Carbon price falls - Kevin Rudd's day of shame

In defiance of the bulk of professional economist opinion, this government has succeeded in removing the carbon pricing scheme (a.k.a. carbon tax) today.

The scheme is by no means ideal and it isn’t the be all and end all for controlling carbon pollution.

Nonetheless, most economists seem to agree that putting a price on carbon would be the most efficient and effective way to reduce carbon pollution.

In addition, the economic impacts of Australia’s so-called toxic carbon tax have actually been incredibly mild. Even the Liberal-National Coalition, now that it is in government, cites the Australian Treasury modelling as the definitive source on the likely economic effects of the scheme. This modelling suggests that repeal will do little to reduce the cost of living and be of little benefit to industries other than coal power generators and associated miners, as shown in the table below.

Government’s economic modelling of the change in economic output in 2020 by industry as a result of carbon price remaining in place relative to repeal (negative values mean repeal benefits that industry)

Source: Australian Government regulatory impact statement accompanying carbon tax repeal bill

Yet the scheme will be abandoned in an atmosphere of incredible political animosity and division. This is especially puzzling when back in 2007 and 2008 there was a remarkable political consensus. Both Labor and the Coalition, but also key business and environmental representative groups, were in agreement that pricing carbon should be the central response to lowering Australia’s emissions.

What went wrong that led this to unravel so badly?

Sure, Tony Abbott had a big part to play, but to a large extent the blame must fall on Labor’s Kevin Rudd.

Philip Chubb, head of journalism as Monash University, and former national editor of the ABC’s 7.30 Report reveals in his book, Power Failure, some incredible character flaws that led Rudd to make some appalling mistakes that squandered the political consensus on carbon trading.

Chubb was given incredible access to the politicians and public officials that were closely involved in the development and implementation of Australia’s emissions trading scheme. He spoke with all the key players: Rudd himself, Julia Gillard, Wayne Swan, Penny Wong and Greg Combet.

I managed to catch-up with Chubb for an hour to discuss his book, and he has uncovered an incredible tale of hubris and short-term political opportunism undermining good public policy.

He describes Rudd as a man self-consumed by such an incredible ego that he was unable to effectively delegate and entrust others to make key decisions. Also, perhaps because he was so sure of himself, Rudd failed to appreciate that even if he was 100% correct on an issue, it didn’t matter if he didn’t bring along others with him. 

Chubb remarked to me,

a more fundamental way in which he wasn’t suited to be Prime Minister, certainly a Prime Minister dealing with a complex issue like climate change, was that he was the antithesis of a collaborative leader. So consultation, collaboration, engaging the political capital of stakeholder groups rather than spending all of your own on developing a policy was just not what he could do.

I recall during 2008 how groups that should have been the government’s best friends – that were in broad support of their climate policy agenda, such as the renewables industry – seemed angry with the government that they weren’t being listened to. Consequently the government had few strongly publicly backing its first attempt to introduce an emissions trading scheme.

It seemed as if the government simply took it for granted that its policy agenda would be enacted. Over 2008 and 2009 the Labor government didn’t seem to spend much time at all communicating to the public about how carbon pricing would impact on them personally and their communities, and how the potential negative impacts would be managed. And it left a vacuum ripe for exploitation by vested interests with assorted scare campaigns.

The most shocking thing Chubb revealed, and the best illustration of how Rudd’s ego bordered on the delusional, was the attitude he took to the 2009 climate treaty negotiations in Copenhagen,

Rudd went off to Copenhagen believing that he alone could solve the problems of the world, quite literally, and that he would come back in triumph as the leader of the world having secured a global agreement.  And of course he came back not just empty handed, but completely devastated

This is truly incredible given what was obvious about the two major players – the US and China.

For China to move, given their relatively low levels of income per person, they needed to see concrete action from the United States.

And the reality was that while US President Obama was no doubt keen to do something meaningful on climate change, to follow through on any major initiative required passing the gauntlet of the US Congress. At the time of Copenhagen, Obama didn’t have an emissions trading scheme enacted (and none has passed the Congress since). Also, under the US constitution for an international treaty to become binding, Obama would have to obtain two-thirds approval from the Senate, which seemed incredibly unlikely.

Yet somehow Rudd thought he himself could overcome this.

Given this, one can see why Rudd didn’t engage with the Coalition’s Brendan Nelson or Malcolm Turnbull to get their support to pass an emissions trading scheme in the Senate. Instead of trying to collaborate with Nelson and then Turnbull to see an important policy implemented, he used climate change against them to foster division with the Liberal and National parties.

Then when these political games handed control of the Coalition to the global warming doubters and Rudd faced some concerted resistance, he completely capitulated.

According to Chubb, he went missing in action in the first few months of 2010 on climate change policy. No one could get him to focus on what the government should do in response to Abbott’s opposition.

In the end Rudd decided to surrender.

Today is the day of shame for a former prime minister who chose short-term political gain over an opportunity for a lasting bipartisan agreement to address climate change.