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The lost mid-week

April 30th, 2010

I’ve been off the grid for the last few days, during which the Rudd government seems to have been making big decisions, or repudiating old ones, every day. The biggest, clearly, was the dumping of the ETS. In one sense, it’s hard to regret the abandonment of the failed deal with Malcolm Turnbull, which was probably worse than no policy at all. But the government should be negotiating with the Greens and holding the Liberals and independents to account, instead of caving in to the politics of fear, tribalism and ignorance.

On the positive side, the end of tobacco labelling is an important step forward in drug policy. It would be good to see drugs like marijuana treated in the same way as we are going with tobacco: legal but discouraged in every way possible.

A striking feature of these two issues was the appearance of the Institute of Public Affairs (long the paid mouthpiece of Big Tobacco and Big Coal) which was happy about the first, and critical of the second. Anyone who deludes themselves that they are “making up their own mind” to disregard the scientific consensus on the risks of tobacco smoking and climate change should realise that they have been sucked in by the IPA and similar hacks.

That’s all I have time for, and there’s the Henry Review and the Budget to come. Have a good weekend.

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  1. TerjeP (say Taya)
    April 30th, 2010 at 22:07 | #1

    Previously I have said I opposed the ETS but would support a modest revenue neutral carbon tax. You have retorted that such advocacy is part of a destructive campaign designed to cause distraction and prevent us from getting the ETS implemented and getting a price on carbon. Now you say that having no policy is probably superior to the ETS that was on offer. I suspect that your own tribal loyalties have been and continue to cloud your judgement. You are allowed to disagree with the ALP you know.

  2. paul walter
    May 1st, 2010 at 02:05 | #2

    I’d have thought Quiggin would have originally preferred your carbon tax idea, if managed adroitly, Terje, rather than the ETS, gutted to silliness thru cave ins to vested interests. Forgive me if I’m wrong, but I don’t think he likes the ETS, or feels its the best theoretical option, as opposed to political response.
    I think he is sighing in resignation; better even an ETS than nothing at all, if society is here trying to deal with a new and actual reality- ecological degradation in relation to sustainability not just of “way of life”, but possibly life itself.

  3. iain
    May 1st, 2010 at 06:51 | #3

    In Europe, emissions (across all scopes) are increasing despite the EU ETS.

    Increasingly, the West is simply outsourcing its (scope 3) emissions, which it is fully responsible for.

    http://www.businessgreen.com/business-green/news/2250514/west-outsourcing-emissions

    The disadvantage of Australia delaying something like an ETS, is that it reduces momentum towards eventually creating an effective global carbon price signal. But how likely is this to ever occur?

    The advantage of Australia delaying the ETS is that it highlights why we are so irrational at responding to non-obvious threats such as climate change.

    It should also provide the impetus for creating solutions other than fantasy economic or technical “fixes” (such as an effective global ETS, or effective nuclear power) which are simply not going to happen. A focus on, or search for, more effective solutions may not be a bad thing.

  4. TerjeP (say Taya)
    May 1st, 2010 at 07:40 | #4

    Iain – effective nuclear power is a proven concept. There is no doubt that it works and that it scales and that it can provide electricity with a high capacity factor. It is a mature proven technology.

  5. TerjeP (say Taya)
    May 1st, 2010 at 07:46 | #5

    In terms of tobacco labeling the proposed policy is an unproven one. The legislation ought to have a five year sunset clause to allow for the gathering of evidence and to ensure some subsequent debate about that evidence.

  6. TerjeP (say Taya)
    May 1st, 2010 at 07:52 | #6

    Paul – JQ has been a consistent advocate for an ETS and has expressed a preference for it over alternatives such as a carbon tax.

  7. Freelander
    May 1st, 2010 at 09:24 | #7

    I am enjoying the media bombardment of silly whining by tobacco and mining, and their numerous lackies, in response to the new taxes and the packaging proposal. Such completely not unexpected tripe.

    Great work for the lackies and incredibly well paid. What about taking their tax free status away and banging ‘a great big tax on them’?

