Abbott versus a Madigan-Greens alliance?

The Abbott government’s attempt to abolish the Clean Energy Finance Corporation has been defeated by the Greens and Labor with the support of Senator Nick Xenophon, but also interestingly Senator John Madigan of the DLP.

Madigan’s reasons for supporting the CEFC suggest there may be unexpected room for common ground with the Greens in the future. This could create major headaches for Abbott and his colleagues, even post-June 30 when new senators take their seats.

Madigan’s support for the CEFC will come as a surprise to many given he has downplayed concerns about climate change, strongly criticised wind power, and opposes the carbon price.

But it appears to all be characteristic of a man deeply suspicious of unfettered free markets with a deep concern for those people lacking economic power. A man who appears nostalgic for times prior to Hawke-Keating reforms, when government played a more hands-on role in directing and insulating sub-sections of the economy with a mixture of tariffs, state-owned enterprises and a range of price and competition controls.  

In a speech in support of the CEFC, he harks back to times past where state-run banks were a common feature:

"The Clean Energy Finance Corporation is dragging Australian financial institutions into investing in the 21st century. It is helping fulfil the role that used to be filled by the likes of the Commonwealth Development Bank, the rural and regional development banks and other public lending institutions that engaged in nation building."

Madigan support for the CEFC seems to derive not so much from concern about climate change but rather because he sees it as playing a role in supporting domestic industry and manufacturing:

"...[The CEFC] supports and encourages good local industry development on a responsible basis. I want an energy transition that promotes Australian jobs, Australian technology and innovation and Australian manufacturing and helps protect the environment to boot … practical solutions that achieve such high performance standards take a long time to develop and commercialise – 20 years or more."

"They also need ongoing government assistance along the way.

He then goes on to praise the pin-up boy for the Greens and the renewable energy industry:

"I look at some of the cleanest, greenest countries on the planet, such as Germany, which are eminently practical in their approaches to reducing emissions. German coalition governments take practical approaches to practical problems. They provide direct funding and capital grants to develop and commercialise low-emission technologies. They assist companies and households to buy low-emission technologies.

"They are driving down emissions by using a combination of direct action, including capital subsidy programs and regulation, as well as taxing pollution."

These statements are likely to delight the Greens, while horrifying many senior policy makers and politicians who are strong believers in free markets.

The reality is that the Greens' membership and supporter base has never really been deeply in love with an emissions trading scheme as the primary policy solution to climate change. They, like Madigan, are suspicious that it will be gamed and corrupted by greedy businesses. 

Instead, they prefer more tangible policy instruments linked to things they can touch and feel.  Feed-in tariffs that set prices for electricity from solar and wind, minimum standards for the energy efficiency of homes, and bans and managed shutdowns of coal-fired power stations are more their thing. 

Such policies pose significant risks because they rely heavily on the quality of government officials’ judgement and foresight. While these officials are often just as intelligent as their private sector counterparts, everyone makes mistakes and government mistakes are not mopped-up quickly by market competition.

Yet at the same time a large proportion of the population (including many who vote for the Coalition) are like Senator Madigan. They aren’t prone to dismiss warnings from highly qualified scientists and respected institutions that global warming is a serious problem. But they are deeply worried about the industry dislocation and loss of jobs that comes with transitioning out of fossil fuels.

For them to be willing to support such a transition they need to be able to clearly see tangible examples on the ground of the industries and jobs that will replace those that are lost. They need to see a pathway for how they get from where we are now to where we need to be.

Saying the market will sort it all out just isn’t going to do the job.