Carbon Tax Is In The Best Labor Tradition Of Reform

by Greg Combet

John Button was a politician and minister renowned for making hard decisions. More than that, he was a reformer and a visionary.  He was a man deeply grounded in Labor values who understood that the future of manufacturing in Australia depended on re-skilling, productivity through capital investment, and competing in the global market.

As minister for industry and commerce from 1983 to 1993, Button carried through significant changes in industry policy, lowering tariffs and reducing other forms of economic protection. He led the transformation of Australian manufacturing from myopia and insularity to dynamism and export-focused competitiveness.

None of these reforms was easy. Precious few were popular at the time. Within the labour movement these were controversial reforms indeed. One has only to recall the special place of tariff protection within Australia's 20th-century economic history and orthodox labour movement thought. But Button knew that working Australians were better served by embracing economic change, rather than pretending it could be avoided. He knew Labor values of fairness and justice were best advanced by building economic strength and resilience, not through economic atrophy.

If we are to carry this legacy into the future, we must again make difficult decisions.

A central challenge is to transform our economy from one that has the highest per capita level of greenhouse gas emissions among developed economies to one that can generate energy, develop products and export goods while reducing carbon pollution. Reducing the emissions intensity of our economy is not a transformation to be feared. It is a future that must be embraced for environmental and economic reasons.

On July 10 the government announced a comprehensive blueprint to move to a clean energy future. Reducing our carbon pollution means we have to produce and use energy in a cleaner, smarter way. The government's plan for a Clean Energy Future will achieve this through:

  • Introducing a carbon price and using every cent raised to assist households, support jobs and tackle climate change;
  • Promoting renewable energy;
  • Encouraging energy efficiency;
  • Creating opportunities on the land to cut pollution.

The government considered two key questions when it designed the Clean Energy Future plan: can the policy deliver the reductions in pollution we need and will it do this in the cheapest and most equitable way? The first question is crucial for the credibility of any climate change policy. The carbon price mechanism is an emissions trading scheme designed to cut emissions by at least 160 million tonnes in the year 2020, and continue to cut emissions each year to achieve an 80 per cent reduction over year 2000 levels by 2050. This represents Australia's fair share of the global effort to reduce emissions.

The second question is essential for maintaining a strong economy and minimising the cost of adjustment for households and businesses. This is why the core of the government's plan is a carbon price. A carbon price is the most efficient policy instrument because it sends a market signal about the pollution content of goods and services consumed. It will drive a restructuring of our economy, stimulating a move away from highly polluting technologies and products towards cleaner technologies and products. And it will do this at the lowest cost.

Significant economic reform is almost always portrayed as a negative. The temptation is to resist change. But to leave things as they are risks externally imposed adjustments - perhaps the present debt crisis in Greece and elsewhere in Europe is a case in point.

As with the reforms of the 1980s, present-day economic reform must be undertaken in the national interest, to ensure we remain competitive in a global economy. In the low-carbon world of the future, businesses, investors, researchers and innovators who find cleaner and more sustainable ways of doing business will secure a competitive advantage. I am confident we will see the innovation and investment necessary to transform the economy.

But achieving this transformation must be driven by more than just a carbon price. Additional innovation programs will complement the carbon price. To help drive further investment in clean technologies, the plan includes a new $10 billion Clean Energy Finance Corporation. In addition, a new, independent statutory body, the Australian Renewable Energy Agency, will be created to co-ordinate about $3.2bn in grant funding supporting research, development and demonstration of new renewable technologies.

Along with the carbon price and the Renewable Energy Target, these programs will drive the biggest expansion in the clean energy sector in Australia's history

Once the Clean Energy legislation passes the parliament and a carbon price is introduced next July, the task of reforming our economy, reducing pollution and maintaining security will begin.

And just as we look back and honour Button for his vision, leadership, tenacity and political courage, so we should take inspiration from his legacy. The modern Labor reform legacy was built on two fundamental concepts. First, delivering growth through open international trade and market-based reforms to the domestic economy. Second, a commitment to equity and fairness, to ensuring all people secure a fair share from the economy's growth.

I am proud to be able to locate the Gillard government's plan for a clean energy future squarely in this Labor reformist tradition.

Our plan is pro-growth: an efficient carbon price, linked to international carbon markets, to drive a restructuring of the domestic economy. Our plan also ensures equity: households will be assisted through tax cuts, increases in family benefits and higher pensions, targeted at low and middle-income earners.

If John were still with us, I believe he would be relishing the fight just as much as he would approve of what we are doing.

In February 2009, Greg was appointed as Parliamentary Secretary for Climate Change. He was previously Parliamentary Secretary for Defence Procurement. In June 2009, Greg entered the federal ministry as Minister for Defence Personnel, Materiel and Science and the Minister Assisting the Minister for Climate Change.

As published in The Australian, Friday 30 September 2011