  8. Freelander
    May 1st, 2010 at 09:36 | #8

    @TerjeP (say Taya)

    I would support a thousand year sunset clause. Really need to give it a chance of working before pulling the plug. Also, if it doesn’t work, what’s the harm?

    In that case, the tobacco industry are simply wasting a lot of money not having plain packaging and the government is doing them one incredible favour. In that case, to be consistent, they should be saying “Thank you government, we recognise that we have been incredibly stupid branding and wasting money on all the stuff we put on those packages. Thank you so much for showing us the errors of our ways and increasing our profits. Government, we think you deserve a bonus. We’re going to give ourselves one, it is only fair we give you one too. “

  9. stuart
    May 1st, 2010 at 10:27 | #9

    John, how can you say the CPRS is worse than no policy at all??

    It may have thrown a lot of money to the polluters but the right incentives still remained in place, it covered the vast majority of GHG sources and would have started us on the path to sizable reductions in emissions. I can see why one would be unhappy with polluters getting propped up, but compared to the alternative of no emissions reduction, it is clearly preferable!

    We need to reduce emissions and now neither major party has a credible position on climate change. It’s been a terrible week for anyone who wants real climate action.

  10. stuart
    May 1st, 2010 at 10:32 | #10

    @iain
    The problem with focusing on scope 3 emissions is that there is no support for using scope 3 emissions as part of an international agreement!

    Also recent studies have shown that the EU ETS has been effective in reducing emissions in covered sectors even with its multitude of design flaws.

  11. May 1st, 2010 at 10:36 | #11

    Freelander,
    Those comments seem worthy of Hugo Chavez. If a judge knocks the labelling laws out on constitutional grounds (you know, the law and stuff) would you call for that judge’s arrest and imprisonment – or just to hit judges with a great big tax?

  12. May 1st, 2010 at 10:53 | #12

    @stuart

    The CPRS was indeed worse than no policy at all. It would have locked in failure by entrenching rights to pollute and brought everyone who favoured cap and trade into disrepute, utterly blocking future reform for at least a decade. It was a sandbag manoeuvre.

    If the government really wants to protect the polluters, then I’d sooner they stay away from emissions policy and not taint those of us who are keen on it.

    @TerjeP (say Taya)

    By contrast with CPRS, I regard the tobacco measures as supportable. Yes they should have brought them in with near immediate effect — say by September — and the tax hike should have been 100% — i.e well above the point where most people would really have had to accept that they had to give up and I’d have made cigarettes packs like those musical greeting cars — including a really annoying noise as they opened the packet like a car alarm or someone coughing uncontrollably — but this does fit the “better than nothing” description.

    The tobacco people are squealing like stuck pigs about the value of their IP, which is an open admission that this will hurt their business — which is surely the point of the exercise. They are in the death and disease promotion and cost to the public business. We want to hurt their business.

  13. Donald Oats
    May 1st, 2010 at 11:11 | #13

    I expressed my unhappiness with the Garnaut report when Professor Garnaut stated the GHG emission reductions necessary according to the science, and then proceeded to explain how that would be politically unattainable, and so we should go for a more modest emission reduction target. The pollies smelt the opportunity and went for an even lower target than the one Garnaut flew the kite on, with Rudd, Wong and co. choosing 5% as the low end (unconditional) target. Meanwhile, most commentators didn’t make a big noise about the shifting of the baseline year for comparison against. A 5% reduction as measured against the baseline year of 1990 would be equivalent to a much larger reduction in absolute terms than a baseline of 2000, or 2005 – stating the obvious I know, but it makes a huge difference. Even Garnaut was gobsmacked at the final lowball targets of the Rudd government, going on TV to provide a defence of his report in light of this.

    An ETS may still have been an improvement over the current shambles though. Dropping it right off the table after all of this work is a rather insipid response to a lame opposition “Great Big Tax” claim. As all and sundry have pointed out, if Kevin Rudd believed climate change (by GHG emissions) to be the great moral challenge of our time, then scuttling away from the ETS policy is hardly congruent with that belief. I reckon Labor should have placed the original (pre-Turnbull-changes) ETS back for a third consideration and defied the Liberals to reject it so close to an election. Then chucked a DD just for good measure. Delaying it from consideration for another 2–3 years is just closing the window on the cheapest point in time for making permanent GHG emission reductions, and destabilises investment in today’s alternative energy technologies which would have helped fund the development of the next generation of AE beyond today’s. What a wasted opportunity.

