Climate change and the new narrative: understanding the politics and the impacts
In this challenging series of articles, CEO of the Sustain Group, Matthew Tukaki, will discuss the changing nature of politics and the impacts it is having on the climate change and business response debate. This first blog covers the politics of the debate and policy execution is important while his second blog will provide a detailed industry analysis of the impacts, both directly and indirectly.
For many in business, Government and the community there is a growing reality that climate change and all of its many guises is occurring and has been for some time. We see some of the impacts most obviously in places where we would expect, our Oceans and rising sea levels, colder climates becoming warmer and an increase in natural event activity. Before the industrial revolution the concentration of carbon dioxide (CO2e) was sitting around 273 parts per million (PPM) while we are shortly to reach (in our current environment) 400 PPM. By the end of the century scientific consensus tells us that we will reach 750 PPM if all we did was to have what we do today remains constant.
Of course the reality is remaining constant requires everything today to remain as it is, which is impossible given human evolution that has seen population growth and the movement, over time, of developing countries to become developed and in our current environment, major populous economies of China, India and Indonesia continuing on their own growth trajectories. All things being equal, and all things culminating our acceptance that generally the science is correct, and our climate will warm, sea levels will rise and the world we are used to today will change – then what happens next in the development and formulation of effective public policy and who, at the end of the day, is responsible for ensuring the path we take into the future is the right one.
Does the responsibility lie in forms of direct action that can be taken by the individual households, business and industries? Is it the responsibility of Government to provide leadership or even the sole responsibility of business to adapt and transform?
The truth of course lies somewhere in between where all participants in a domestic and global economy are equally required to not only achieve consensus, but provide direction and execution. Before we head full on into the business response and the impacts, we need to first understand the politics both at home and abroad. There is no better place to start than right here at home:
The politics of climate change: Australia
As sure as night follows day the politics of any social or economic debate loom large depending on where you fit in the political spectrum. In Australia we have the left and right of politics while in the United States you have the same thing with the added confusion of the Tea Party – I say confusion because there is trouble in distinguishing sometimes how far to the right one republican could be over a tea party candidate. Irrespective, the debate and discussion in Australia has moved from the scientific to the economic and from economic to the social and business impacts. We surely do have our sceptics and that is fine. In every healthy democracy would we really have balance in our debates if everyone believed in the same thing? Although, sometimes it is like having that crazy uncle come to dinner. That said, in the main the Australian public do believe that the Government should act on climate change and in the main they do believe it is an issue. However, the fact the former Labour Prime Minister promised an Emissions Trading Scheme and was unable to fulfil that promise and the fact that the current Labour Prime Minister said a few weeks out from the last election that there would be no carbon tax under a Government she leads and then changed that policy direction when in Government, have caused a fracture in the debate – you see, when politics begins to consume the topic the subject of policy debate becomes lost. The fact is, politics has been a contributor to the course of public debate we are currently on because of the upheaval we have had.
The fact is, the former Labour Prime Minister, Kevin Rudd, was replaced by the current Prime Minister, Julia Gillard, because he had failed in the polls and had lost his way. He had failed in the polls because of a series of policy execution blunders and in part a failure to act on climate change. At the same time, on the other side of politics, the then Opposition Leader Malcolm Turnbull was partly rolled because he was unable to convince the majority in his party that they should act to support the Rudd Government’s ETS. Had there been consensus and bi-partisanship then we would have had an ETS several years ago. Added to this complexity was the Green’s Party holding seats in the Senate (house of review) that the Government needed to pass the ETS legislation. The Greens did not feel that it went far enough and voted it down. Malcolm Turnbull has lost the Leadership of the Opposition, the Rudd Government had failed to get the ETS through the Parliament and had been behind some serious policy blunders when it came to the execution of the Home Insulation Program (an economic stimulus project implemented during the GFC) and as a result, the political environment began to change.
