate’s vote, many may have cause for regrets.’

Perhaps many do. But from this vantage point the political system has worked messily but as intended. Having promised in opposition to axe the tax, on 17 July 2014 the Coalition axed the tax. Against all odds, even. The showy last minute political games played by Clive Palmer made it look touch-and-go for a bit.

Nevertheless, given the serious problems Australia has had in recent years about governments keeping their promises, the repeal of the carbon tax was a pretty good case of democratic function, not democratic failure.

Taylor’s lament isn’t really that the political system has failed, per se; it’s that the political system has failed to achieve one specific goal — a legislatively driven programmed reduction in Australia’s carbon emissions.

Of course that bipartisan goal of a five per cent reduction of carbon dioxide emissions from 2000 levels within the next six years ostensibly remains. But nobody thinks the Coalition’s Direct Action plan — an apparently un-ironic throwback to the days of corporatist industry policy, with taxpayers simply paying private companies to cut their emissions — will achieve that goal.

The carbon tax has been a centrepiece for three elections. In 2007 John Howard followed the lead of the energetic Kevin Rudd and the Coalition announced its own emissions trading scheme. In 2010 Julia Gillard promised that there would be no carbon tax under the government she led. Instead, there would be a ‘citizens’ assembly’ into the evidence for climate change — possibly the most cringe-worthy idea in the history of Australian politics — with the eventual aim of introducing an emissions trading scheme at the end.

Finally in 2013 Tony Abbott defeated a briefly resuscitated Kevin Rudd with a promise to abolish the very carbon tax Gillard had promised not to introduce.

Buried in that potted history is a wealth of extraordinary drama, and nuance, and subtlety—real or imagined. We’ve had multiple formal emissions trading scheme proposals — including Kevin Rudd’s Carbon Pollution Reduction Scheme and Julia Gillard’s Clean Energy Future.

We’ve had a host of government inquiries — most prominently those done by Peter Shergold under the Howard government and Ross Garnaut under the Rudd government.

We’ve had a diverting but ultimately empty debate about the definition of a ‘tax’. When Kevin Rudd in 2013 announced that he was going to ‘terminate the carbon tax’ by moving it to an emissions trading scheme slightly ahead of schedule, those semantics of when a tax becomes a trading system became a parody of themselves.

It is hard to over-emphasise the shift in the politics of climate change over the last five years. Throughout 2009 commentators and the press gallery urged the Coalition to join the carbon tax bandwagon. There were claims that the Coalition had not ‘learned the lessons’ of 2007 — a viable party had to embrace an emissions trading scheme policy.

Today the emissions trading scheme is history and those who proposed it toppled from their leadership roles.

For climate activists the task is now to regroup. Christine Milne proposed a ‘website of climate criminals’ that would include such names as Ian Plimer, Gina Rinehart, George Pell, Andrew Bolt, Martin Ferguson and the IPA’s John Roskam. This sort of name-and-shame is probably good politics for the Greens with their base, but it’s worth recalling that the Milne and her party voted against the Rudd government’s emissions trading scheme in 2009: they were on a joint ticket with Plimer, Rinehart, Pell, Bolt, Ferguson and the IPA.

The carbon tax is repealed but it is not dead. Bill Shorten has promised to take a carbon tax to the next election. Clive Palmer, who was a climate change sceptic as recently as the 2013 election, has had a Road to
Damascus conversion and is now seen holding press conferences with Al Gore and being closely advised by Australia Institute staffer and former Greens chief of staff Ben Oquist. Palmer has forced the government to retain much of the infrastructure around the carbon tax — the Clean Energy Finance Corporation, for instance, but most gallingly the Renewable Energy Target.

So the carbon tax is gone. But its associated policies are still in place — ineffective, wasteful, and unfortunately resilient.

Dumping The Carbon Tax Without Dumping Anything

When Julia Gillard promised in 2010 that there would be no carbon tax under a government she led – but that her government would pursue an emissions trading scheme – she probably thought it would defuse a toxic debate and help secure victory.

Like so many of Labor’s ploys in that election, it was far too clever by half. Tony Abbott dined off Gillard’s no-tax promise for three years.

Now it’s Kevin Rudd’s time to dine. On Sunday we learned that he wants to transition from a fixed-price carbon tax to a full-blown floating-price emissions trading scheme one year ahead of schedule.

Here’s the riddle: why?

It seems strange to bring this up now. Over the last year or so, anger about the carbon tax has dissipated. Australians like the status quo. The GST swung elections back in its day. It destroyed leaders. John Hewson was one victim. The Howard government almost lost in 1998 because of its proposed great big new tax on everything. But now the GST is completely settled.

Furthermore, Rudd’s fiddling with the carbon scheme isn’t costless. It creates a $4 billion hole in next year’s budget. It exposes the government to charges of policy disarray. The way it was announced (a bare leak to the Sunday papers) recalls one of the worst habits of Rudd’s first outing as prime minister – the obsession with impressive sounding but light on detail “announceables”.