  14. May 1st, 2010 at 11:44 | #14

    One interesting aspect of the Henry Review is the mooted changes in road charging from excise and fees to per kilometer road use charging with a congestion loading.

    This is fairly similar to what I’ve proposed here on more than one occasion, and I had actually written to him along these lines about 18 months ago (and some other politicans too).

    I doubt he took any notice of me, but there is an economist down at Monash (whose name eludes me now) who has also propsed this.

    It will be interesting if the states can be persuaded to buy into this as most of the road charging is state based.

  15. Judy
    May 1st, 2010 at 11:52 | #15

    While I have no compassion for tobacco companies, it is clear to see that this government is addicted to publicity and diversions. How else can it be interpreted? From backing down on the ETS when they could have easily triggered a double dissolution election, to a list of failed projects and broken promises, it must be the worst government in Australia’s history. The most stunning thing is how they they think they can fool the people with their spin, lies and smokescreens. I just can’t see anywhere where they have succeeded. Bob Hawke and Paul Keating must be disgusted to see what has become of the ALP. Surely the ALP must be disgusted with themselves or can they actually look the Australian people in the eye and say they have done a good job. Perhaps they can as they are pretty good actors. It’s no wonder why the past leaders are keeping their distance. They don’t want to be seen condoning this circus.

  16. May 1st, 2010 at 11:58 | #16

    @Judy

    This was called a lib-bot spamming last time you posted it. It still is.

  17. Freelander
    May 1st, 2010 at 11:58 | #17

    @Andrew Reynolds

    Not every thing that Hugo has done has been bad. While I feel no compulsion to defend the man, one thing is clear, his opponents in that country are far worse.

  18. Freelander
    May 1st, 2010 at 12:00 | #18

    As for great big tax, I see nothing wrong with a great big tax on mischief.

  19. TerjeP (say Taya)
    May 1st, 2010 at 12:12 | #19

    A revenue neutral tobacco tax would be more credible. As it stands it’s a revenue grab.

  20. Freelander
    May 1st, 2010 at 12:16 | #20

    To some extent the tobacco tax probably is revenue neutral. The revenue raised by a tobacco tax goes some way to neutralising the additional expenditure smokers impose on the public purse.

  21. BilB
    May 1st, 2010 at 12:35 | #21

    Of course it is a revenue grab, Terje, Rudd said that himself, and I would be inclined to call his comment as being reasonably authoratative. How can you possibly have a neutral tax unless it is a floating one that reacts to the number of smokers remaining, their consumption, and the varying health probabilities. What you will see is tobacco companies buying up Alcopop producers to follow their customer base making the tax income neutral from their position.

    And Judy if the ALP are throwing up smoke screens, then they will now be paying a higher tax on that. But tell me, what do you think Menzies would have to say about the Abbott circus.

  22. Michael of Summer Hill
    May 1st, 2010 at 12:46 | #22

    TerjeP (say Taya), no matter what technological safeguards are in place, nuclear power is not the answer for it would only take one major accident to ruin the Australian economy not to mention the long term effects on the ecology and lives of people. No TerjeP (say Taya) nuclear power is not the answer even if you compare it to the current environmental disaster evolving as a result of the largest oil spill in history in the Gulf of Mexico.

  23. TerjeP (say Taya)
    May 1st, 2010 at 13:02 | #23

    Michael – I don’t think we need another thread devoted to the nuclear debate.

  24. TerjeP (say Taya)
    May 1st, 2010 at 13:04 | #24

    BilB – a revenue neutral tabacco tax would be a tax on tobacco that funds other tax cuts.

  25. TerjeP (say Taya)
    May 1st, 2010 at 13:11 | #25

    Fran – there is no evidence for the labeling reforms.