Before this Copenhagen began and there was hope a global consensus of one form or another could be reached. This was never going to happen for a series of very important reasons. When you have such upheaval in domestic economies the focus of individual Governments is not about finding consensus on a major policy dealing with the environment, their focus was on ensuring people kept their jobs and homes. Also, it stands to reason that these types of global agreements take time and are complex to negotiate. The expectation that the public had been given, that Copenhagen would “seal a deal”, was not correct. Trade talks took decades to culminate in a series of global agreements and accords, one of the outputs being the World Trade Organisation and both simple and complex agreements to unravel tariffs. So, on the one front domestic politics have an impact on climate change policy and directions and then so do global politics because when you have so much going on in the world that impacts on the daily lives of people such as the GFC was having, your focus changes. It doesn’t mean that Governments and Oppositions in the main don’t want to act – it is simply a case for focussing on some things over others, that in the order of priority climate change for some remains a key priority while for others it is further down the order – but now, it is linked to economic outcomes, more so than science, and the ability for business and industry to adapt and transform, transition and renew. So it has become no longer just about environmental policy, it is interwoven with economic, taxation and social policy.
Copenhagen was a mix of opportunity and failure thanks to timing. The complexities of building global consensus cannot be achieved in a matter of a few years post Kyoto or for that matter during a few weeks both pre, during and post Copenhagen. It takes time because you then need to not only build a global framework you then have to institute financing for transformation and transition (someone always has to pay for it), you need an organisation or process in place to monitor the benchmarks and targets, you need legislation in various countries to enable its adoption or adaption, you need to ensure you have an administrative function in place to support nation states as they move towards achieving goals and targets and, importantly you need the same message and narrative.
It took global trade talks decades to achieve even elements of moderate consensus so when dealing with large parts of public policy that have an international alignment, these things are never easy and cannot be achieved in short timeframes. It should be a reality check for all public policy makers.
Timing: New Zealand and the European Union
Other Governments around the world began acting on Climate Change before the Global Financial Crisis began to permeate the planet. Therefore, they were not distracted by other big issues in executing public policy. New Zealand is one of those countries where the former Labour Government began its ETS implementation in 2008. The process of public discussion and debate had continued much earlier, but then the legislation was only slightly amended in 2009 by the Opposition National Government. In many ways consensus had at least been achieved through continuity of policy.
Phase 1 of the European Union ETS began in 2005 with Phase 2 coming slightly later on in the piece. In both the New Zealand and EU examples I reflect on what role timing played in the equation. For example, had both failed to implement when they did and had have waited even only two years, would the domestic and global political and economic environment played a part in them being delayed? In the case of the ETS proposed by the Rudd Government as far back as 2007, the reality is that the timing would have been right but was undone by the politics of the debate. What role the Greens played in that narrative will, I am sure, be reflected on by generations of historians to come. However coming back to the cases of both New Zealand and the EU, and putting all political spin aside, if they were considering introducing an ETS today would they? And I believe the answer is no because the timing today is wrong. In the case of New Zealand the Christchurch Earthquakes has had an immense pull factor on the economy which has its own challenges. In the case of the EU, the continuing problems faced by member States and its contribution to the foreign and sovereign debt crisis may have precluded it from acting if it was on the agenda today. Again, logic suggests, whoever the Government of the day may be, they respond to the needs of the electorate and the economy over the short and medium term more so than public policy and the longer term benefits.
Timing and Australia
The question then comes back to timing and politics in reference to Australia. Was the time right to implement an ETS back during the Rudd Prime Ministership? The answer is yes it was had political consensus been achieved. While Australia still would have dealt with economic stimulus as a result of the GFC, the economy was in relative shape to withstand the worst of it while at the same time legislating for an ETS that would have been bought on in stages and through the addition of industry sectors and timelines. But then the same question remains whether or not the timing of a Price on Carbon is right in 2011 / 2012 and beyond. In a sense, the answer is yes. The economy is still in relative stable shape and sometimes the decisions behind big pieces of public policy need to be made during both hard and good times. Australia’ thanks to our proximity to China and the demand from economies in Asia and beyond for our commodities gives us more space to execute climate change policies. The complexity for Government is not if pricing carbon or implementing an ETS makes policy sense, it lies in the ongoing political narrative of needing to juggle minority Government with an Opposition who have been effective in leading the debate. In order to pass the legislation the Government requires the support of the independents in the lower house of the Parliament and now only the Greens in the Upper House. The irony in all of this is that several years later the same party who could have supported the movement of the legislation (the Greens) under the Rudd Government are now playing the same role and seemingly oblivious to the role they played in its earlier failure.
In terms of the Opposition, while they have been good at driving the political narrative away from the Government, they also have to be careful. At some point before the next election the public will want an explanation of what they propose by “Direct Action” in more detail. Not only that, the Carbon Price legislation will already be in place and so the eventual scrutiny on the Opposition policy will come. At that point the Government could regain the political narrative. “Could” being the operative word.