But we forget how Gillard’s 2010 bungle completely realigned the debate over Australian climate change mitigation policy. Three years later, her broken promise allows Labor to market Rudd’s minor scheduling change as “dumping the carbon tax”. Even better, they don’t have to actually dump anything.

The distinction between “tax” and “trading scheme” has always been a triumph of semantics over clarity. An emissions trading scheme is a tax. It just happens to be a very complicated one. Just like a simple carbon tax, it prices an externality – pollution. The trick is that firms are allowed to trade their tax liabilities with each other. But that doesn’t make it any less a tax.

(Here’s the Oxford dictionary definition of “tax” if you’re sceptical: “a compulsory contribution to state revenue … added to the cost of some goods, services, and transactions”. Under a floating scheme, the added compulsory cost would be the European price of around $6 a tonne. The current fixed Australian price is about $25 a tonne.)

Gillard’s broken carbon tax promise has ruled the debate over climate change policy in these last three years. Before the promise, Tony Abbott was calling Kevin Rudd’s emissions trading scheme “a great big new tax on everything”. Afterwards he targeted Julia Gillard’s “bad tax based on a lie”.

There is a subtle but important difference in these talking points. The focus on the lie eases political pressure off the policy itself.

Thanks to the Coalition’s rhetorical realignment, it is the carbon tax that is remembered as Gillard’s folly, not the entirety of the climate change program.

Long forgotten is the protracted and contentious debate about mechanisms and international agreements and subsidies and targets and the assumptions of Treasury modelling and the Garnaut Report.

We haven’t heard much about all this in recent years. Australia’s climate mitigation programs include everything from industry subsidies to renewable energy targets to efficiency regulations. Thanks to the broken promise, the whole debate was anthropomorphised. Climate policy was given human form by Julia Gillard and her tax.

Now Gillard is gone and it has all become a bit confused.

Kevin Rudd plans to recoup the $4 billion in lost revenue by cutting climate-related industry assistance, tightening tax concessions for salary-sacrificed cars, and imposing a further efficiency dividend on the public service.

Take the efficiency dividend with a grain of salt – it’s the magic beans of public finance.

But cutting industry assistance is a great idea. Rudd should have taken the opportunity to go further. The Productivity Commission counted $5.1 billion in direct budget support for private industry in 2011-12. If you want to reduces expenditure, surely that’s the first place to look.

Unfortunately, the Opposition is lumbered with an absurdly expensive, ludicrously inefficient and gimmicky hodgepodge of climate change policies clumped under the banner of Direct Action.

The Coalition’s shadow climate minister, Greg Hunt, insists his plan is the true “market solution” to climate change, but has not been able to convince anybody of that.

We shouldn’t place too much faith in market mechanisms. Tony Abbott was mocked for his comments about invisibility yesterday but his basic point was right. An emissions trading scheme is not a real market. It is a highly regulated approximation of a market, where supply and demand are artificially created by the government to meet a political goal. (I detailed this argument in the Drum in 2011.) Of course, Abbott’s attack on artificially created markets should apply double to his Direct Action program.

In retrospect, it seems obvious the Coalition’s plan has been propped up by the unpopularity of Gillard’s no carbon tax promise.

As has the whole climate change policy debate. Not for the better.

Another year, another failed climate summit

The 49-page agreement produced at the Rio+20 Earth Summit is unmitigated junk. I’m not going out on a limb here. It’s one of those rare universally agreed upon truths.

Greenpeace called the summit a “failure of epic proportions”. The organisers of the original 1992 Rio Summit said the document was a weak collection of “pious generalities”. Friends of the Earth described it as “hollow”. George Monbiot wrote it was “meaningless platitudes”. Richard Branson used the phrase “mealy-mouthed”.

They are all correct. The document, “The Future We Want”, is stuffed full of trite acknowledgments, reaffirmations, recognitions, and renewals. It’s like a greatest-hits album. There’s no new material.

“The need to further mainstream sustainable development” gets acknowledged, of course. The “natural and cultural diversity of the world” has its due recognition. The “importance of freedom, peace and security [and] respect for all human rights” gets reaffirmed. Also reaffirmed is the Universal Declaration of Human Rights, which dates back to 1948. Indeed, the word reaffirm is used 59 times throughout.

Virtually every goal of every lobby gets its due. The unions even managed to get “decent jobs” thrown into the priority list. Hell, why not? Coordinated global action on decent jobs is no more or less likely than coordinated global action on emissions reduction.

One paragraph even proudly says the signatories recognise that “Mother Earth is a common expression in a number of countries and regions”. And they say satire is dead.

Rio+20 was supposed to be the revitalisation of the global climate movement. The first Rio summit set in train everything from the Kyoto Protocol to Copenhagen. After the failure of the 2009 Copenhagen conference, and the water-treading at Cancun and Durban in 2010 and 2011, Rio was to be the spark that got climate action going again.

But now Kyoto expires at the end of this year, and the cycle of yearly climate meetings are a wash. It’s been obvious for years there would be no coherent or significant international action to reduce carbon dioxide emissions.