  26. May 1st, 2010 at 13:14 | #26

    @TerjeP (say Taya)

    Yes it would, but that would not abate the externality imposed on the public via the health system by smoking related disease. That is either a hidden cost or we simply refuse service to smokers, which would be pernicious and fail general utility and GINI tests.

    Anything that returned the cash to smokers by another route would allow them to make the same poor choice and indeed, even giving them largely illiquid benefits would largely do that.

    Putting money into the health system makes more sense as do specific programs that met good cost-benefit epidemiological analysis. Subsidising smokers’ patches makes sense — and indeed, it might even make sense to have a smokers’ patch supplied free in each box, idf needed, at the expense of cigarette space.

  27. TerjeP (say Taya)
  28. May 1st, 2010 at 14:20 | #28

    @TerjeP (say Taya)

    The link demolishes its own argument so effectively the wrioter has to cherrypick to get the result he wants.

    If tax revenue falls short of projections and indeed falls, this shows

    a) it is not a tax grab

    and

    b) it deterred people smoking the taxed items

    In Australia, we have no problem with counterfgeit cigarettes, so in context, this should work

    Thanks for the affirming link.

  29. May 1st, 2010 at 14:23 | #29

    @TerjeP (say Taya)

    There actually is some evidence from marketing studies that people (especially the young) choose according to livery. Good enough for me given the absence of positive benefit associated with smoking. If it messes up their business, that is a sufficient benefit, IMO

    Still, let’s see if it works in the five years or so following the change.

  30. BilB
    May 1st, 2010 at 15:05 | #30

    Terje 23

    That is exactly what it did do, it replaced the alcopops tax that did not get up.

  31. TerjeP (say Taya)
    May 1st, 2010 at 15:19 | #31

    At #23 I made a comment regarding the nuclear debate. I don’t think that is the comment you are responding to. Please clarify.

  32. BilB
    May 1st, 2010 at 15:29 | #32

    Obviously #24, Terje. Heaven forbid that I would be the one to trigger another N—— F—explosion! I don’t think that I could live with the fallout.

  33. TerjeP (say Taya)
    May 1st, 2010 at 15:47 | #33

    On that basis one could argue that every tax is revenue neutral because it is an alternative to some other tax that the proponent also considered. I think that logic debases the language a bit too much.

  34. Freelander
    May 1st, 2010 at 15:58 | #34

    All taxes are revenue neutral. Terje, I like it!

  35. stuart
    May 1st, 2010 at 16:00 | #35

    @Fran Barlow
    Fran, I don’t understand how the CPRS lock in the rights to pollute?
    Permits aren’t perpetual and can only be used once. When they are allocated they are only allocated to polluters for about the first 10 years and they still face a price incentive. After this period we’d be left with a working scheme without compensation to polluters which covers a greater proportion of national emissions than any other emissions trading scheme in the world.

    Instead now we wont even get any sort of coherent policy legislated until 2013 (at the earliest), and with implementation time any scheme probably won’t start before mid 2014, giving us only 5 1/2 years to reduce emissions to meet our 2020 targets

  36. Freelander
    May 1st, 2010 at 16:01 | #36

    And of course it is fully the choice of smokers whether the tax is revenue neutral or not. So blame them. If they stop buying smokes, or cut their consumption enough in response to an increase, neutrality is established. Let’s hope they choose neutrality at least.

  37. BilB
    May 1st, 2010 at 16:05 | #37

    No language considerations here. That is exactly what happened. Only time will tell if the tax increase is not revenue neutral in your terms. If the price crossed an affordability tipping point then the revenues could well cause a collapse of cigarette sales thereby achieving an overall loss of tax revenue. That would be horrible. If you want to attack this look at it form the view point of governments profiting from addictions, another example being gambling. Hong Kong? Major guilty party.

  38. Abraham
    May 1st, 2010 at 16:18 | #38

    I anyone else amused that the “great big tax on everything” was going to cost the government money?

  39. TerjeP (say Taya)
    May 1st, 2010 at 17:50 | #39

    Suddenly when it comes to smokes some of you decide to believe in the laffer curve. How cute.

