Making climate change policy durable — or not

National and Labour agree on foreign policy enough for it to be called bipartisan, after decades of difference. A big exception is climate change.

At Environmental Defence Society boss Gary Taylor’s climate change conference in Melbourne on Tuesday Labour’s Charles Chauvel intervened from the floor to state “in public what I have told you in private” that Labour was ready to agree a bipartisan stance on the emissions trading scheme (ETS) with some provisos, notably that changes do not “gut” the scheme.

The “you” was Climate Change Minister Nick Smith who was on the platform with his Australian counterpart, Senator Penny Wong. Chauvel was testing Smith’s asserted preference for a National-Labour scheme over one relying only on the Maori party.

Wong’s emissions trading scheme bill was defeated this month in the Senate, where Kevin Rudd’s Labor government is in a minority. Liberal (and opposition) leader Malcolm Turnbull, an advocate of emissions trading, has been unable to get policy agreement within his party and his partner National party is flatly opposed.

The bill will return to the Senate in November. If it doesn’t pass then Rudd has threatened a full election, in which, on present polling, the Liberals would be savaged, leaving him free post-election to pass the bill without concessions to the Liberals. More likely, the bill will pass in November with concessions, locking the Liberals in and embedding the policy.

Contrast the experience here. Labour, having rejected Smith’s calls for bipartisan talks, scraped together a majority after two governments vacillated for 10 years.

National won the 2008 election promising large changes. The cost to the economy (and so all of us) has been uncertainty about the policy environment, which has frozen business investment.

The point now is to get something that will survive changes of government. On that both National and Labour agree because there are electoral risks for both if the ETS remains contentious. But they disagree on the “something”.

Labour is on the weaker ground. The alternative to a bipartisan policy now is for the government to embed its policy by staying in office until it becomes the norm and major change is problematic.

On this there is a parallel with Australia. Rudd can realistically expect two more terms. And two terms or more is not a bad bet for John Key.

That potentially gives National leeway to go with a bare majority. Factor in the week’s delay between the ETS special review committee completing its report and tabling it, far beyond the time Parliament’s standing orders allow. After talks with National, the Maori party wanted to withdraw its dissenting report.

Nevertheless, both major parties were still saying at the time of writing they want a bipartisan policy.

One problem is that any deal will have to be leader-to-leader. And, since the Richard Worth affair, Key is wary of Phil Goff.

Moreover, Smith indicated in Melbourne that he will adopt an “intensity” approach similar to Australia’s — that is, a shift from a “capped allocation (of free emissions permits) on the basis of historic emissions and an aggressive phase-out” under the scheme as legislated by Labour to one “based on industry average emissions which are then phased out at a rate of 1.3 per cent a year”.

He is also changing the rules on forestry where investors have been sitting on their hands — an economic disaster, because trees are needed to offset other emissions if the 2020 reduction target is to be met.

And Smith talks insistently of aligning or harmonising with Australia. Labour worries that matching Australia’s generous exemptions and subsidies would amount to “gutting” the ETS, thus breaching its terms for a deal.

Actually, the vastly different economies and emissions profiles make harmonisation impractical. Moreover, to get his legislation through by December, Smith can’t wait for Australia to sort its shenanigans. In fact, at the Melbourne conference both Smith and Wong said they would first get their schemes in place, then talk alignment.

Why bother? It is now accepted there will be no full world climate deal at Copenhagen in December. The optimistic guess at the Melbourne conference was for agreement in Copenhagen to keep talking and some sort of deal by 2011.

But the conference was also told of China’s drive to lead the world in solar energy and electric cars and some energy-efficiency measures. Other major developing economies are starting to bother about energy and pollution. In the rich world emissions trading is emerging as the preferred emissions reduction mechanism.

New Zealand need not be a “world leader”, which Smith scathingly rejects. But, as a rich country, its trading reputation requires it to be up with the pack — especially if the pack is coming from behind. Climate policy is foreign policy as well as economic and environment policy.

That suggests a need for National-Labour bipartisanship. Division is a debilitating luxury.