Thursday, March 17, 2011

Carbon Price Catch 22

There was only one catch and that was Catch-22.

Julia Gillard asked Greg Combet what to do about putting in place a price on carbon.

“The problem,” he said, “Is you have to explain the system in a simple clear way in which the people will be able to understand.”

“So all I need to do is that and all will be well?”scan0026

“No, if you do that you will be accused of lying because you’re not telling the full story.”

“So I should tell the full story – including all the intricacies of the timings on when prices will change to an extent great enough to ensure changes in behaviour subject to the cross price elasticity of high carbon emitting products?”

“No if you do that you’ll be accused of not being able to sell the carbon price because you won’t cut through.”

“So I should speak in a way that cuts through?”

“No because if you do that you’ll be accused of lying because you’re not telling the full story.”

Julia was moved very deeply by the absolute simplicity of this clause of Catch-22 and let out a respectful whistle.

"That's some catch, that catch-22," she observed.

"It's the best there is," Greg Combet agreed.

On Monday night on QandA Julia Gillard said this:

There's this image that somehow we're the only ones, simply not true. You know, China closing down a dirty coal-fired power generation facility at the rate of one every one to two weeks. Putting up a wind turbine at the rate of one every hour. Set their own targets by 2020 of reducing carbon pollution by 40 to 45 per cent per unit of GDP.

This seemingly (and actually truly) straightforward statement on positive things done in China led to The Oz acting as though it had found the smoking gun:

Julia Gillard's 'dirty' remark backfires

Really? Backfires? Why?

Opposition climate action spokesman Greg Hunt leapt on the comments, accusing the Prime Minister of failing to mention that China, the world's largest emitter of greenhouse gases, was experiencing huge growth in emissions, but the Climate Institute's John Connor backed Ms Gillard's remarks.

Yep. Because she didn’t in this on-the-spot (and without any notes) interview also outline that China was building coal fired power stations she is committing a terrible deception on the public (well , according to Greg Hunt, so yeah, run that headline!). Today blogger Drag0nista, who I often converse with on Twitter, had a piece on The Drum alleging the same thing:

Similarly, the PM intentionally misled Q&A viewers with her comment about China. While scolding us for being climate recalcitrants, the Prime Minister misrepresented China’s climate actions to emphasise our tardiness:
"You know, China [is] closing down a dirty coal-fired power generation facility at the rate of one every one to two weeks."
In reality, China is replacing its old coal-fired power stations with
new ones. China is a long way from abandoning coal in the way suggested by the Prime Minister.

Really? She intentionally misled us? Sorry, but what I heard was the PM say this:

You know, China closing down a dirty coal-fired power generation facility at the rate of one every one to two weeks.

Helpfully Drag0nista links us to an article to prove her point:

China is replacing 31 gigawatts worth of coal-fired power plants with newer models.

The government said today it plans to shut some of its smaller, most inefficient coal-fired power plants, with 13 GW of capacity set to close this year, 10 GW in 2010 and 8 GW in 2011.

The National Energy Commission plans to replace the highly polluting plants with large, energy-efficient coal plants with a combined capacity of 50 GW.

Similar plans led to more than 34 GW of the most-inefficient plants being taken offline from 2006 to 2008. In 2007, the government closed 14.38 GW, surpassing its goal of closing 10 GW. And in 2008, the government beat its goal of 13 GW by closing 16.69 GW of plants.

Replacing coal-fired plants with newer models has some benefits in reducing emissions. China's coal plants consumed an average of 370 grams of coal per kilowatt hour in 2005. By using newer coal technologies, the government reduced the average consumption to 349 grams per kWh in 2008. And new plants, such as the 1 GW Huaneng Power International coal plant in Yuhuan, can generate a kWh with just 283 grams of coal.

imageSo China are doing what Gillard said they are doing – what a shocking way to mislead us! Her crime on the set of QandA was not to give more detail on what they were being replaced with, which is not actually a fault at all, unless you’re Greg Hunt and you’re desperately trying to hold on to some credibility.

The Oz’s editorial today kept up its attack on this egregious misleading by Julia Gillard:

China's coal story poses a problem for Canberra

GILLARD will lose credibility with sweeping generalisations.

Well hell, we certainly don’t want any sweeping generalisations, like, you know, that Gillard will lose credibility with sweeping generalisations…

The editorial goes on:

On ABC TV's Q & A on Monday night, the Prime Minister implied coal-based energy in China was being replaced by wind-generated power. If only. The facts tell a different story. China may be closing down its "dirty coal-fired power generation" facilities, but that doesn't mean it is using less coal. Rather, every kilowatt hour of electricity saved from the old stations has been more than replaced by power from a coal-powered station using newer technology.