  40. Andrew c
    May 1st, 2010 at 17:56 | #40

    Just to point out that the cigarette tax is a tax on the poor, the desperate and the mentally ill.
    Now some may subscriibe to the odious, purse-mouthed, mercantilist Christianity of K Rudd and Abbott, but please remember that not everybody wants to live into a sad, poverty-stricken old age before dying at the legislated span.

    Busy-bodies with power are not generally admirable people and I dislike how choices are being made on behalf on those who it seems can’t be trusted to make them for themselves.

  41. May 1st, 2010 at 18:33 | #41

    @Andrew c

    Just to point out that the cigarette tax is a tax on the poor, the desperate and the mentally ill.

    Nonsense. It’s a tax on people who buy cigarettes. The poor, the desperate and the mentally ill need not buy cigarettes. People on the frontlines serving the mentally ill, people like Dr Ian Hickey, support this measure, with the caveat that the measure comes with appropriate support for the mentally ill in general and those giving up smoking in particular.

    Stripped of the high dudgeon, what you are saying is that tobacco promoters should be able to stay rich at the expense of the poor, the desperate and the mentally ill. Your feigned concern for the interests of these people to cover your special pleading for rich parasites is repulsive.

  42. Alice
    May 1st, 2010 at 19:38 | #42

    @BilB
    Please spare us another N……F…explosion…….anything but that.

  43. Freelander
    May 1st, 2010 at 20:03 | #43

    @TerjeP (say Taya)

    The laughter curve is a humorous claim about aggregate revenue raising and aggregate activity in an economy. Though maybe you are right. Maybe Mr Laffer believed that when applied to a single market, if taxation was so high that nothing was sold in that market and, hence, production of that product ceased, the resources used would not be redeployed but would stay unemployed for the rest of time? Maybe he thought that idea was also entailed on his napkin?

    If I was in favour of a massive reduction in taxation, and had no scruples,these are exactly the type of claim I would make, if I believed anyone would believe me.

  44. iain
    May 2nd, 2010 at 08:02 | #44

    @TerjeP (say Taya)

    Terje, my point was that nuclear power has not proven effective at solving climate change (nor for that matter other pressing issues such as peak oil). European trends have demonstrated quite clearly that nuclear power increasingly lies abandoned and renewables are increasingly bing adopted instead.

    A further point is that renewables, by themselves, are not an effective solution either, and that more fundamental social change mechanisms may be required to address pressing environmental concerns. Replacing the flawed model of representative democracy and a focus on planning legislation are possible starting points.

  45. May 2nd, 2010 at 08:17 | #45

    @iain

    I’m going to pass on responding to your comment on nuclear, as this has been discussed at some length on the other Monday on Tuesday thread. Stipulated here: Your claim on nuclear is specious. Moving on …

    A further point is that renewables, by themselves, are not an effective solution either, and that more fundamental social change mechanisms may be required to address pressing environmental concerns.

    That’s certainly fair comment. Highly urbanised industrial economies cannot in practice run as they are on renewables. Ted Trainer argues cogently from within his perspective that very significant cuts in per capita consumption are implicit in any renewable-centred strategy. It also implies a serious cap on the rate and end point of development in the currently non/under urbanised parts of the world. In practice, these people are going to have to accept a lot less as well. They will have to abandon not only the dream of living as well as we have, but even living as modestly as we will.

    Persuading the population to accept this is foundational to the success of renewables and the low carbon renewable-based world economy and fairly obviously must anticipate any change to the representative democracy model. I’d like to see a timeline for these projects!

  46. Michael of Summer Hill
    May 2nd, 2010 at 08:20 | #46

    Iain, when you have an out of step Coalition Leader who thinks nuclear power is the “only realistic way” for Australia to cut its carbon emissions and compare it to Labor’s CPRS, in my opinion there is no contest for Labor would win hands down at the next election.

  47. iain
    May 2nd, 2010 at 08:21 | #47

    @Fran Barlow

    Sorry Fran, I must have missed the fatasy world where nuclear power has solved climate change and where climate change is no longer an issue.