Yes, there was an outbreak of optimism before the Copenhagen summit. Recall the “Hopenhagen” campaign, the sort of silliness only an alliance of the United Nations and high-price advertising agencies could produce.

For all that enthusiasm, there was never a clear explanation about why developing nations would suddenly jettison their long-term economic development goals. At the time, we were told the Copenhagen negotiations were thwarted at the last minute by India and China. This influential report in Der Speigel of the final moments of Copenhagen reads very different in retrospect – it’s plain now the negotiations weren’t scuttled by personal offence, but were doomed from the start.

That of course has been what free marketeers have been saying about global action all along. And now a sense of hopelessness is starting to seep through the green movement.

The Australian Conservation Foundation’s Don Henry told Radio National on Thursday last week that he was “very disappointed” with the Rio declaration. In his view, Rio revealed an “unusual confluence of caution”, as rich countries tended to their wounded economies, and poor countries focused on reducing poverty.

Striking the same baffled note, Martin Khor, one of the members of the UN Committee on Development Policy, said last week, “We’ve sunk so low in our expectations that reaffirming what we did 20 years ago is now considered a success.”

But the reluctance to curtail economic growth for uncertain environmental ends has always been predictable.

Certainly, these climate conferences have coincided with one of the greatest economic down turns in the past century. It is possible to blame their failure on the great recession.

But regardless of the global economy, it is in no single nation’s interest to substantially reduce emissions unless everybody else is also doing so in unison. Ross Garnaut described this as a true prisoner’s dilemma: international cooperation, he wrote, “is essential for a solution to a global problem”.

So another interpretation is that climate negotiations have plateaued because such cooperation has a natural, hitherto undiscovered, limit. It can only go so far. The failure of coordinated emissions reduction is a natural experiment political scientists will study for decades.

I argued in The Drum last month adaptation is now the main game. For green groups, this ought to be the take-home message from Rio. And if they focus on adaptation, they might find surprising allies.

But to get there, they would have to drop their utopian fantasy of the planet coming together to achieve a shared goal. And that realisation may be much more disappointing than their discovery the Rio agreement is nonsense.

We Can’t Stop Climate Change – It’s Time To Adapt

The release of the Productivity Commission’s draft report into climate adaptation at the end of last month could have been a spark that changed the debate in Australia.

That’s because it implicitly suggested that adapting to climate change – regardless of whether its origin is anthropogenic, ‘natural’, or whatever – is now the main game.

And the PC is not alone. In the 2007 report of the Intergovernmental Panel on Climate Change, there was just one chapter on adaptation. The previous report in 2001 was the same: one chapter. Now, according to the outline of the 2013 report, the adaptation section will blow out to four chapters.

This new attention on adaptation makes sense. Nobody believes global emissions will be reduced to the extent the IPCC claims is urgent and necessary. Supposed deadlines for action have come and gone, over and over. By 2012, sceptics, alarmists, realists, and optimists should all agree that seriously mitigating climate change is a pipe dream.

So, given this, it was very disappointing the Productivity Commission’s draft report entered the public sphere with such a quiet thud last fortnight.

The mainstream press had a few short, passionless bites. The online specialty service Climate Spectator, which usually scrutinises every aspect of climate economics and politics, simply reposted a newswire report announcing the release. No further analysis apparently needed.

The final product will be released at the end of this year. But even in draft form, it starkly illustrates how much of a philosophical shake-up moving from a mitigation focus to an adaptation focus will be.

The PC’s report discusses worthy things like emergency management and information gathering. But its bulk argues this: in order to boost the resilience of Australian society, a rigorous program of deregulation, tax reform, and liberalisation is needed.

According to the PC, Australia needs economic growth and regulatory reform to deal with climate change. Yes, it is very disappointing this report didn’t get the attention it deserves.

As the PC says, regulations can make the economy inflexible. They make it harder for us to adapt to change. After all, individual regulations are written with certain circumstances in mind. When those circumstances change (as they would in a world with a shifting climate) the existing stock of regulations can add friction to adaptive action.

Other regulations increase costs and thereby reduce adaptation incentives – like those which meddle with insurance markets.

It’s the same with many taxes. The PC rightly says “taxes that influence the way resources are used … could inhibit the mobility of labour, capital, or both”. For example, property taxes make it more expensive to move out of low-lying areas at risk from sea level rises.

Government programs can also impede flexibility. Drought assistance creates an incentive for farmers to stay on marginal land, rather than relocating.

These are the practical issues. But an adaptation program is more than just a collection of policy recommendations. It is a different philosophy.

Rather than focusing on a single, over-arching, world-historical goal (achieved through unprecedented consensus and political action at the national and international level), adaptation focuses on process, institutions, and diversity. It asks: what makes communities most flexible, resilient, and responsive to environmental change? It’s about developing strategies to deal with uncertainty, not politics to achieve global reform.

In a 2009 paper published in the journal Atmospheric Sciences, Robert L Wilby and Suraje Dessai characterise this as the difference between top-down and bottom-up approaches.

