"the greatest moral failure of our generation ….."

from Crikey ….

Watching the Prime Minister at the National Press Club this lunchtime is to witness an extraordinary disconnect between rhetoric and action.

Global warming, says Kevin Rudd is the elephant in the room. His government is attacking that elephant with a mouse.

As Bernard Keane puts it ….

“The surrender is virtually complete. Our biggest polluters have won, and the rest of us will be paying for it under a joke of an emissions trading scheme that encompasses a significant transfer of wealth to our largest polluters.”

And that's it in a nutshell.

Keane writes:

“The Government has restructured its emissions trading scheme to deliver even greater assistance to Australia’s biggest polluters and to scale back its commitment to participate in any international agreement, well below that advocated in the Garnaut Review.

The emissions trading scheme White Paper released this morning proposes that Australia commit to a unilateral 5% reduction in carbon emissions on 2000 levels by 2020, equivalent to a 27% per capita reduction given Australia’s population growth.

In the event of an international agreement, the Government has proposed committing to up to a 15% reduction by 2020, equivalent to a 34% per capita reduction.

The unilateral target of 5% is in line with that recommended by Garnaut, and the 15% target would reflect an international agreement somewhere between the 550ppm realistic goal discussed by Garnaut -- which would require a 10% cut -- and the 450ppm ambition that would require a 25% cut by 2020.

However, the Government has rejected Garnaut’s recommendation that it commit to a 25% cut if an international agreement around 450ppm is reached (equivalent to a 40% per capita reduction). Australia will go no lower than a 15% cut, even though the White Paper specifically states that "the Government believes that it is in Australia’s national interest to achieve a comprehensive global agreement to stabilise atmospheric concentrations of greenhouse gases at around 450ppm".

In the event such an agreement is reached, the Government has only committed to reconsider its post 2020 targets.

The Government strongly argues that its 5-15% effort is comparable to that adopted by Europe on a per capita basis -- Europe’s current goal of 20-30% below 1990 levels equates on a per capita basis to 24-34% below 1990 levels; Australia’s 5-15% goal would be 34-41% below 1990 levels.

The Government has also made significant concessions to Australia’s biggest polluters in the design of the scheme. Under the White Paper scheme, the carbon price will be reduced by permitting unlimited importation of accepted international permits, and there will be a $40 price cap for the first five years of the scheme. The Government expects the initial permit price to be around $23 a tonne, and some borrowing of the following year’s permits will be permitted in addition to unlimited banking.

The compensation arrangements have been significantly broadened to include industries that previously missed out on compensation and to provide greater flexibility for companies in determining their eligibility for compensation, through providing a value-added option in addition to the tonnes per million dollars revenue, and extending the period on which the calculation is based.

The threshold of 2000t per million dollars revenue/value added has been retained from the Green Paper, above which trade-exposed firms will be eligible for 90% free permits. But in a big victory for the LNG industry and other previously borderline industries, the lower threshold at which 60% of permits are provided free has been dropped to 1000t per million dollars revenue/value added.

As a consequence the proportion of free permits under the scheme has increased from 20% to 25% -- with another 10% for agriculture, which will remain excluded until at least 2015.

The Government has also clarified that such firms will receive increasing numbers of free permits if they increase production, meaning there will be no cap on emissions from our worst polluting sectors. There will be a 1.3% "dividend" deducted from caps each year but under normal economic growth conditions, it means that by 2020 45% of permits will be handed out free to polluters.

The Government will also provided $3.9b over five years in handouts to the coal-fired power industry, as well as a $2.15b "climate change action fund" for handouts to businesses, community groups and the coal mining industry. The petrol excise offset from the Green Paper has been retained, and the Government has strengthened its household assistance measures, promising to overcompensate nearly all low-income households with 120% of their additional costs, and committing that most middle-income households will not be out of pocket.

The Government expected to generate $11.5b in permit revenue in 2010-11, with all permit revenue recycled back into assistance, and a substantial risk that if big polluters grow faster than the rest of the economy, the Government will be forced to fund some assistance measures from the Budget.

Now the Government’s selling task begins, commencing with Kevin Rudd – having bumped Penny Wong -- at the Press Club today. Next stop; the Senate.”

and …..

The surrender is virtually complete. Our biggest polluters have won, and the rest of us will be paying for it under a joke of an emissions trading scheme that encompasses a significant transfer of wealth to our largest polluters.

The Government has rejected the two fundamental truths at the heart of the Garnaut Report -- that it costs less to act now rather than delay, and that acting within an international agreement significantly reduces the costs of curbing carbon emissions.

By taking a 450ppm option off the table until after 2020, the Government is in effect saying that such an agreement in Copenhagen isn’t merely improbable, but that we wouldn’t cooperate with it for a decade even if it eventuated, despite modelling consistently showing that the costs of pursuing even ambitious emissions reductions targets are much lower when there’s an international framework. The signal to the rest of the world is clear: Australia is still a climate change recalcitrant.

Remember we’re not talking here about unilateral action. The Government has said it will not take action until after 2020 to comply with a 450ppm target even in the event the rest of the world manages to agree to such a target next year.

And on compensation, too, our biggest polluters have won a major victory. In addition to increasing the flexibility with which eligibility for compensation will be calculated, the Government has lowered the arbitrary threshold at which 60% of free permits are allocated, dropped from 1500t per million dollars revenue to 1000t per million dollars revenue or value added. That will bring in the LNG sector -- although presumably won’t shut up Don Voelte, corporate Australia’s biggest whinger. Doubtless there are firms around the 900t per million dollars mark who are already preparing to lobby for further relaxation.

In the absence of an international emissions trading agreement, if eligible industries grow at about the same rate as the rest of the economy between now and 2020, at that point 45% of all permits will be handed out for free to polluters, even with a sort of carbon efficiency dividend each year.

And each time more permits are handed out to polluters, the burden on the rest of the economy increases. Low and medium-emission firms ought to start lobbying now for the retention of the price cap through to 2020, otherwise it’s going to be very expensive bidding for the remainder of the permits left over after they’ve been gifted to polluters.

And if heavily-polluting industries grow any faster than the rest of the economy, the impact on scheme revenue will mean taxpayers will have to start funding some of the assistance measures, which are meant to be revenue-neutral.

The coal-fired power industry will also do very well. Despite taking investment decisions for a decade or more knowing that action needed to be taken on climate change, they will still receive nearly $4b in assistance, described as "once and for all" in nature. Believe that when you see it.

With such massive handouts and generous compensation arrangements, the ETS will be a half-baked, ineffective joke amounting to little more than a paper-shuffling exercise for our most polluting industries. The latter have worked hard and successfully to convince the Government to further weaken what was already an inefficient and anaemic scheme in its Green Paper form.

The political consequence of that, however, is that the Coalition will be struggling to find grounds on which to block the ETS when it comes before the Senate next winter, and might lack an industry support base for its efforts, even in Western Australia. Today the Coalition was still saying a 2010 start date was too soon. That plays into the Government’s hands perfectly, reinforcing Kevin Rudd’s message that he occupies the moderate middle ground on climate change.

It’s politically astute, but a craven surrender to polluters and rent-seekers. In the middle of the year, Kevin Rudd was talking up his capacity to take tough decisions. On climate change, we’ve yet to see any evidence of it. Worse, we’ve announced to the world that we’re not prepared to play our part in reducing our emissions.