Tony Abbott on the Science and Economics of Climate Change

(A tale of two Abbotts)

March 31, 2013

Tony Abbott has been moving in opposite directions on the science and economics of climate change. Until as recently as 2009 Abbott was one of our most extreme climate sceptics. By 2011, his conversion to the mainstream was complete and he acknowledged both the scientific consensus on climate change and the need for action. On the economics however, Abbott has been moving backwards. He started out being viewed as an intellectual and an economic rationalist. When John Howard went into the 2007 election with a carbon trading scheme as policy, Abbott made sound, rational arguments in favour of putting a price on carbon, and went one step further to argue that a tax made more sense than a trading scheme. He even took the time to explain the conundrum that politicians find themselves in, preferring a carbon tax for it's effectiveness and simplicity, but faced with a very difficult political task of selling it to members of the public to whom the economics seems counter-intuitive. Shortly after, he took a curious turn in that he continued to promote a carbon tax as a better mechanism to reduce emissions, but for absurd and non-sensical reasons (though the sound bites may appeal to disinterested or ignorant people, so long as they don't take a second look). He then proceeded to take the coalition down the path of direct action. This is a policy that is rejected by economists as expensive and wasteful, by scientists as unlikely to actually work, and by the farmers who are supposed to do all the heavy lifting. Finally, Tony Abbott has flagged a review of coalition policy (and another likely backflip) as early as 2015. It is little wonder that most of the debate about Abbott rarely gets past the first step of figuring out where he stands and what he really thinks.

Tony Abbott the denialist

Lets start with the science. The following quotes are from Abbott's days as a sceptic.

July 2009, in speech "A Realist’s Approach to Climate Change"

We can’t conclusively say whether man-made carbon dioxide emissions are contributing to climate change

July 2009, 7.30 Report, ABC

I am, as you know, hugely unconvinced by the so-called settled science on climate change.

December 2009, "Town of Beaufort changed Tony Abbott's view on climate change" in the Australian

The argument [behind climate change] is absolute crap. However, the politics of this are tough for us. Eighty per cent of people believe climate change is a real and present danger

December 2009, Sky News interview

Now, er you know, I I think that er that climate change science uh is far from settled, um the fact that we've had er if anything cooling global temperatures over the last decade, notwithstanding continued dramatic increases in carbon dioxide emissions ah suggests that eh the role of CO2 is not nearly as clear the climate catastrophists would suggest.

January 2010, Herald Sun, "2009 Australia's second warmest year ever, according to Bureau of Meteorology figures"

It seems that, notwithstanding the dramatic increases in manmade CO2 emissions over the last decade, the world's warming has stopped.

In March 2011, Tony Abbott mislead parliament with some attacks on Tim Flannery that demonstrated Abbott’s poor comprehension of climate change science.

Tony Abbott the environmentalist

These interviews from 2011 mark Abbott's complete reversal on both the science and the economics. Curiously, he claims that this has always been his position.

July 2011, Interview with Jake and Stampsy, Star FM Gippsland and Latrobe Valley

Yeah look I never said it was a myth. I once used some colourful language describing the so-called settled science of climate change but look, climate change is real, humanity does make a contribution to it and we’ve got to take effective action against it. I mean, that’s my position and that’s always been my position but I’ve never been in favour of a carbon tax or an emissions trading scheme...

March 2011, with Gary Hardgrave, quoted in Sydney Morning Herald, "It may seem crazy brave, but PM should go Howard's way"

I think that climate change is real. I think that mankind makes a contribution and I think that we should put in place reasonable policies to deal with credible threats.... But look, there is enough strong evidence out there to justify taking effective action and that's what the Coalition is going to do with our direct action policy.

Tony Abbott as the intellectual economic rationalist

July 2009, in his blog on The Telegraph:

I am wary of a system which creates new vested interests - which an ETS will do. I suspect that a straight carbon tax or charge could be more transparent and easier to change if conditions change or our understanding of the science changes.

July 2009 speech, "A realist's approach to climate change"

David Davies, it seems, had the gift of being able to take sides without alienating those he disagreed with. Who better, then, to commemorate with some remarks on the politics of climate change – an issue that could benefit from the decency and sense of fair play that David Davies seems to have brought to his political life.

If Australia is greatly to reduce its carbon emissions, the price of carbon intensive products should rise.

There is much to be said for an emissions trading scheme. It was, after all, the mechanism for emission reduction ultimately chosen by the Howard government.