The IPCC looks top-down. This view is purpose-built for mitigation, but no good for adaptation. The IPCC struggles to assess climate change risks on a continental scale, let alone regional scale.

As Wilby and Dessai point out, the IPCC records a low level of scientific agreement even about the direction of rainfall change in much of Asia, Africa, and South America. That degree of uncertainty offers no guide for practical action.

By contrast, a bottom-up approach focuses on how communities adapt to local pressures, not global ones. After all, it isn’t the United Nations that will adapt to climate change. It is individuals. This approach is less flashy, but then, why should climate policy be flashy?

And emphasising adaptive capacity and resilience is a good thing, regardless of whether climate change is a naturally occurring phenomenon or the result of human recklessness. Wilby and Dessai call adaptation measures “no-regret” or “low-regret”. The PC calls them “win-win”.

In his 1992 book Earth in the Balance, then senator Al Gore wrote that adaptation was a “kind of laziness, an arrogant faith in our ability to react in time to save our skins”.

Gore was writing when the IPCC was in its formative stages. This sort of thinking led to an explicit decision to focus on global emissions reduction. That decision has shaped the last two decades of climate debate. (Even including one chapter on adaptation in the 2001 report was seen as somewhat revolutionary.) But the decision built an analytical framework which no longer makes sense.

As a paper published in the journal Regional Environmental Change last year put it, under an adaptation-focused framework, “Science would thus place itself in the role of being a tool for policy action rather than a tool for political advocacy”.

Because the arrogance now rests with those who still believe they can coordinate massive, immediate global political action towards a single goal.

It is, surely, time to face up to the demands of adaptation.

Inside Dirt On Clean Energy Schemes: They Don’t Work

If Julie Gillard isn’t paying attention to what’s happening in Washington DC right now, she should be. The first major scandal of the Obama administration looks similar to one of the centrepieces of her carbon price package.

Solyndra was the jewel in the crown of Barack Obama’s green energy program. This California-based solar cell manufacturer received a $US535 million loan guarantee from the US government in 2009. Part of the administration’s stimulus package, the guarantee was supposed to help spark the green revolution.

When Obama visited the company in May 2010, he announced Solyndra would demonstrate that ”the promise of clean energy isn’t just an article of faith” and would lead the way ”towards a brighter and more prosperous future”.

It wasn’t just the federal government: Solyndra was the biggest beneficiary of California governor Arnold Schwarzenegger’s energy subsidies. It was one of the most well-funded start-ups in history.

But last month Solyndra declared it was bankrupt. A year and a half after Obama waxed lyrical about the oodles of green jobs the company would create, 1100 people are out of work. There’s a criminal investigation under way. Executives have been put in front of a congressional hearing, where they have refused to answer questions for fear of self-incrimination.

Solyndra is Obama’s Enron. Not only a political mess (one of the company’s private investors is a major Democrat donor), but it’s a huge policy mess, too.

So why should Gillard care? Because the program that financed Solyndra does much the same thing as her proposed Clean Energy Finance Corporation.

The corporation is part of the deal to get Greens support for the carbon package. It will have a piggy bank of $10 billion to invest in ”clean energy proposals and technologies”.

Solyndra burnt through half a billion dollars of taxpayer money in two years. The reason for its failure is obvious: if the market thought Solyndra was good value, then the company wouldn’t have needed the federal loan guarantee in the first place.

Companies collapse all the time. But who could think a company that can only attract investment if the government promises to bail it out is the portent of a bright, green future?

The phrase ”picking winners” is deeply misleading. Governments generally subsidise firms that the market has already decided are losers. Sure, it’s possible to imagine a committee of career bureaucrats might stumble onto a great opportunity that investors have missed. But you wouldn’t want to put money on it. Well, perhaps somebody else’s money.

Like Obama in 2010, Gillard in 2011 is stamping her approval on a few trendy, subsidised companies.

The government’s Clean Energy Future advertising blitz is stuffed full of fawning interviews with wind and solar energy companies. It boasts about the new jobs they’ll create. But these jobs rely on government grants, or the carbon price, or mandatory renewable energy targets. They wouldn’t survive on their own. The market has already bet against them. Soon there will be $10 billion more to fund dozens of antipodean Solyndras.

And that money puts the lie to the claim that Gillard’s climate package is a ”market-based” solution to global warming. Not even the government believes so. Otherwise it would have eliminated the masses of climate programs that already exist. (According to the Commonwealth Auditor-General, there are 550 across the country.) Instead, they’d leave the tax to do the work of directing investment. They definitely wouldn’t be offering up even more subsidies.

Tony Abbott should study Solyndra, too. Conservative parties aren’t shy about spending money on energy boondoggles. Even as they happily dance on Solyndra’s grave, Republicans support loan guarantees for nuclear power plants.

And the Coalition’s direct action plan will do its fair share of winner picking. In fact, that’s its whole point. Their Emissions Reduction Fund will spend $1 billion per year on projects that an Abbott government reckons might reduce emissions.

