Lazarus Rising

by John Howard

  At a meeting of the federal council of the Liberal Party on 3 June 2007, I outlined the framework of an ETS that the Government would work towards. It largely reflected the recommendations of the Shergold Report. In designing the ETS, the Government would take into account global developments; Australia would not run ahead of the rest of the world; and the ETS would also ensure that the competitiveness of our trade-exposed industries would be preserved.

  There was a sharp difference between the Coalition and Labor on nuclear power. Nuclear power was part of the solution to the global warming challenge. It was an impeccably clean source of energy; the modern experience was that nuclear power generation was extremely safe; many other nations had successfully adapted it for use in electricity generation (80 per cent of electricity in France came from nuclear power) and, very importantly, Australia had close to 40 per cent of the world’s readily exploitable reserves of uranium.

  It is hypocritical of any Australian government to happily allow sales of Australian uranium abroad but ban the nuclear industry in Australia because, allegedly, it is not safe.

  For decades, as a residue of both the Cold War and the nuclear power plant accidents at Chernobyl in the old Soviet Union and Three Mile Island in the United States, there had been implanted in the minds of most Australians a dread of the use of nuclear power. Yet the passage of time had made the use of nuclear energy infinitely safer, and I detected a change in the Australian community, accelerated no doubt by the dawning realisation that here was a clean source of energy generation, which over time would become economic. It is too early as yet to properly assess the impact on public attitudes of the damage done to Japanese nuclear reactors following the recent tsunami in that country.

  On 6 June 2006 I had established a Prime Ministerial Taskforce to review uranium mining, processing and the contribution of nuclear energy in Australia. This group was chaired by Ziggy Switkowski, then the head of the Australian Nuclear Science and Technology Organisation (ANSTO), and included Professor George Dracoulis, an eminent nuclear physicist, and Professor Warwick McKibbin, who was not only a first-class economist and member of the board of the RBA but also widely recognised as having a deep understanding of the economics of energy and issues relating to climate change.

  The inquiry reported, late in December 2006, that nuclear power was a practical option for part of Australia’s electricity production. Switkowski found that it would take time for nuclear power to become economic, but it would become more so once a price was put on carbon, which would be a consequence of an ETS. The Rudd Government’s refusal to countenance the nuclear power option seemed based on nothing more than remnant ideology.

  Whilst I am an agnostic rather than a sceptic on climate change, instinctively I doubt many of the more alarming predictions. What makes me suspicious are the constant declarations from the climate-change enthusiasts that the science is all in, the debate is over and no further objections to received wisdom will even be considered. First principles teach us that no debate is ever concluded, and it can never be said of a scientifically contestable proposition that all the science is in. For many, it has become a substitute religion. Most of the mass media has boarded the climate-change train; arguments to the contrary are dismissed as extremist. Moral bullying has been employed to silence those who question the conventional wisdom. The chaos at Copenhagen, and mistakes discovered in the work of the International Climate Change Partnership (ICCP) have shaken the edifice, but it will not be easily toppled.

  From 1 April 2001, Australia had a mandatory renewable energy target scheme. This required electricity traders to obtain a certain proportion of their output from renewable sources such as wind and solar energy. The initial target was just 2 per cent. It was from a review of this scheme that the Energy green paper of 2004 emerged, with its core commitment to rely heavily on developing new technology as the principal method of tackling greenhouse gas emissions. The key conclusion was that, recognising Australia’s enormous energy endowments, the goal should be to protect and enhance this asset whilst searching for ways to reduce the greenhouse gas emissions coming from exploitation of Australia’s energy resources. It made no sense to hobble such an enormous natural advantage. No other country in the world would have done so. For the life of me, I could not see why Australia should.

  The centrepiece of this strategy was the establishment of a Low Emissions Technology fund. The Government would provide initially $500 million to this fund, which in turn would leverage at least $1 billion in private-sector investment to develop and demonstrate low-emissions technology. Australia had decided to go for technology as a way of contributing to the reduction in greenhouse gas emissions.

  The green paper followed, which said that Australia needed both renewable and other energy sources; the choice should be between high-and low-emissions outcomes, not renewable and other sources. In launching the paper, I made it plain that for the foreseeable future, coal, oil and gas would meet the bulk of our energy needs.

  The paper had this to say on emissions trading: ‘Australia will not impose significant new economy wide costs, such as emissions trading, in its greenhouse response at this stage. Such action is premature, in the absence of effective longer term global action on climate change, and given Australia is on track to meet its Kyoto 108 percent target. Pursuing this path in advance of an effective global response would harm Australia’s competitiveness and growth with no certain global climate change benefits.’3 Six years later nothing has transpired to shake the commonsense of that statement.

  The big shift in the political climate, late in 2006, resulted in the Howard Government developing a framework for an ETS earlier than originally intended; the commencement and operation of such a scheme was, however, to be influenced by what the rest of the world did.