Oh she “implied” it did she? So she didn’t actually generalise, she just “implied” something – watch out PM, they’re not bothering with what you say, they’re going after what you imply (though to be fair, The Oz is very, very good at using half-facts to imply things…). What a pity that The Oz hadn’t held off on writing its piece until after Julia Gillard gave her speech yesterday at the Don Dunstan foundation:

China is closing environmentally-damaging, unsafe and economically inefficient small coal-fired generators at the rate of one every one or two weeks and replacing them with larger plants that are economically and environmentally much more efficient.

They are putting up wind turbines at the rate of one every hour.

I guess she just anticipated The Oz’s editorial today and so fitted it into her speech yesterday…

The Oz and some others who suggest Gillard needs to lay out everything are to my mind verging on being the “concern trolls” you find on political blogs – they profess to be there to help the PM get her carbon tax through, but in reality will carp at everything she does all the way to the end. You know the drill – she needs to provide more information (voters love detail!); she should have started negotiating before releasing the framework (businesses would have been so eager to help!), she should have locked in the price before making an announcement (because we’ll forget Rudd did that and failed with the RSPT); she needs to explain all the negatives (this one is usually done under the guise of encouraging her to be honest with the voters – we love honesty – especially when it is about us being hurt financially!).

All of these things if done would then be criticised by the same people who criticise her now for not doing them – mostly under the guise of “Gillard is failing to sell her carbon tax”. She’s allowed to sell it – but only if she does it in a way which almost assuredly means it won’t be sold. – Carbon Price Catch 22. 

I’m not saying all who offer advice are “concern trolls” (though I ain’t arguing with you if you put the unknown editorial writer of The Oz in that category). But one good way of detecting if they are is see what they have to say about Abbott’s talk on the carbon price debate. You can pretty well pick any interview, but take for example his interview with Karl Stefanovik a week back on the Today Show:


Overall, Tony, do you reckon this is what Australians really need to be seeing at this point and I know, I know this, the carbon tax and what to do about the situation is extremely important for this country's future but there are a lot of other issues that are very important at the moment, there’s a lot of pressure as you know on household budgets, there’s a lot of pressure on small businesses. Is it not better for the parliament to be spending their time trying to satisfy some of those needs before carbon tax and to pour a little bit more effort into things like hospitals?


Well, Karl, you are right. There is pressure on household budgets and there is pressure on small businesses and the carbon tax is just going to make it worse and that is why this carbon tax issue is so important. Not only is it a terrible breach of faith with the public but it is going to radically transform the way people live. Basically, this is an economy changing and a lifestyle changing tax. It's meant to be. It’s meant to make it almost impossible to turn on your air conditioner, it’s meant to make it much more expensive to drive your car. It's meant to stop people digging up coal and burning it for power. It's meant to close down emission intensive industries like steel and aluminium. This is the very purpose of the tax and that's why it is so important that the Government never introduce a tax like this without first seeking a strong mandate and that's what we haven’t got.



First off – wow that Stefanovik is a real pit bull ain’t he?! Talk about giving Abbott the third degree! image


Anytime you hear anyone bang on about Stefanovik’s great journalist credibility, just point them to that question. I half expected Abbott part way through to ask where was the foot massage Stefanovik had promised him earlier.

But just look at the answer:

  • It’s meant to make it almost impossible to turn on your air conditioner,

Well that’s a lie. It may cause you to be more judicious with your use of your air-conditioner (something my father already says to me whenever he comes to visit), but “almost impossible to turn on”? I guess that doesn’t count as a sweeping generalisation…

  • It’s meant to make it much more expensive to drive your car.

Well yes, but “much more” is again a bit over the top. The increase in expense is hoped to reach the point where you move to other forms of transport where possible in time to eg public transport instead of private cars – or to encourage car-pooling. And also the price is hoped in time to reach a point where car manufacturers actually have a viable business reason for producing greener cars (and all the other infrastructure that would need to go with them).  So yes it will do this, but of course as well Abbott isn’t giving us the full picture because he is not telling us about any compensation. 

  • It's meant to stop people digging up coal and burning it for power.

A lie. It is meant to stop our overwhelming reliance on coal powered energy, but no one (no, not even the Greens) think it will stop people digging up coal. And if it does, we’re talking 30, 40, 50 years.