When Obama announced his green stimulus plan in 2008, a coalition including the ACTU, the Australian Conservation Foundation, the Property Council and the Climate Institute urged the government to ape the American program. Renewable energy outfits are fashionable, after all.

But doling out other people’s money to businesses that only bureaucrats think are exciting is begging for trouble. Most people thought governments had gotten over this sort of speculative activity. Clearly that’s not the case. But the collapse of Solyndra should remind us why governments gave up, for a short while, trying to pick winners.

‘Carbon Cops’ Destined To Join Mega-Regulators Club

The powers which the Gillard Government intends to give the Clean Energy Regulator are unquestionably illiberal.

The climate body will be able to enter and search workplaces and compel people to provide self-incriminating evidence – a clear breach of the basic right to silence.

Those powers are counter to the Western liberal legal tradition, which should provide protection against self-incrimination, and defend the sanctity of private property against state intrusion.

But, that said, the Clean Energy Regulator’s powers are not at all surprising. They’re not even unusual.

It’s a feature of Australia’s regulatory state that government regulators are granted extraordinary powers – often more substantial powers than the police hold.

The Australian Securities and Investments Commission can compel people to give evidence in private hearings, under oath, entirely separate from the court system.

ASIC uses its suite of coercive information-gathering powers around 26 times every single working day, a Senate committee hearing revealed last year. The standard rules of evidence and privilege against self-incrimination do not apply at ASIC hearings.

ASIC’s powers are still being bolstered. In 2010 they had their wire-tapping and phone records access powers increased.

Then there’s the Australian Building and Construction Commission (ABCC), which can bring anyone in for questioning, in secret, and force them to hand over documents, or report on private conversations.

In the Sydney Morning Herald last year, George Williams reported one person was pulled in front of the ABCC because they simply walked by a dispute between a union representative and a building manager.

Last week the ABCC admitted it had issued 203 summonses defectively: the same failure which last year led to the acquittal of Ark Tribe, a building worker who refused to give evidence to the commission.

The Australian Taxation Office has the capacity to ban people from leaving the country if they are in a dispute over tax owed. Paul Hogan learned this first hand. And the ATO can enter and search premises for documents without having requested those documents first.

The Australian Prudential Regulatory Authority and the Australian Competition and Consumer Commission also have substantial coercive powers. They round out Australia’s mega-regulators, a club the Gillard Government’s climate body is destined to join.

Unfortunately the illiberalism of all these powers is obscured by politics.

Conservatives suggest the ABCC’s powers are a necessary evil because they restrain union thugs. Progressives suggest the extraordinary coercive powers of bodies like ASIC are necessary because cartels and corporate fraud and insider trading are endemic.

That’s how the basic principles of the liberal rule of law gets chipped away: through an endless list of exceptions.

Partisans on each side can point to their opponent’s hypocrisies. Hopefully the union movement, which has been rightly vocal defending the rule of law against the ABCC, will be able to recognise the problems inherent in vesting yet another regulator with coercive powers.

After all, does anybody believe the Clean Energy Regulator won’t have its powers extended over time? Every regulator pesters Parliament to have its jurisdiction expanded, its funds increased, and its scope widened. This is the inexorable logic of the regulatory state.

Yes, the creeping thicket of regulation demands growing regulatory powers. If you’re going to impose a regulation you’ll want mechanisms to make sure the regulated comply.

But those powers are being steadily augmented to give independent regulatory agencies an increasing degree of unchecked power.

Typically the powers held by regulatory agencies lack oversight. Richard Gilbert, of the Rule of Law Institute of Australia, has pointed out these regulators are reluctant to disclose data on the use of their coercive powers. And without reliable data, Parliament and the public are unable to assess whether those powers are being used judiciously.

That’s a particular problem because the entire purpose of making a regulatory agency “independent” is to deliberately separate them from the traditional ministerial and parliamentary lines of responsibility. By definition, they lack accountability.

This causes a very real governance problem. Each of these agencies are little fiefdoms, with reputations they feel they need to defend, particular interests, ideological preferences, and obsessions.

This is no more evident than ASIC’s behaviour in recent years.

In one of the most celebrated recent cases, ASIC pursued the mining company Fortescue with such fervour the judges started questioning the regulator’s motives – because there’d been no suggestion anyone lost money out of Fortescue’s actions.

And ASIC’s attempt to have the activity of “rumourtage” (spreading false rumours for profit) penalised failed, after the only rumours ASIC could identify which had altered market outcomes turned out to have been, in retrospect, true.

ASIC seeks more power and influence. It’s an independent body, so it acts independently.

While it eagerly sought its new wiretapping abilities, in June ASIC admitted it had not even used them since they were granted late last year.

We can infer the need for those extra coercive powers may not have been as pressing as originally made out. But it must feel nice to have them on the shelf.

ABCC, ASIC, APRA, ATO, ACCC, and now the CER: it’s rarefied company which the Clean Energy Regulator joins.

No doubt the partisan fluffery will die down and the political roadshow will move on from this week’s debate about ‘carbon cops’.

