TiP

As Julia Gillard set out on the selling job of her political career, Essential Media published a new poll showing just how hard the task is.

The total of respondents opposing the carbon pricing measure has risen to a record 53 per cent versus 35 per cent supporting it and the “don’t know” component down to 12 per cent.

This poll was taken before the policy was announced.

Those opposing the proposal include 20 per cent of respondents saying they would vote for Labor and 21 per cent leaning to the Greens.

Obviously reacting to polling feedback, Greg Hunt, the opposition spokesman on climate action, appeared at the Lowy Institute on ‘Carbon Monday” to declare that electricity is “singularly unsuited” to a major tax.

“Electricity,” he said, “historically has been the largest source of social progress and of emissions growth, but it is also an essential service.”

It is, he argued, not very susceptible to pricing, pointing out that IPART in New South Wales had found that a 50 per cent price rise over five years had resulted only in a six per cent decrease in per capita consumption.

He accused the Prime Minister of resisting the logic of the argument that you can drive up power prices with very little environmental gain, but a great deal of pain for users.

“If the carbon tax won’t work on petrol,” Hunt said, “it sure as heck won’t work on electricity demand.”

And Hunt argued that the Gillard government has secretly embraced the opposition’s direct action approach by negotiating behind the scenes with brown coal generators to pay for the closure of some to enable their replacement with baseload gas, a switch that only cuts part of the coal plants’ emissions.

When Julia Gillard brings her “Securing a clean energy future for Australia” caravan – a clear reaction to focus group rejection of Rudd’s “carbon pollution reduction scheme” – to NSW she will run headlong in to the fact that the State’s three coal-fired generation businesses, all owned by the government and not slated to get compensation or help to close, will be hit by more than a billion dollars a year in carbon costs.

The media are already reporting, for example, that Macquarie Generation, the second largest of the trio, marginally behind Delta Electricity in capacity, faces a $580 million annual bill and may have to absorb up to $230 million of this cost while the profit it declares is only $125 million.

This fits with Loy Yang Power in the Latrobe Valley declaring that it faces a $450 million a year emissions bill and the expectation that it can only recover a portion of the burden in the wholesale east coast market.

More than half the national power supply is provided by government-owned generators in NSW and Queensland; it will not take long for critics to latch on to the hit taxpayers will take as the Gillard tax eats their gencos’ payments to State revenue.

The point will resonate in Western Australia, too, where State-owned Verve Energy has said it will have to pay out some $200 million a year and has no hope this decade of walking away from its coal-fired production.

The biggest ticket issue for the Prime Minister, however, may be that the policy she has announced will not result in domestic abatement of 160 million tonnes annually by 2020, which is what the government emissions target now requires.

At circa $25 per tonne, the carbon price will not significantly alter coal’s role as the most cost-effective generation fuel in the short to medium term – it will take $50 per tonne to start driving black coal generation out of the marketplace.

The proposed scheme, the government acknowledges, will deliver only 59 million tonnes a year of abatement by 2020 inside Australia – the rest will need to be pursued through buying emissions credits overseas.

This assumes the availability of international credits – beyond New Zealand, which Climate Change Minister Greg Combet is flagging as a potential partner with Australia in a trans-Tasman trading scheme.

It is, as one senior economist pointed out to me on “Carbon Sunday,” a very big assumption. We have no idea if the necessary international market will develop in the next few years.

Already the overseas trading concept is being skewered by economists of note pointing out that there are big dangers in the credits turning out to not produce emissions abatement in their home countries – dodgy trading, in other words – and/or that the volatility of overseas markets may skittle the domestic carbon price.

What’s missing at present in the debate is the realisation that the 160Mt national target in 2020 is almost certainly too low. It has already been increased from the 144Mt Rudd claimed when he introduced the target and continuing growth in energy use is likely, I think, to push it towards 200Mt annually at the decade’s end.

This would mean that the $3.7 billion in annual transfer payments from Australian emitters to international holders of emissions credits, as claimed at the Lowy by Hunt, is more likely to be north of $5 billion.

A trenchant letter in today’s edition of The Australian by Ziggy Switkowski winds up: “Why are we being led down this path at this time by such an extra-ordinarily complex program?”

Adele Ferguson, writing in The Age, comes up with the likely answer: “Julia Gillard is positioning herself as the Mary Poppins of politics – she has given two spoons of sugar to the majority of the electorate to boost her standing in the polls and dropped the medicine on the top tax bracket and on businesses that won’t come back to bite her.”

That, however, remains to be seen – as the Essential Report poll indicates and as the Coalition is betting as it harps on the policy impact on electricity prices and on the cost of living generally. And, as a leading energy commentator pointed out to me today, when the analysis gets more forensic and starts to overwhelm the spin. Not to mention when the miners, who are claiming they face a $25 billion extra cost this decade, start another advertising campaign.

One such piece of analysis is the claim by the Real Estate Institute that the policy will add $5,000 to the cost of a new home. That will work a treat, for example, in western Sydney, a critical election battleground and where a fair few of those who will get less than two spoons of Gillard sugar are located.

Giles Parkinson, writing in Climate Spectator, argues that one of the biggest imperatives of the Labor package is to make the government as small a target as possible.

That may be Mission Impossible – even for Julia Poppins.

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