  • It's meant to close down emission intensive industries like steel and aluminium. This is the very purpose of the tax

A lie. No it is not. It is meant to make them more efficient and reduce their carbon impact.

Sweeping generalisation, lies, half-truths, misleads. All parts of Abbott’s great cut through, and all things many in the media will criticise should Gillard do them. But here’s the catch – they’ll also criticise her for not doing them.

imageThe next concern we’ll start hearing is that linked to the announcement today of Ross Garnaut’s paper on carbon pricing – namely the price will be too low to do anything, and the concessions are too great so the Greens will back out of it.

Now it is pretty obvious the Greens won’t be doing handstands over Garnaut’s suggestion that the CPRS compensation be essentially kept in place for three years. But let’s not fall for the mistake of thinking this is 2009 all over again.

The Greens voted against the CPRS not because they were too pure (though I admit I held this view as well), but because they believed the CPRS locked in high polluting behaviour for, well for ever.

Yes they were against the compensation. Yes they wanted a higher target. But the real kick for them was the long targets put in place that effectively meant energy companies and the like could keep going on their merry way, and laugh at the Government while doing it.

There are a couple of differences also between now and then. The biggest is they are in the tent. Back then Penny Wong did not given a damn what the Greens had to say. She didn’t care, didn’t want to care, didn’t even want to pretend to care – in fact the strategy was to show she didn’t. This attitude was reflected by the fact that during the heat of the debate Kevin Rudd did not meet with Bob Brown for over a year.

The reason was the Senate maths. Rudd decided as the Greens did not have the balance of power the best bet was to cut them out, come up with a deal the Libs couldn’t refuse because it would be so weak that refusing it would seem mad and extreme. He bet the farm on that strategy and lost.

The Greens didn’t need to vote for it, because it was obvious they had no stake in it, and the Bill had enough things wrong with it that they could justify to their voters why they didn’t. They were pretty nicely vindicated at the election.

But now it is different. They are in the tent and they must get a result. If they come up empty handed this time they will I believe have to answer the “perfect is the enemy of the good” argument. Gillard and Combet know this. But they also know there is a media just aching to make it seem like the Greens and ALP are at daggers. They also know it is good for them to be seen to push the Greens around every now and then (or at least that is the theory put forward by more than a few in the media, I’m not so sure). And so we’ll get Gillard put the Greens in the extremist camp in her speech, Although saying:

The Greens are not a party of government and have no tradition of striking the balance required to deliver major reform.

is hardly to the barricade stuff. And so Bob Brown laughed it off (or more likely laughed at the media for being so gullible as to think it would be an issue). Similarly the Greens will every now and then do what they need to do to show they haven’t sold out, and so you’ll get Bob Brown saying of Combet:

Combet equals coal

And you don’t see the ALP saying, right that’s it, get your coat, we’re leaving.

Both sides are behaving like adults who know the game, and know the play. The negotiations will be tough – each will be trying to get just enough so the other is uncomfortable, but not uncomfortable enough to walk away. Each will want to claim the result as a win.

Yes the Greens will be disappointed with the compensation and they will want a higher starting price (whatever it is – you know they’ll want it to be higher). But the main game for the Greens is to ensure a model is in place that allows for decreases in compensation and increasing of price in time (and not in the never-never period, but in the next 10 years at least).  That way they will be able to say to their voters they at least got the cart moving.

It won’t be easy, but here’s my call – it will be the easiest part, because the rules are set and aren’t changing. The ALP and the Greens aren’t working in a Catch 22 zone where one side will be criticised by the other for being both too hard and then too soft.

Out in the media however, different rules apply; that’s the hard part. And that’s the catch.


Mr Tiedt said...

As usual, your writing is brilliant Greg (I LOVE the catch-22 bit) but I'm going to have to, for once, disagree with your analysis. I think Drag0nista hit this one on the head earlier on.

Labor was always going to cop flack for a Carbon Tax, and it was always going to cost Gillard political capital. Most of the criticism she has copped has been the usual shrill rubbish, and Abbott has accepted so much sympathetic coverage he must be thinking that this politics business is pretty easy, but I think Gillard has made some mistakes that she will regret.

Most of the flack has been undeserved - but not all of it. Labor could have sold this better - and we may all suffer if ultimately they do not succeed.

Sonia said...