But we will be left with just another mega-regulator, desperate to expand its domain, and gathering more and more powers.

Too many economists in the carbon kitchen

There’s a lot of interesting material in the survey of Australian economists released last week.

But the results are not much use as a guide for developing public policy. Few political issues can be reduced to technocratic questions of policy design.

Conducted by the Economics Society of Australia, nearly 600 economists were quizzed about an array of policies.

The one which gathered all the attention asked whether they agreed “price-based mechanisms” (clearly the Government’s carbon tax and emissions trading scheme) were better than “direct regulation” (Tony Abbott’s direct action plan). Only 11 per cent did not.

It should have come as no surprise. Abbott has been unable to find any economists which back his plan, because direct action is obviously a bad idea.

That the overwhelming majority of economists support a price mechanism over direct action probably has as much to do with the clear deficiencies of the latter as opposed to the virtues of the former.

But does that mean emissions trading is the right thing to do? Not quite.

Economists are often ridiculed for making unrealistic assumptions in order to model human behaviour. But the first assumption policy designers make is the most crucial one: assume your policy is enacted wholesale, uncompromised by the brutish political process.

When asked how to tackle climate change caused by pollution, most economists would likely recommend a trading scheme or tax. Price the externality and move on.

But as a 2007 paper in the Natural Resources Journal concluded, “the introduction and implementation of [emissions trading] policies is explicitly political and should be recognised and analysed as such.”

Politics, not economics, decides how much pollution will be allowed. Politics decides who will be allowed to pollute. Politics decides the conditions under which the pollution permits will be traded.

In an unguarded moment in December 2008, Ross Garnaut complained that Kevin Rudd’s interpretation of his emissions trading scheme had been captured by “vested interests”, and wondered about the “wisdom of how far it’s gone”. Rudd’s legislation had deviated from his policy ideal. But what did he expect would happen? Economists must not assume that their ideas will be implemented untarnished by political calculus.

So while there is an economists’ consensus the ideal price mechanism is better than the ideal regulatory approach, its existence doesn’t take us very far. Policy is all about implementation.

The academic study of policy implementation – as opposed to policy design – only goes back a few decades. The title of the 1973 book which sparked this field is succinct – Implementation: how great expectations in Washington are dashed in Oakland: or, why it’s amazing that federal programs work at all.

As the authors argue, “The separation of policy design from implementation is fatal”. No matter how well designed and elegant a policy may be it will be useless, even counterproductive, if it is implemented ineffectively, inconsistently, or has been whittled down by the political process.

For the ideal model of emissions trading to achieve its goals, international action is the difference between successful implementation and failure.

You can’t resolve a commons problem simply by taking independent action. The tragedy of the commons is a tragedy for a reason. Perhaps global action is imminent. Nevertheless, that’s a question for diplomats, not for economists.

The results of last week’s survey are less useful than they appear in other ways.

The economists were asked if aid spending should be reduced, if jail sentences were an appropriate punishment for those convicted of price fixing, if corporate boards should have gender quotas, if non-government schools should receive funding, and so forth. Some they were for, some they were against.

These questions have their economic aspects. But most of all they involve questions about morality, liberty, equality, and social justice.

The discipline of economics can have insight into the effectiveness of policy, but it cannot define our values.

Should – as another question asked – governments “provide greater economic incentives to improve diet”? If we decide that as a society we want governments to make our eating habits a question of high public policy, the design of those incentives will be important. Yet it is far from obvious that’s the case.

Values pervade questions about climate policy as well.

Public choice economists (a sub-branch of economics which studies incentives in the political arena) have long recognised voters tend to prefer command-and-control approaches like Tony Abbott’s direct action. Economists protest regulation is less efficient than pricing mechanisms, as they should. But for many voters, regulation still seems “fairer”.

This accounts for the fact that regulation has always been more prominent in environmental policy than pricing. It may also explain the great political oddity of 2011: the extremely popular Coalition has an inferior policy for a problem the public believes is real and should be tackled. It’s just that, given the option, voters prefer regulations to price signals. Even when price signals are less costly overall.

In the 20th century, many economists and politicians thought technocrats were only limited by the amount of data or computing power they could muster. If we could assemble enough information, experts would be able to design perfect policy and run an economy to its maximum efficiency.

But we know better. The technocratic dream has very real limits. No matter how many specialists and experts agree on the way forward, effective policy may still be far out of reach.

Free speech in the climate debate

You’d think that climate sceptics deserve free speech as much as everybody else.

That, however, isn’t the view of the ABC’s media criticism program, Media Watch. In an episode this March, Media Watch host Jonathan Holmes called for the government to use a practically defunct regulation to restrict the free speech of climate sceptics because he disagreed with the content of that speech.

Two days later, GetUp! — the ‘progressive’ membership based lobby group — responded to this call to action, launching proceedings with the government regulator, the Australian Communications and Media Authority.