The United States and its path: five to seven years out
For context, and in respect of the United States, I was asked the question by a CEO of a Chicago based marketing firm as to my thoughts on the United States implementing public policies on climate change and whether or not I saw something tangible coming out of the UN Rio conference next year. The fact is the substance of the Clean Energy Act failed to materialise because even though there was growing consensus developing in both the Congress and the Senate, there was not enough. The country was already weary of war at the end of the Bush era and the economy was stagnating. President Obama offered change and a war weary nation was willing to accept it. The timing of implementing effective climate change legislation was in the immediate aftermath of the Presidents election – timing again is everything. Indeed, it could have been used as effective forms of economic stimulus as part of the GFC public policy narrative. If you read through reports such as “The Effects of H.R 2454 on International Competitiveness and Emission Leakage in Energy Intensive Trade Exposed Industries” written in 2009 for Senators Bayh, Specter, Stabenow, McCaskill and Brown you can actually see some of the cost assessments that showed the minimal impacts providing the legislative process was strong. Now, however, the timing is wrong. Currently we have a US economy in trouble, a Congress, Senate and President unable to agree on the raising of the debt ceiling in a timely fashion or even agreement on what needs to be done to effectively kick start an economy that is in serious trouble. On the politics side you have a series of issues related to the scientific debate now moving from economics and back to the accuracy of the data. You have positioning between the Republican and Tea Party movements and an unending election cycle that is now about jobs and the economy. There will be no substantive climate change policies implemented in the United States over the course of this next two years unless they are wholly connected to economic stimulus. If the President is unable to win a second term, the focus of a new Republican (possibly Tea Party backed) President will be on jobs and the economy. This means we may not see any effective climate change policy in the United States for at least the next seven years, unless of course some kind of environmentally catastrophic event was to occur that would then force any Government into a response.
Of course if the economy was to begin to stabilise, jobs were being created, unemployment was coming down and Government debt was being reduced – then they too could be mechanisms to trigger other major social and economic reforms. However, we need to take a reasonable and time lined view of events and not fool ourselves that the work needed on the domestic home front is large, and not easy or simple. We also have to keep in mind what the average American voter is focused on now more than ever – yes, in the main they may believe their Government needs to act on climate change, but at the end of the day, climate change policy does not pay the mortgage or the bills – it does not put gas in the car or put food on the table – only a job does and that is the reality.
Politics and using other countries policies as examples or alluding to major trading partners not taking action yet being heavy emitters.
There is a temptation to draw correlations between heavy country emitters such as China and India as reasons not to act. In doing so you attempt to inform the public that neither country has a really tangible approach to addressing climate change yet behind closed doors you let them know in private that “no, that’s not what we are saying”. However it is in fact what is happening and, in fact, China and India are already acting on climate change through massive investment in clean energy production, mass transit and efficient building and power generation. However, they are also trying to find balance between the ability to continue in the development of their own economies, therefore responsibility for domestic growth and jobs while, at the same time, being aware of their global responsibilities. It is a dangerous game for those who oppose climate change policies to use other countries, particularly large trading partners, as examples of who is not acting. This creates issues and problems on the diplomacy front that can have impacts later on as large scale global agreements reach critical time mass.
Is the Australian Government approach the right one?
Interestingly, and this is something time will tell, the policy itself appears to be sound. A price on carbon leads to an effective end which is an ETS. The price starts with compensation for both business and individuals. On the one hand, for trade exposed and heavy emitting sectors, there is a Coal Sector Jobs Package worth $1.3 Billion over six years for 25 gassy mines in New South Wales and Queensland. There is $300 million (still to be agreed and supported by the Greens) for the Steel industry to transform over five years and there is a Coal Mining Abatement Technology Scheme over 6 years and totalling some $70 million. At the household layer there will be compensation to low and middle income earners to help with rising costs of living associated with energy and consumptive costs such as food – all of which will be impacted as costs in the supply chain are passed through to the home. Quite smartly what we actually have here is a combination of social, taxation and economic reform. If you had one of those things on its own it is possible to be wound back with relative ease – something the Opposition have said they will do. However, it becomes harder and more impossible when you have an element of all three so intermeshed. So, will it be wound back as the Opposition claims? Probably not, it may be played with around the edges, but the chances of wind back are slim. That means the legislation is smart and relatively well constructed. When it comes to the pricing on carbon, there is a minor yearly increase from $23 in year one to $25.40 in 2014-2015 Between July 2015 and June 2018 the floor price will be $15 increasing by 4% per annum with a ceiling price of $20 (above the International) and increasing by 5% per annum. From July 1st 2018 there will be open trading with no ceiling or floor price. I would also expect there would be a degree of interoperability between the New Zealand and Australian systems over time or even from that time. Something that can easily be achieved through common trading and market platforms.