  48. Michael of Summer Hill
    May 2nd, 2010 at 09:31 | #48

    Iain, I should also stress that Turnbull’s about-face to stay in politics may be in reponse to what many suspected of the Coalition leader that he is an out of step hack lacking credibility rather than what is being written of Labor dumping the ETS for Turnbull still believes in the ETS.

  49. May 2nd, 2010 at 11:19 | #49

    @iain

    Nice attempt at a thread hijack. If you want to do this, go to the Monday (on Tuesday) topic.

    I will agree that you are tilting at fantasy however.

  50. Ernestine Gross
    May 2nd, 2010 at 19:01 | #50

    Fran Barlow :@iain
    Nice attempt at a thread hijack. If you want to do this, go to the Monday (on Tuesday) topic.
    I will agree that you are tilting at fantasy however.

    Objection. The thread on CSP was hijacked by the pro-nuclear advocate team, including Fran Barlow. Several attempts have been made by several people to stop Fran but without success.

  51. May 2nd, 2010 at 19:37 | #51

    @Ernestine Gross

    There is no “pro-nuclear advocate team”. Terje made one remark (@11) about the “distraction from nuclear”, Ikonoclast responded and I responded to him/her.

  52. Ernestine Gross
  53. Ernestine Gross
    May 2nd, 2010 at 20:23 | #53

    In conclusion, when a tax on the big pollution is too difficult, introduce a bigger tax on many smaller polluters, otherwise carry on as before.

    It would be very good,. IMO, to see the currently young generation not taking up cigarette smoking at all as a consequence of the success, after many years, of science trumping spin. If this were to be aided by the very high tax on cigarettes, relative to the budget of many in this age group and if a drab packaging helps, then all for the better. But what about the older people who are addicted to nicotine? Those who were young when spin dominated science. Isn’t the high tax on their habit nothing more than punishing the victims of spin even more? These people also paid higher marginal tax rates when they were young.

    If science would have trumped spin for good a long time ago, then some generous oldies might still go along with the new tax hike. But this is not the case and one doesn’t have to go far to see it.

    On this very blog-site the case was made, tightly argued and supported by empirical evidence that the spin methodology, first developed by the tobacco industry, has been copied by several others and, I understand, ‘The Right’ has excelled in it. As for my own observations, I have data of cases since 1994 and I watched its application in a big way before the Copenhagen Conference on the big pollution topic. But this is not all. The methodology is alive and well on some threads of this blog-site that are open when the boss is away and busy.

    Professor Quiggin, you may wish to have a little look at the last Monday (on Tuesday), 27 April thread and the thread on High Penetration Solar Deployment, 26 April 2010. IMO, a prominent supporter of taxes on cigarettes and prolific writer of stories gives a pretty good demonstration on how it is done by a ‘sincere enthusiast’ for nuclear energy. Nothing seems to change except the ASX industry code, so to speak.

    If the aim is to prevent spin trumping science, then the spin industry should be taxed big time. My earlier suggestion to this effect was only partially tongue-in-cheek. It is not only ghg emissions and tobacco smoke that damage humans and the environment. There is asbestos, there are other drugs. There is processed food which seems to transform healthy humans into big wobbly people. There is leukaemia and lymphoma and, …, there are the major players in the GFC.

    Banning spin altogether may not be a good idea IMHO; freedom of speech is important. Presumably it isn’t a trivial matter to empirically distinguish between sincere idiots and professional spin doctors. But, it is also not easy to distinguish between a joke and a case of say ethnic vilification. The idea of internalising the abuse of the substance ‘freedom of speech’, by means of a financial penalty should not be dismissed out of hand.

  54. Alice
    May 2nd, 2010 at 22:01 | #54

    @Ernestine Gross
    This comment has to go on the record Ernestine..

    Fran says
    “There is no “pro-nuclear advocate team”.

    The ultimate in outrageous denial of the sheer encyclopaedia of lengthy pro nuclear posts Fran has placed (no…. mass produced) in JQs blog and Fran now has the nerve to say there is “no pro nuclear advocate team” here…and then suggests it was Terje who made one comment to which she responded.
    The truth and the facts and the evidence has absolutely no meaning to some. The intention to deceive is alive and well here.

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