GetUp! are being predictably self-aggrandising. What’s much more concerning is that Media Watch called for this attack on free speech in the first place. Broadcast weekly for just fifteen minutes at a time, Media Watch is one of the ABC’s flagship programs — a self-appointed press watchdog, dedicated to exposing media perfidy, ethics breaches and bias.

To do so, it is handsomely supported. According to a report, this quarter of an hour show received $1.4 million in funding to broadcast in 2003. Media Watch may be a short program, but (squeezed in between the national broadcaster’s other mass-market political fare of Australian Story, Four Corners, and Q&A on Monday nights) it is at the heart of the ABC’s self-identity as a countervailing force against the commercial media. In short: Media Watch is the ABC’s official arbiter of press ethics.

So it was quite a big deal when Media Watch conclusively demonstrated that, on the right to free speech, it’s one of the bad guys — asking for the legal system to step in and manage the vigorous public debate about climate change.

The program opened with an extended discussion about the number of climate change sceptics hosting AM radio shows, their take on climate science, and the fact that they interview more sceptical scientists than non-sceptical ones.

Of course, it’s hardly news some radio commentators prefer to interview certain guests more than others. ‘Opinion maker has strong opinion’ would not stop even the smallest press. And this is not the first time Holmes has been concerned about sceptic success. On The Drum in February 2010, he bemoaned that climate sceptics are winning because they’re the ones with ‘the passion, and the commitment.’ It’s an old tune, and clearly one which he is personally passionate about. That’s fine.

Yet on this particular Media Watch episode, Holmes went one step further. He argued the radio hosts are in breach of the Code of Practice governing commercial broadcasters which mandates ‘reasonable efforts are made … to present significant viewpoints when dealing with controversial issues of public importance’.

And the reason the regulator hasn’t enforced the code against Alan Jones and his fellow sceptics? ACMA ‘won’t or can’t enforce the Code unless someone complains it’s being flouted.’ Nudge nudge, wink wink.

When I raised Media Watch’s seeming hostility to freedom of speech on The Drum , Holmes was indignant, writing:

So Media Watch suggested they should do what the Code requires, and ensure that ‘reasonable efforts are made … to present significant viewpoints when dealing with controversial issues of public importance’. Such as, just occasionally, interviewing scientists who maintain that the evidence points to dangerous, man-made global warming — scientists who represent by far the majority scientific view — as well as (not instead of) scientists who disagree. And I said that it shouldn’t need complaints to the ACMA to make that happen. How ‘chilling’! How restrictive! What an enemy of free speech I must be!

Well, yes.Genuine supporters of free speech reject the idea that speech which is in any way objectionable — as climate scepticism clearly is for Holmes — has a regulatory solution.Someone who combs regulations (and the Codes of Practice are regulations, even if they are developed in consultation with the broadcasters) looking for ways to alter another’s speech cannot ever be described as a friend of freedom of expression.

On Twitter a week later, he dug himself deeper, arguing that ‘Chris Berg reckons requiring tv radio to be fair = assault on freedom’. In his eagerness to have the government’s regulator step in to manage the speech of climate sceptics, Holmes has completely failed to think deeply about the free speech implications of what he suggests.

The right to freedom of speech is meaningless without the right to choose that speech. No-one should be forced to say something they do not believe as a condition of saying something they do.

In the United States between 1949 and 1987, the ‘Fairness Doctrine’ obliged broadcasters to do exactly that. The regulation compelled contrasting views to be presented whenever an issue was raised on the air.

And certainly, the doctrine resulted in balanced and civil broadcasting environment. But it did so by exclusion. It was easier to avoid controversial topics than risk a regulatory penalty for being perceived unfair.

Testifying in 1984, the broadcaster Dan Rather argued that ‘Once a newsperson has to stop and consider what a Government agency will think of something he or she wants to put on the air, an invaluable element of freedom has been lost.’

The Fairness Doctrine quickly became a political weapon. During the Kennedy Administration, the Democratic National Committee produced activist kits teaching party members ‘how to demand time under the Fairness Doctrine’.

The Nixon administration also used the Fairness Doctrine to threaten the licenses of hostile broadcasters. Angered by The Washington Post’s Watergate coverage, Richard Nixon is on record saying that ‘the Post is going to have damnable, damnable problems … They have a television station … and they’re going to have to get it renewed.’ The Fairness Doctrine is now widely recognised as having had a ‘chilling effect’ on speech.

Compared to the Fairness Doctrine, the Commercial Broadcasters’ Code of Practice is a model of restraint. But, as Media Watch helpfully demonstrated, that is because it is largely defunct — it has been interpreted benignly, and wielded rarely. Media Watch advocated that this free speech status quo be overturned, and the Code of Practice be used as a political weapon. After all, I doubt Media Watch would argue that gay broadcasters should be compelled to air the views of homophobes, or Christian broadcasters to air the view of anti-theists. Instead he called for the Code to be used solely against those discussing Australia’s biggest, most controversial, political issue — the carbon price.

