Xavier Rizos researches relationships between economics, governance, regulation, politics and culture. We spoke to him about his article ‘Will the market save us?’ which is featured in the new Overland, and why it will take more than a ‘carbon tax’ for Australia to have an effective climate policy.
What motivated you to write this article now? Do you find that there is still much confusion around what the government’s carbon package actually involves?
I wrote this article while doing personal research to understand the impact of the carbon tax, which caused so much attention in the media a few months ago when the package was released. In doing so I was struck by the gap between the attention given to the tax and the lack of information in the Australian Media on the trading scheme, which is actually the system designed to reduce emissions in the long term. All the data points I found made it pretty clear that the carbon tax was not going to send the Australian economy broke anytime soon. And it was not the Leftists saying that, but very business-oriented firms. A line from one of the economists at a big Australian Bank seemed to summarise the consensus: ‘Typically, the advocates of tax policies overstate the benefits and the opponents overstate the likely damage. We suspect it will be similar with the carbon tax.’ Furthermore the carbon tax is only going to be around for three years, which is incredibly short on the industrial timescale to transform an economy. So really before we know it, the tax will be gone and we will be left with the trading scheme. This is the real deal.
Yes I find there is much confusion. Or even rather denial. Confusion would at least imply some form of scrutiny on the trading scheme, albeit ‘confused’, with an opportunity to clarify what has not been understood. At the moment there is complete silence on the trading mechanism: does the general public know how it is being prepared? Who is working on it? Are there firms skilling-up carbon operators? Are they recruiting? Which firms have started to ‘decarbonise’ their means of production in order to avoid paying polluting permits? Is the monitoring of those measures publicly available? Does anybody care? These will be the agencies entrusted to deliver the emissions reductions. The current lack of scrutiny actually tells a lot on our collective concern for the issue at hand …
If the carbon-trading scheme is the more crucial part of the government’s carbon package, why do you think public debate has centred more on the carbon tax?
To continue on the previous answer, it betrays how our collective psyche works. We, as a nation, are totally obsessed by the ‘Tax’. The perceived amount of money that we believe we will have to extract from our wallet. Even if in fact it will be totally neutral because not only will the government not tax households, but it will also give money back in compensation of an expected average price increase of $10 per week.
This shows that we react to ‘keywords’ and ‘tax’ is one of them. The lesson learnt from the past months is that despite aspirational claims, as a nation we are more collectively concerned by $10 that will not leave our wallet than by developing strategies to reduce our energy consumption and radically transform our economy. Partly because don’t know any other way than burning fuel, and partly because we are actually incredibly focused on the short-term: next year’s tax return is easier to picture than what a green economy will look like in twenty years time.
You say that the carbon-trading scheme is only one part of the equation to deliver an effective climate policy and that the government should start to articulate a social vision of what a decarbonised Australia might look like. In your opinion, what should a decarbonised Australia look like?
Indeed. Imagine as a thought experiment that you have a conversation with a coalmine owner in 19th century Britain. Imagine you tell him that he would have to stop employing children to go down the mine, that he would need to give the weekend off to his employees, that his wife would have the right to vote, and that she would find a job and teach at the city’s university or even run the company that employs him. And that, by the way, the government was about to raise taxes and utilise the funds to build a social infrastructure unknown until that time: sewers in London to eradicate the pestilence, schools to educate those kids not working down the mines any more, hospitals, etc. You get my point.
This coal mine owner would have probably totally freaked out. He would have claimed that his business would go broke and that all these changes would send the country to hell. Well, in fact his business did go broke, but not because cheap child labour was outlawed, but because a new innovation – oil – took over the world and made his coal irrelevant.
The same goes for the ‘green’ industrial revolution we are contemplating. If we believe that the pressure to reduce emissions will not go away, that energy and resource scarcity will increase, then the pressure to develop renewable energies and to change our energy consumption habits will keep growing.
I would even argue that even readers unphased by the ‘green agenda’ should consider the economic implications for Australia of not taking the lead on this. If we don’t embrace that trend, we risk being as irrelevant as this coal mine owner. At the moment we are so convinced that the wealth of our country comes from the mining and resources industry. We don’t take renewables seriously. We cannot see anything beyond the dirt we dig. However a smart strategy should be to enjoy the current boom while it lasts, but furiously invest the money into preparing for the next industrial revolution, which I believe is going to be about renewables and recycling: producing more energy in aggregate, while consuming less at an individual level, and polluting less overall.
A decarbonised Australia will probably see households focus on reducing their gas and electricity bills via a combination of straight reductions (i.e. ‘switching the lights off’, leaving the car in the garage) and use of technology (smart meters that shuts the house when nobody is in, the complete phasing out of greedy devices, etc.). For businesses and industries, it will require to ruthlessly cut the energy bills, as well as phasing out the use of fossil fuels.
Start getting really serious about renewable energy. Several energy companies are working on this. The problem is not the technology, but the economics to make it cheap enough for the whole country to embrace renewables.
What’s next for you? Are you working on any new writing?
I am actually working on a history book with the History Teachers’ Association of Victoria. Co-writing it with their Executive Director Annabel Astbury. The title will be The Human Odyssey: from the Ancient to the Modern World. It will take the readers from the Australopithecus to the 20th century, particularly focusing on how one thing led to the next. For instance what happened in the middle ages that prepared the renaissance, which led to the scientific revolution, which made the industrial revolution possible, etc. It is in a way quite topical regarding the ‘decarbonisation’ of our economy. In retrospect, things often seem ‘obvious’ when you read them in a history book. They never are the day before the new chapter has been written in real life. We are probably just there, at that moment. We can turn our back to it, whinge about a $10 non-tax and keep complaining that burning fuel is bad but just too hard to even think how to stop doing it, or we can chose to embrace the coming ‘renewable’ revolution, be informed about the mechanisms at play, show leadership and vision in changing our life styles, and even help our politicians work on the right policies.