  With its emphasis on technology, Australia was anything but out of step with world opinion. In Sydney in January 2006, the first meeting of the Asia Pacific Partnership for Clean Development and Climate took place. It brought together Australia, the United States, China, Japan, India and Korea. Canada was welcomed as the seventh member at the October 2007 meeting. This was an important grouping. It included the United States and other major emitters who were not adherents to the Kyoto Protocol. The common thread was an emphasis on developing a technological response to the greenhouse gas problem. In the spirit of this grouping, Australia and China signed a clean energy partnership in October 2006.

  The most positive response to the greenhouse gas challenge over the next decade or two will be a technological one. Low-emissions technology, including carbon storage and sequestration, and the development of nuclear power by those countries not now employing it, are together far more likely to bring about an early reduction in the rate of growth of greenhouse gas emissions than anything else. Technology is universal. National and regional differences will always colour the usefulness of ETSs, however economical, logical and rational they may seem.

  Until late 2009 there appeared to be strong public support in Australia for an ETS, albeit with lively debate about its structure. The unexpected change in the leadership of the federal Opposition, with Tony Abbott being elected with a commitment to oppose the Rudd Government’s ETS bill, dramatically changed the scene. Further complicating the picture was the total collapse of the Copenhagen Summit. These two events have already had major consequences. Kevin Rudd decided to postpone the ETS for at least three years, and this commenced a sequence of events which led to his downfall as PM. Ratifying Kyoto in December 2007 was feel-good politics at its best. Persuading the public to accept an ETS proved much harder.

  Concern about climate change may have gone off the chart, but during my final three years as Prime Minister, water was the most immediate environmental issue that Australia faced. Years of successive drought had crippled our farm sector and brought the mighty Murray-Darling River system to its knees. To the climate-change true believers the drought was simply another facet of what was happening to our p
lanet. To others, however, it was history repeating itself. The worst drought in Australia since European settlement had been the Federation drought of the early 1900s. Those old enough to remember knew that the first 50 years of the 20th century in eastern Australia had been particularly dry. The second half of that century had been much wetter.

  After the 2001 election John Anderson, Deputy Prime Minister, fifth-generation wheat grower and passionate believer in the survival of rural Australia as an integral part of our nation, had begun campaigning strongly for reform of water policy. Reminding me of the dimension of the challenge, John would point out that Australia had 5 per cent of the world’s landmass but only 1 per cent of the river and water basin run-off.

  It was a daunting problem for a federal government. All the power was with the states. The only thing the Commonwealth had was large amounts of money; the states were always conscious of this. Water entitlements to farmers were handed out by state governments. Most water consumed in Australia was used in country areas. According to the advice of the Murray-Darling Basin Commission at the time, rural consumption was 80 per cent, urban 12 per cent and the rest 8 per cent.

  The Murray-Darling River system encapsulated the dilemma of water policy in Australia. Unless something fundamental changed, Adelaide could face a threat to the adequacy of its drinking water in less than 20 years. For decades, governments from both sides of politics in New South Wales had issued far too many water entitlements, thus depleting river flows. Victoria had run a more disciplined water system. Queensland had been less indulgent than New South Wales, but it also issued too many licences. The basin commission was a hybrid organisation with limited power, and a monument to the unwillingness of parochial state governments to cede something so obviously national to the Commonwealth Government. Rivers pay no regard to state borders. The Great Artesin Basin lies beneath four states and territories.

  Recognising this, John Anderson began a patient campaign. He talked on a one-on-one basis to his counterparts in the various state governments, and eventually, at a meeting of the Council of Australian Governments (COAG) on 29 August 2003, agreement was reached for a national water policy, which involved acceptance of an important principle: water entitlements should be invested with the characteristics of property rights. They should become tradable, even across state borders. Called the National Water Initiative, this was a huge step forward and a tribute to Anderson’s persistence. He has received little praise for what was genuine cooperative federalism. John Anderson, typically, gave some credit to his NSW Labor counterpart, Craig Knowles, for agreement being reached. John would later tell me that this was partly due to the fact that, in his pre-political life, Knowles had been a property valuer and thus understood the need to treat water entitlements as property rights and put a value on them, if progress towards a rational system were to be achieved.

  Part of the water initiative was the establishment of a National Water Commission whose tasks included advice on the allocation of a $2 billion water fund established by the federal government for investment in water use and conservation projects, largely put forward by the states, on a shared funding basis.

  As the grip of the drought tightened, consequences of the over-allocations of water entitlements became more acute. At some point it would become necessary for the over-allocations to be returned. The problem was that none of the states was willing to invest the money needed to buy back the entitlements.

  This became the genesis of the policy which I began devising, in discussion with Malcolm Turnbull, at the end of 2006 and presented by me in a speech to the National Press Club in Parliament House on 25 January 2007, as the Murray-Darling Rescue Plan.