The problem with an emission trading system, though, is that it’s complex, difficult for non-experts to follow, and plagued with uncertainties.... Before making investment decisions, businesses want to minimise uncertainty. The problem with emissions trading schemes is not just that they impose a price on carbon but that it is an uncertain price because it is subject to a market that government and speculators can manipulate.

The Coalition has always been instinctively cautious about new or increased taxes. That’s one of the reasons why the former government opted for an emissions trading scheme over a straight-forward carbon tax. Still, a new tax would be the intelligent sceptic’s way to deal with minimising emissions because it would be much easier than a property right to reduce or to abolish should the justification for it change.

The fact that people don’t really understand what an emissions trading scheme entails is actually its key political benefit. Unlike a tax, which people would instinctively question, it’s easy to accept a trading scheme supported by businesses that see it as a money-making opportunity and environmentalists who assure people that it will help to save the planet. Forget the contested science and the dubious economics, an emissions trading scheme is brilliant, if hardly-honest politics because people have come to think that it’s a cost-less way to avoid climate catastrophe.

In the last paragraph above, Abbott highlights the dilemma faced by politicians in choosing between the option that makes most economic sense and the options that make most sense to a public that does not necessarily understand the economics. This is especially poignant given the path Abbott eventually chose.

October 2009, ABC Lateline with Lindsay Tanner and Tony Abbott

We don't want to play games with the planet. So we are taking this issue seriously and we would like to see an ETS

November 2009, 2UE

You can't have a climate change policy without supporting this ETS at this time

Cracks in the façade

In his book, ironically titled "Battlelines" (2009, Page 171/2), Abbott was spineless and non-committal. He employed the classic, if annoying, politician's trick of leaving all possible options open and trying to appeal to every camp at the same time. This marks the start of his transition from economic rationalist to "common man" who does not understand economics. He introduces direct action, attributing it to then coalition leader Malcolm Turnbull. He is also careful not to use the term 'tax'.

The Howard Government proposed an emissions trading scheme because this seemed the best way to obtain the highest emission reduction at the lowest cost. Issuing licences would enable government to cap overall emissions. Allowing trade would advantage the least polluting businesses over the most polluting ones. As licenses would be valuable assets, businesses would have a strong incentive to compete in becoming environmentally efficient. On the other hand, artificially created markets could be especially open to manipulation. Issuing taxi licenses in Sydney, for instance, has certainly created a market, but not a very competitive one, and the main beneficiaries seem to have been licences holders rather than consumers. For this reason, many now think that a carbon charge scheme directed at the least environmentally efficient producers would be simpler and fairer than an emissions trading system.

The Rudd Government's changes to the proposed emissions trading scheme, which now largely mirrors the Howard Government's once-reviled model and timetable, suggest a belated recognition of its logistical complexity. Imposing new direct costs on the power, transport and agricultural sectors may not, in fact, be the best way to limit carbon dioxide emissions. In a recent speech, for instance, Malcolm Turnbull has said the re-vegetation, more energy-efficient buildings, and further research into geothermal and tidal power could lead to greater carbon dioxide emission reductions that the proposed ETS.

Direct measures that improve the efficiency of cars, encourage the use of renewable energy such as domestic solar power, promote recycling with urban rainwater tanks, create carbon sinks on grazing land, and make coal burning less polluting are all worthwhile. Cars that use less petrol, electricity bills that are potentially lower, and land that's better managed are changes that make sense on their merits. They don’t do the damage to export industries that is inherent in an unreciprocated emissions trading scheme or carbon charge.

Absurd and non-sensical

In interviews following the release of his book, Abbott took his curious turn to supporting a carbon tax, but giving absurd and non-sensical justifications.

July 2009:

ABC journalist Fran Kelly:

But you have clear ideas on this. You for instance are more attracted to the idea of a carbon tax than an emissions trading scheme. You say a carbon tax would be fairer, less open to abuse. Could a carbon tax be a simple solution to the obvious split in coalition ranks.