In many ways, it makes sense to set the price on carbon before the introduction of an ETS as opposed to executing the ETS model first. In that sense, the economy becomes used to the way things are priced and calculated up front. The policy also provides the business and industry sector with certainty in terms of what the policy is, how it will be legislated, what the timelines are and what needs to be done to transition or adapt. It also provides investment certainty when it comes to projects that are on the drawing board when it comes to viability – again, all things that are important on the commercial end. All of that aside, good public policy evolves over time and develops as both circumstances or situations change. Time will tell if this public policy has the ability to do that, but that is the case with all big things – it is not something you can simple switch on at 9am on a Monday morning the week after it is announced.
The difference between public policy development and its execution
You can construct the best piece of public policy in the world but unless it is executed accordingly it will fail the test on every occasion. That is the risk the Australian Government faces and it is probably more so to suggest it is the case versus the argument that is being focused on by the Opposition – trust. For many voters in the electorate they will at least understand that the circumstances the Prime Minister found herself in on election night 2010 led to a change in policy direction. It is the case with all minority Governments that in order to survive your full electoral cycle you need to negotiate and find consensus. In the early years of Mixed Member Proportional representation in New Zealand where Coalition Governments in the true sense were a new thing (after the First Past the Post system was voted out in a referendum in the nineties), these challenges were always present. Even today with a National Coalition Government that governs with a mix of parties and personalities – the reality is, sometimes what you say to win Government and the circumstances you might find yourself post election night may require you to change your policy direction. So, if we begin to remove some of the “trust” factor out of the debate and replace it with public policy execution the question becomes is the Government able to execute, based on the record in both the previous Rudd Government and now current Gillard Government, this policy? Surely there have been failures such as the Home Insulation Scheme, the first iteration of the Murray Darling Basin Review and some minor elements of the Building the Education Revolution program. That said, ask yourself the question if the Government at the time possessed enough corporate knowledge to enable the effective execution of policy from the bottom down and one may draw the conclusion they had not. It is not as easy as some would claim to simply win Government – in the case of the Rudd Government, they won after 11 years of Howard Coalition rule. While it is not an excuse, it does take time to build your corporate knowledge base. Unlike the business sector where in a major corporation there are normally succession or transition plans put in place, in the case of Governments there are none. One may argue that the transition from one Government to another should in fact be more detailed than is currently the case – to at least ensure continuity of public policy and the civil service in some instances.
Has the Government learnt enough from the failings of the past to execute the policy it has developed? Only time will tell but the debate should not be so much about trust in what was said before an election that resulted in changed political circumstances, it should be focused on trust in policy execution. After all very few Governments have the opportunity to implement and execute large forms of public policy during their time in power.
In all these things and as Prime Minister David Cameron stated to the UK Parliament during the debate on the actions of News Limited in the hacking scandal recently: “you don’t make decisions in hindsight, you make them in the present”.
Matthew Tukak is the CEO of the Sustain Group and Australia’s Representative to the United Nations Global Network, a collaboration between business, industry and the United Nations with a focus on Labour, Human Rights, Anti-corruption and the Environment. Matthew is also the former head of one of Australia’s oldest and largest employment and human resources companies, Drake, where he led the business through the worst of the global financial crisis and restructured it to meet the changing demands of the employment market into the future. A former Chairman of the Workwise Group, the Government Policy Advisory Policy and CIO Council, Matthew is a respected commentator within the employment sector. Matthew has a comprehensive knowledge of the Labour markets across Australia, New Zealand and Asia, the impacts of Government policy and more pressingly, the role of the commercial sector in alignment with employment outcomes and not for profit service providers. Latterly in his role as CEO of Sustain Group, Matthew leads an organisation at the forefront of the climate change and business response narrative.