The steam will go out of the argument against the carbon tax. Its hard to maintain that kind of rage. You are so right Grog. However Labor announced the Carbon tax they would have gotten flack. I trust Combet to be able to sell it. I watched Garnaut today and his belief that half of all the money raised should go back to ushelp should

Anonymous said...

Greg, I agree with your premise that the ALP has a catch 22 problem, but I only think Labor has itself to blame for this not the media. No hard earned policy is without difficulties, better politicians recognise the cul de sac before they get in it.

And I think your being disingenuous with offering JG no blame for her creating in the minds of many, probably most that China was drawing down coal fire power plants and using wind instead. She is not as silly as you make out to book end a statement like she did with those two facts without knowing how some will fill it.

Ian Lee said...

What hasn't been said anywhere is how much fun politics is at the moment.

Remember years of mind numbing predictable boredome and drudgery under Howard and poor old Kim Beazely? In comparison to then, what's going on is electric.

What would add poignancy to the current debate now would be if Gillard were to say to Abbott:

"get away from me you damned dirty monkey"

Sir Ian Crisp said...

Pity the poor punter as he watches the harlequinade in Canberra. A mere week after the happy family snap with aunt Julia, uncle Bob, aunt Christine, and adopted children Rob and Tony all smiling at their own broadmindedness we are now told Bob and Christine have been airbrushed out of the picture.

Adam Rosalky said...


You always cut so well to the pragmatic heart of the issues.

The hysteria over details is astounding! That the Greens might pull out over a three-year compensation package. That the Opposition is in hysterics over the fact that the trading scheme will be fixed price (read "tax") for two years. Jeez!

In fifty year's time - who will care about the details surrounding the establishment of he scheme? It's minutia.

firstdog said...

You're quite good at this

Lulu said...

Mr Tiedt,
We all have to get the message across. Why leave it to politicians. It really is more important to explain that severe weather events WILL happen more frequently, and they will shift averages a bit. However as we try to raise money to replace livelihoods for people whose lives have been destroyed during extremely wet, wet seasons, or wild fires during extreme temperature and wind events, we need to consider this could worsen... at least this is what my climate scientist mates tell me. I respect their interpretation of the data they collect, and compare with other world class scientists' data. I don't understand why people refer to this like religion ... something they can choose to believe in. Who believes they are not sick, when they have a full-blown flu? A stoic optimist, perhaps.

Anonymous said...

A PM allowing the shooting of innocent refugees trapped in an illegal prison calls the Greens "extreme". Excuse me while I puke.

Anonymous said...

And by the way, government's don't have to sell anything to the public, they just need the votes in both houses of parliament.

Why the media trolls want this "selling" they never demand of the lieberals over trifles like illegal wars is beyond me.

Persephone said...

Well written Grog.
Loved the Catch 22 analogy

Anonymous said...

The price per tonne needs to be at least $70, only then will we curb dangerous warming and make a nice place for our kids and puppies.

Anonymous said...

Anytime you hear anyone bang on about Stefanovik’s great journalist credibility, ....

We weren't in any great danger of this happening, surely? The Today Show went and got credibility as a news program when we weren't looking?

I love your work Grog, but the Oz is such a lost cause- why waste time reading it? I'm sure it is toxic.

ernmalleyscat said...

I like the Catch 22 analogy. The gotcha questions and gaffe watch style of news media has reduced political debate to a silly game of marketing and second guessing reactions.

I'm also reminded of the great Peter Cook movie 'The Rise and Rise of Michael Rimmer' - - where a marketing guru takes over the Tories and first bombards the public with referenda and opinion polls, then exploits the confusion to promise 'no more intrusive consultation', and becomes dictator.

I don't think anyone on the scene here has the wit or lack of enemies to pull it off, but it seems very prescient.

Ian Lee said...

Re what Gillard should really be saying to Abbott visa vi the current Catch22 scenario, I've been reliably informed that I've misquoted the late and great Charlton Heston in previous quote. The correct quote can be found here:

Anonymous said...


Powerful forces behind the scenes appear to be orchestrating events to set up and profit from a carbon emissions trading system worth trillions of dollars.

The current players are not just ahead of the game. They wrote the rules and designed the playing field. While taking out any opposition.

In 2000, the Joyce Foundation provided a grant to Richard Sandor and Kellogg School of Management to develop competing carbon trading software. At the time, Barack Obama was on the board of directors for the foundation. This eventually led to the birth of the Chicago Climate Exchange (CCX) the only voluntary emissions reduction and operational cap and trade system in North America.