Tony Abbott:

Well, eh, let's wait and see. Um. You, y y you're right Fran. Ah, I think that uh uh if uh I were in government, ah and ah more able er to er make these things happen ah we would be thinking about, about all of this, ah but the fact is we're not in government, er we can't run the country from opposition ah and that's why ah in the end it will be the government's problem to deal with er not ours. If the government changes different story but but certainly er ah I think that ah um if if the simple, if the simple challenge is to put a price on carbon uh if you were to ah put ah a carbon tax on er energy consumption, if you were to put a carbon tax on fuel consumption, ah and if you were then er to rebate that tax er to the people who paid it, um you would have raised the price of carbon, ah you would have avoided and increase in the overall tax burden, ah and you would have gone down a path that everyone understands so ah ah I think that would have been a much simple way of going.

Dec 2009, Sky News interview

If you want to put a price on carbon why not just do it with a simple tax. Why not ask motorists to pay more?

Why not ask electricity consumers to pay more?

And then at the end of the year, you can take your invoices to the tax office and get a rebate of the carbon tax you paid.

It would be burdensome, all taxes are burdensome, but it would certainly change the price of carbon, raise the price of carbon without increasing in any way the overall tax burden.

Consider what Abbott is saying in the quotes above - all taxes a burdensome, except this one. It would be a good idea to impose a tax, then refund all of it at the end of the year. Despite the full refund, it would still achieve the goal of putting a price on carbon. Even though he is still promoting a carbon tax, this is a significant chage in approach from Abbott from economics to appealing to the lowest common denominator.

"Weathervane" Abbott completes the backflip

July 2010, The Sydney Morning Herald, "No carbon price ever, Abbott promises"

A carbon price would never be imposed under a Coalition government, Tony Abbott has vowed, apparently toughening the policy he announced last December when he said a price on emissions would be considered when the Coalition reviewed its ''direct action'' climate policy in 2015.

The shadow treasurer, Joe Hockey, has said he believes a carbon price is ''inevitable'', and the environment spokesman, Greg Hunt, said last December the Coalition would use the direct action policy of government grants to reduce emissions in the ''first instance'' but would ''consider [a carbon price] when we know what the US is going to do''.

Most business groups have emerged from briefings with the Coalition believing that the ''direct action'' policy was an interim or transitional policy and the Coalition would consider some form of carbon price in the longer run - probably the baseline and credit scheme it proposed during the failed negotiations with the then-Rudd government last year.

But yesterday Mr Abbott said ''we do not believe in artificially imposing a carbon price on consumers. There will be no carbon price on consumers under a Coalition government.''

Mr Abbott appeared to suggest the Coalition's acceptance of a carbon price would be contingent on the big developing countries such as India and China accepting binding targets for absolute reductions in their levels of emissions.

The following claim contradicts the most fundamental principle of economics, one that Abbott himself has understood since his first year studying economics.

March 2011, with Gary Hardgrave, quoted in Sydney Morning Herald, "It may seem crazy brave, but PM should go Howard's way"

Our direct action policy will actually reduce emissions. All the government's policy will do is make emissions more expensive and the cost will in many cases be passed straight through to the consumer and that's why this is such a bad policy.

July 2011, The Sydney Morning Herald, "Abbott falters with second carbon gaffe"

TONY Abbott has had to correct his second climate change policy gaffe in as many days, as Julia Gillard's job to sell her policy grew harder with the launch of a $10 million advertising campaign backed by angry industry groups.

Mr Abbott was accused by the government of deliberately misleading people when he told a radio station that although he supported reducing carbon dioxide emissions, ''I've never been in favour of a carbon tax or an emissions trading scheme''.

This statement was at odds with several public comments he made in support of both a carbon tax and an ETS during 2009, when Malcolm Turnbull was trying to negotiate an ETS with Kevin Rudd.

For example, in October, 2009, Mr Abbott said: ''We don't want to play games with the planet so we are taking this issue seriously and we would like to see an ETS.''

Mr Abbott changed his mind just before he rolled Mr Turnbull on December 1, 2009, telling his leader he was a ''weather vane'' on the issue.

After taking the leadership, Mr Abbott changed Coalition policy to one of opposing a price on carbon.

Confronted with his past comments yesterday, Mr Abbott said he had never supported a carbon tax or ETS since becoming leader.

Two days ago he was forced to clean up after himself when he described Labor's target of reducing emissions by 5 per cent by 2020 as ''crazy'', even though his direct action policy shares the same target.

Jan 2013, Address to the Federal Campaign Rally, Lidcombe, Sydney

Isn’t it bizarre that this government thinks that somehow raising the price of electricity is going to clean up our environment, stop bushfires, stop floods, stop droughts? Just think of how much hotter it might have been the other day but for the carbon tax!

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