Some claim a Code of Practice is the price broadcasters pay for using public spectrum; that the rest of the media is free to do what it likes but there must be special rules for those using the airwaves. The history of the Fairness Doctrine, and the egregious actions of GetUp and Media Watch, show just how slippery a slope that view is. ‘Public interest’ rationales easily become political interest rationales.

Considering how central the climate change debate is to contemporary Australia politics, it is striking how fast and loose Holmes is willing to play with the principles of free speech.

In column after column, speech after speech, proponents of climate change action argue that science has a communications problem. The government has now hired a climate communicator, Tim Flannery, who is profiled elsewhere in this issue of the IPA Review. As Media Watch demonstrates, that ‘communications problem’ is starting to become a cause for regulatory action itself.

Holmes’s regret in February 2010 that sceptics are winning the debate has become Holmes’ declaration in March 2011 that the government should step in to forcibly ‘balance’ it.

Referring to George Bush’s 2003 declaration to the Australian parliament that he loved free speech, Holmes’ predecessor David Marr lamented to the Media Watch audience ‘If only more Australian commentators shared his view.’ Indeed. And if only Media Watch did as well.

Climate Change Can’t Be Stopped, But We Will Adapt

Julia Gillard is half-right. The world is acting on climate change. But not acting to stop it – to adapt to it. In the 1920s, an average of 240 people out of every million died every year from extreme weather events: drought, flood, windstorm, landslide, earthquake, extreme temperatures and wildfire.

According to data from the International Disaster Database, last decade that figure dropped to just three per million.

Actually, the numbers are even better than they first look. The 20th century saw a 99.9 per cent reduction in the risk of death from drought. And the risk of death from floods came down almost as much: 89 per cent. Floods and drought – two of the most commonly mentioned consequences of climate change. We’re getting much better at managing and surviving them.

The causes of this remarkable decline in mortality are many. Better transport and communications help move food to where it’s needed, quicker. Globalised trade gives producers an incentive to do so. Hardy modern agriculture can survive not just long-term climatic shifts, but the more pressing problem of bad growing seasons.

Better flood control and prevention, weather forecasting and more responsive emergency services all help reduce the damage from floods. Never have we been better at protecting ourselves against nature.

If the past is any guide to the present, that’s how we’ll deal with further changes in climate (whether caused by human activity or not): through adaptation. Especially considering there’s next to no chance of serious international action to reduce carbon emissions. Sure, if Australia introduced a carbon price now, we would not be “leading the world”. Other countries have introduced their own. But there’s action on climate, and then there’s “action on climate”.

The only purpose of carbon pricing programs is to achieve deep emissions cuts. By that measure, they’ve been a dismal failure. Those jurisdictions that have introduced them have been slowly backing away from serious reductions. The coalition of 10 American states acting on climate that Gillard often cites will soon be nine: New Hampshire is planning to withdraw.

European climate policy is pushing bravely ahead. But if nuclear power is off the table after the Fukushima scare then cutting emissions there will be a dead end. As George Monbiot wrote in The Guardian last week, “the energy source to which most economies will revert if they shut down their nuclear plants is not wood, water, wind or sun, but fossil fuel”.

And China has been increasing its carbon dioxide emissions by an average of 12 per cent every year this century. By 2020, China will be emitting nearly 500 per cent above its 1990 levels, even after their highly publicised emissions reduction efforts.

The goal of public policy must always be to increase human welfare. One lead author of the Intergovernmental Panel on Climate Change, Richard Tol, has pointed out that many studies of the economic impact of climate change have excluded the possibility of adaptation entirely – as if potential sea level rises will be met by humanity with a stoic fatalism, rather than levies and insurance. (Tol, it’s worth pointing out, is no climate sceptic.)

Nor do enough studies consider the positive effects of temperature increases. In a warming world, marginal land can become productive for agriculture, just as often as productive land can become marginal.

Given how we’re getting better at coping with extreme weather events, there’s reason for optimism. Taking all peer-reviewed studies of the economic consequences of temperature rises into account, Tol estimates that climate change could cost just a few per cent of global GDP over the next 90 years. That’s about one year’s economic growth. The cost of climate change is the equivalent of a bad recession, spread over nearly a century.

With the economic cost of climate change so low, Tol suggests (at most) an optimal carbon price would be $2 per tonne – a lot less than the $26 to $40 per tonne suggested by the government and commentators. But at $2, the cost of collecting such a tax would seriously eat up its revenue; hardly worth doing at all, and a bit trivial to be ”major economic reform” on which Julia Gillard could build her legacy.

The most damaging consequences of IPCC-projected climate change will be in the Third World. But developing countries aren’t disproportionately vulnerable to climate change because they’re in more dangerous parts of the globe, but because they’re poor.

Wealth and sturdy institutions are critical for handling natural disasters and climatic changes – as we’ve seen in the difference between the 2010 Haitian earthquake and the 2011 Japanese earthquake. This makes the real climate change question a question about economic development. How can the world’s poor get rich quick?

If her government is serious about tackling the consequences of climate change, that should be the one question exercising Julia Gillard’s mind. Her carbon price is, at best, a distraction.