The Rudd Government’s ETS legislation is being re-presented to parliament in a couple of weeks time. The Government is doing its best to torment the Opposition by counting down the days and reminding them that failure to pass it a second time will provide a trigger for a double dissolution.
Malcolm Turnbull was very concerned about a double dissolution and would have allowed the legislation to pass. Tony Abbott opposed it and has dared the Government to bring on an election, but three members of his party crossed the floor.
The Greens opposed the legislation because they regarded it as not radical enough. But if they changed their mind and voted in favour of it the second time, and the same three Liberals crossed the floor, it would pass.
Why would the Greens do that? Perhaps because they see little chance of achieving anything more to their liking, with the IPCC now looking shaky over its Himalayan glaciers predictions and the Climategate scandal. So it cannot be assumed the ETS is a dead duck; there is a chance it might get through. What then?
One possibility is that the Government would delay gazetting it. Implementation would be a huge anchor on the economy, with fuel and electricity prices rising, and there are plenty in the Rudd Government who are only interested in using the ETS as a wedge issue against the Opposition. They secretly hope it never eventuates.
Another possibility is that free carbon permits would be handed out for as long as most of the world does nothing. The net effect would be little more than the dead weight cost of setting up the scheme (although that’s not to be sneezed at).
A third is that the Government will set about implementing the scheme, driven by the zealous Wong, only to discover in a couple of years that it has not achieved anything positive and is indeed crippling the economy just as many said it would. In that case it might have to unwind the scheme, as California is now contemplating. From the Wall Street Journal, 11 Jan:
California Cap-and-Trade Revolt
A ballot measure would suspend the law until joblessness falls.
Could Californians finally be serious about turning around their sputtering economy? One hopeful sign is a ballot initiative that would repeal the Golden State’s version of a cap-and-trade carbon tax.
This feel-good law to reduce the state’s carbon footprint was enacted with great hoopla by the Democratic legislature and Republican Governor Arnold Schwarzenegger in 2006 when the state’s economy was growing and the jobless rate was 5%. The law requires that starting in 2012 the state must ratchet down its carbon emissions to 1990 levels by 2020. The politicians and green lobbies told voters this energy tax would create jobs—the same fairy tale many in Washington are repeating today.
Now the jobless rate is 12.3%, 2.25 million Californians are unemployed, and the state government is broke. So Republican Assemblyman Dan Logue has begun collecting signatures for “The Global Warming Solutions Act,” a ballot initiative that would suspend California’s cap-and-trade scheme until the unemployment rate falls below 5.5%. He’s aiming to get it on the November ballot.
No matter what one thinks of climate science, it makes little sense for an individual state to unilaterally impose major new tax and regulatory costs on its own industries. The impact of California’s gesture on global temperatures will be infinitesimal, but the economic impact will make the state even less attractive to start or expand a business.
A 2009 study by economists at the California State University at Sacramento and commissioned by the California Small Business Roundtable found that the implementation costs “could easily exceed $100 billion” and that the program would raise the cost of living by $3,857 per household each year by 2020. So much for the free green lunch.
The law all but encourages outsourcing to Nevada, Texas, China and India. Even the liberal Sacramento Bee, which supports the law, says that policy makers should be “candid about the real costs of the transition it is contemplating. . . . Industries that are energy-intensive will move elsewhere.”
Meanwhile, a new study commissioned by the Governor’s Office of Small Business Advocacy estimates that the direct cost of current California regulation is $175 billion, or nearly twice the size of the state general fund budget and about $134,000 per small business each year. The Golden State already has the second most business-unfriendly regulatory climate in the nation, after New Jersey and before the cap-and-trade law.
The stakes here are huge, and not merely for California. This is the first serious effort to roll back the environmental extremism that has dominated state capitals in recent years and is now ascendant on Capitol Hill. The green lobbies and businesses that have a monetary stake in cap and trade—including big utilities that want subsidies and Silicon Valley political capitalists investing in solar and ethanol—are sure to spend heavily to stop it. They know that an electoral defeat in the greenest of states could end their national and global hopes for cap and trade.
For Californians the issue is simpler: Whether they want to continue to impose burdens that encourage employers to locate anywhere except their once prosperous state.