When Swan's river runs dry

All indications are that Treasurer Swan is going to have a frustrating 2014. There is a good chance that the honourable member for Lilley may not only lose the second top job in Australian governance, but might be sent home altogether after losing his seat.

The two-party-preferred vote figures just won’t budge for Labor, with the Essential Poll earlier this week showing 55/45 to the Coalition for the fourth week in a row, and the latest Galaxy poll showing a nasty 59/41 drubbing.

And if Swan is stuck at home with his beloved Bruce Springsteen record collection, he will no doubt wince each time in The River, the Boss sings “Is a dream a lie if it don’t come true, or is it something worse”?

For there is a dream Labor will bequeath to a Coalition government, should one be formed, and there is a very good chance it will become a lie, and then something worse.

The dream, such as it is right now, is to reduce carbon emissions by 5 per cent of 1990 levels by 2020 by selling permits to polluters and lending or investing the money to build renewable energy capacity.

On Swan’s watch, half the money raised during the $23/tonne ‘carbon tax’ period is handed back to householders – through tax breaks, pension increases and family tax benefits – to spend as they like. A sizable proportion of what's left over is earmarked for lending or investing in renewable energy via the Clean Energy Finance Corporation and Australian Renewable Energy Agency.

That second part, the ‘direct action’ component of the Gillard government’s plan, is vital. Carbon emission reductions must take place either by more efficient use of carbon-based energy sources, or by their replacement with renewables.

So building renewable infrastructure via ‘direct action’ is essential if Australia wants to be part of a global solution to the problem of unpredictable climate change caused by emissions of the various greenhouse gases.

There are many MPs at a federal level who believe it’s hopeless to try to do anything about climate change, simply because poorer nations with billions of people in them won’t get around to doing anything and Australia’s small size means our actions won’t help a bit.

Some clearly think that the cost of adaptation will be less than that cost of preventing the disruption of existing climatic patterns, including nasties such as the reversal of ocean currents and raising of sea levels.

Others think scientists can’t possibly know what the effect or our greenhouse gas emissions is, or that the world is ‘cooling’, or that we’re in a mini-ice-age that requires more, or variations on that theme.

None of these positions stand up to much scrutiny.

Other nations and states, including China, South Korea, the EU nations, New Zealand, California and Quebec, have set up, or are trialling, market-based carbon-reducing measures. They expect rich nations like Australia to do their bit too. Even the US Congressional Budget Office has been crunching numbers on how a carbon tax would work (note to the CBO – an emissions trading scheme is easier to sell politically).

The cost of adaptation is perhaps hundreds of times the cost of mitigation, and will be paid as much in blood as money if resource wars break out over dwindling arable land and water resources. Australia will in no way be insulated from those changes, and will have to play its part in coping with a dramatic increase in displaced people moving through our region as a result of those kinds of conflicts and food shortages. 'Stopping the boats' will become a quaint historical idea.

And finally, on what scientists really know about climate change, they know a lot. While those without a science background make black-and-white assertions, climate scientists continue to make statements of probability about where the rains are likely to dry up, where they’ll be heavier, and which regions will be hotter or cooler.

Those statements of probability suggest long-term disaster for agriculture on the Australian mainland (although a boon for Tasmania). That alone should be reason enough for us to stay focused on encouraging international action.

Now back to the future, in which former Treasurer Swan is spinning Springsteen disks at home and watching News24 for the latest exploits of a Coalition government.

What he would likely see is a government that will, in its first few months, try to generate as much political capital as possible from the ideas that “Swan and Gillard cooked the books”.

By estabilishing that narrative, a Coaltion government will give itself maximum room to move on abolishing, delaying or modifying any manner of programs – quite possibly even the modest expenditure it has earmarked for its Direct Action policy (currently about $3.2 billion over forward estimates).

The Gillard government’s dream was to raise revenue from polluting industries to fund or co-fund the creation of less-polluting energy infrastructure.

If a future Coalition government can convince voters that ‘Labor spent all the money’, it will be able to dodge the issue of renewable energy – namely, that parts of a fairly efficient energy generation/distribution system can’t be shut down without low or no-carbon emission infrastructure being built to replace it.

That’s the lie – pretending that Australia is like China, with lots of filthy power generation that just needs to be improved to hit the 5 per cent target by 2020. As Alan Kohler explained last year (Contracts for closure: the real story, September 6, 2012) there is not even enough ‘clean’ gas generation coming on stream to replace the ‘dirty’ power stations, let alone renewables.

Then there’s the something worse. The money Australia needs to spend on low or no-carbon energy capacity just isn’t there in the absence of a carbon price. As Jessica Irvine reminded us yesterday (How Australia can build the next boom, May 29), there is a growing infrastructure deficit in Australia across the board – not just in renewable energy. Irvine suggests creating a Reserve Bank-like body to manage infrastructure investment, funded by the government’s AAA-rated bond issuance.

While that is a good idea, the Australian Renewable Energy Agency and Clean Energy Finance Corporation are largely doing that already in the renewables space. But rather than raise money through borrowing, their funding comes out of carbon permit revenue.

For the CEFC, that was supposed to be worth about $2 billion a year starting from this July and continuing at that level over five years – to be geared up with  private sector investment.

But all political indicators are that this way of funding clean energy infrastructure will be abolished. No new agency will take its place. And renewable projects will be part of a long list of infrastructure that won’t be built.

As Swan watches this unfold, he’ll know that his government’s dream was far from perfect. But to see it become a lie, and then something worse will be hard. The Australian reports today that there is to be one last burst of ‘green loans’, with the Clean Energy Finance Corporation “planning to write up to $800 million in green loans before the election, defying the Coalition's call for the agency not to sign contracts before September 14 because Tony Abbott has vowed to scrap it.”

After that, renewables infrastructure investment will become like another line in that song, going “down to the river, though I know the river is dry”. That song doesn't end on a happy note. Neither will this.