Al Gore, founder of the London-based Generation Investment Management, GIM purchased a huge stake in Chicago Climate Exchange (CCX). GIM is the fifth largest shareholder. Former Vice President Al Gore partnered with people from Goldman Sachs such as David Blood, Mark Ferguson and Peter Harris to name a few.

Glen Beck says: “The Obama administration has also instructed the Environmental Protection Agency to declare CO2 a dangerous threat to human health which will lead to regulation of carbon emissions.

A patent for such a device was worked on by CEO Carlton Bartels. Shortly after he filed for the patent on his system to trade residential carbon credits, he was killed in the 9/11 attacks. Bartels wife then shopped the idea around and was able to find a buyer Franklin Raines. Who just happened to be the CEO of Fannie Mae at the time. The patent was eventually approved by the U.S. Patent and Trade Office on Nov. 7, 2006 — coincidentally the day after Democrats took control of Congress. So now, Fannie Mae, who is congressionally mandated to “make housing more affordable,” is poised to reap billions on a system that has nothing to do with housing except for that it would make housing costs go up.
Remember when Fannie purchased risky mortgages from banks, bundled them together and sold to investors as mortgage-backed securities? And then the housing market was absolutely destroyed? Well, former Fannie VP Scott Lesmes was responsible for that bundling. Now Cantor Fitzgerald own – how convenient.

Well, here’s the good news: Not only will this new carbon trading “system” try the exact same bundling method (except with air); they are using the exact same guy: Scott Lesmes.
Glen Beck goes onto say: “It’s almost like Goldman is willing to take a little heat now, in order to get a little piece of the $10 trillion green pie later. I challenge the media: Will anyone pick this story up? Will anyone question this and the timing of it all?”

Meanwhile in Australia, CCX is a major shareholder along with Macquarie Group Limited (note Malcolm Turnball ex Macquarie Group) and Climate Exchange plc London, of the Sydney based ENVEX chaired by former NSW State Premier Bob Carr.

One only has to look at the fallout from the Sub prime mortgage debacle. The creation of CDO’s (collateral Debt obligations) that no-one understood and how it caused over consumption and engineered the Global Financial Crisis. Therefore history is going to repeat itself with a Carbon Trading scheme.

The Powers-That-Be (‘Elite’) are building a society that reduces all of its citizens to a common standard of living. The resulting society does not value the individual, their rights or their achievements.

Gordicans said...

And here's Tony Abbott's reaction when the carbon tax comes in, he's left holding a s**t sandwich with no plan B and loses the liberal party leadership:

Anonymous said...

Love your work Grog.

A short while ago I seem to remember the mining tax was announced with a mass of detail and look how well that worked out.

From Q&A it was quite apparant that the GST is their model for getting it done right down to the bit where they splinter the greens in place of the democrats (though that's not likely while Bob is around).

Fishnet Fantasies said...

THE AIR CONDITIONING LINE???? Grog you dissapoint, scintillating polictics.... I pine for Alexander Downer and that's just downright kinky.

Fishnet Fantasies said...

My suggestion for raising revenue: Let's Tax Omissions instead of Emissions and the politicians can foot the bill totally.

Jen said...

It is extraordinary to see the neocons that make up the Coalition (of The Ignorant)both fedreally and at State gov't in Victoria stick their fingers in their ears and squeal "nyah nyah nyah we don't believe you" over any scientific evidence they don't like . The list now includes global warming, dangers of the nuclear industry and the impact of grazing cattle in sensitive Alpine areas. The gall of this position is only outdone by Andrew Bolt's incredible clanger that Chernobyl only effected 50 people.

When did it become optional to accept fact? And whyTF do the media keep letting them get away with it??
Go Grog.

Percolated Fish said...

"They also know it is good for them to be seen to push the Greens around every now and then (or at least that is the theory put forward by more than a few in the media, I’m not so sure)"

I'm not so sure either. It goes to her integrity and trust when Gillard on one hand, says the Greens can't be negotiated with, yet on the other is then seen negotiating with them.

This isn't just some silly game played out to appease the media. Every-time she calls them an extreme party who can't do deals, it only makes that image of her announcing the Carbon Tax - with the Greens standing next to her - that much worse.

She's not selling a consistent message. She's saying "Here I am publicly saying one thing, while behind closed doors I'm doing the exact opposite. Now, can you believe anything I say?"

If she then is able to negotiate with the Greens and get this major reform through, she only proves herself to be a liar - and plays right into Tony Abbott's hands.