  The plan involved the Commonwealth spending some $10 billion over a period of years, essentially doing two things. It would fully fund the buyback of water entitlements by the states, even though the states themselves had been reckless in their allocation of those rights. It would also fund a program to line and pipe the irrigation channels of the Murray-Darling. This would dramatically reduce evaporation and lead to millions of litres of water being conserved. There was also money to fund water conservation projects on individual farms.

  In return for this enormous sum of money and the assumption by the Commonwealth of a financial responsibility which had been incurred by the states, they were asked to refer their powers over regulating water usage within the Murray-Darling River system to the Commonwealth. The fragmented state regulatory approach had failed; consistent national regulation was needed. I thought that, in agreeing to pick up the entire price tag for buying back the over-allocations, the Commonwealth was making a generous offer.

  If this offer had been made at the commencement of a new term of my Government, the states would have all agreed to it. It was obvious from their immediate response that they were taken by surprise at the scale of the Commonwealth offer, and sorely tempted to accept it. The problem was that it was an election year. The Coalition had been in power federally for 11 years, and Labor was desperate to get rid of us. In the end Labor tribalism took precedence over the national interest, even on such a life-and-death issue for Australia as water.

  The states were a fascinating study with their responses. Morris Iemma from New South Wales responded in a positive fashion from the word go. This was understandable. His state would be the greatest beneficiary, as New South Wales had been responsible more than any other state for reckless over-allocations. Peter Beattie was reasonably accommodating. Mike Rann huffed and puffed about a different way of doing it, but knew in the end it was a good deal for South Australia.

  To discuss the plan, I convened a meeting of relevant premiers as well as the Chief Minister of the Australian Capital Territory in Canberra for 8 February for what was a preliminary gathering which reconvened on 23 February. It was obvious from this discussion that New South Wales, Queensland and South Australia (with some haggling) would come on board, as would the Australian Capital Territory. The problem proved to be Victoria.

  On 23 February, after my discussion with them as a group, I allowed the premiers to discuss the matter alone. When I returned to the cabinet room, Peter Beattie (who I liked to deal with) indicated on behalf of all of them that three states, namely New South Wales, Queensland and South Australia, plus the Australian Capital Territory, were agreeable, but that Victoria had a problem. I asked to see the Victorian Premier, Steve Bracks, alone. In this meeting he said to me, ‘John, I need more time to shift my people. I will ultimately come to the party on this but I just need a bit more time.’ I took him at his word. The statement at the end of the whole meeting indicated that progress had been made and hopes were reasonably high. Of concern, though, public comments later made by Bracks were starkly at odds with the private indication he had given me.

  Victoria would never honour the private understanding I had reached with Bracks. Malcolm Turnbull, the responsible minister, had numerous discussions with the Victorians. It is true that the Victorian farmers were critical of aspects of the Commonwealth plan. It was also true that it did not suit the national political interests of the ALP for my plan to win acceptance. It was bold and imaginative. To have won acceptance of something as sweeping as this would have been a real plus for the Coalition in the lead-up to the election. To this day I remain convinced that, on this occasion, the Commonwealth was the victim of a good cop/bad cop routine put together by the premiers out of tribal loyalty to their federal colleagues; there was scant regard for the interests of the Murray-Darling River system. In frustration my Government introduced legislation to implement as much of my national plan as was possible under existing constitutional power. It fell short of what the national interest required but was approved by parliament on 17 August.

  The issue remains unresolved. In recent months there has been litigation threatened between the states. The Murray-Darling will likely enjoy some respite due to the heavy rains of 2010 in Queensland and northern New South Wales, but this can only be temporary. Australia
needs a national system. At some point the federal government will need to seek constitutional power at a referendum to assert control over the Murray-Darling basin. This is a classic example of failed cooperative federalism. My sense is that the people of the Murray-Darling basin states would vote to give power to the national government. They understand the logic of this vital river system belonging to the entire nation and not remaining under fragmented state control.

  Australia is now a long way from the global warming debate of 2007. The Labor Government went into full retreat from what the former PM called ‘the great moral challenge of our time’. People are turning against the ETS; the ALP lazily assumed that negative attacks on the Coalition would be enough to win public endorsement of its ETS without the need to explain its complexity. It should not be surprised at changed public attitudes.

  Equally, the world should not have been surprised at the stance of China during the recent gathering in Copenhagen. It should never have been left to the meeting itself to confirm that China is not willing to accept the same disciplines as the developed world. The United States in particular must have known that China would take the position she did. It surprised me that the Americans had apparently made no attempt to engage both China and India well before Copenhagen and, knowing their likely responses, work to adjust expectations accordingly. It was poor diplomacy. Surely the Obama Administration realises that we still live in a world of nation states. When it comes to the crunch on really big issues, multilateralism usually falls short.