Thursday, January 28, 2010

Carbon Tax, climate emergency and climate justice

The Greens have just released a carbon tax policy. Ross Garnaut is spruiking for a carbon tax. It could easily become the mainstream alternative to the carbon trading scheme that Rudd’s government is trying to push through.

For activists oriented to a climate emergency and climate justice program, carbon tax is a difficult area. A carbon tax is advocated for many reasons, one of them being that it can cut out the possibility of scam offsets, financial speculation in carbon credits, and all the other jiggery-pokery of carbon trading. All this is certainly a plus for carbon tax. But it has to do more than be better than carbon trading. It has to provide an overall positive shift toward a zero-emissions economy, and at emergency speed. I argue that this includes the necessity of ensuring its outcome enhances social equality rather than the opposite.

With these considerations in mind, the idea of a carbon tax is subjected to criticism below to investigate in what ways, if any, it could be a useful tool. I have tried to include pragmatic criticism that will make sense to people who are not socialists, as well as some considerations for how carbon tax could sit within the policy of the Socialist Alliance.

1. Setting the right price
There are still problems setting a carbon tax. Firstly, what price is right? This debate will still occur, with all the vested interests lining up to lower the tax to meaningless levels. And what do you tax? Do you tax at the point of extraction – at the coal mines, oil and gas wells? At the point of import/export? What if it’s already been (or will be) taxed overseas? It’s all very well for fossil fuels, but how do you tax forestry and farming? There is no exact calculation for the amount of carbon released by logging a hectare of forest. Nor is there an exact calculation for the amount of nitrous oxide released by applying nitrogen fertiliser to a field. A carbon tax could end up having important loopholes outside of the fossil fuel arena.

2. Can you price the air?
There is also a general philosophical problem with putting a price on carbon. If you price carbon pollution, does that mean that nature has a dollar value attached to it? Have we just fallen into the sophistry of pretending that the environment is a subset of the economy? And if you set a price on each tonne of carbon pollution, does this mean that the tonne that tips us over the limit for runaway warming – the straw that breaks the camel’s back – can have a price set on it? One could conceive of a carbon tax in different terms, however: if it is not about a price on the environment, it can be simply a penalty for pollution.

3. Polluter pays - or not?
Polluters will find ways to pass on the costs of the carbon tax to consumers. This does not meet the standards of the “polluter pays” principle, unless you subscribe to the naive, neo-liberal theory that production is driven by consumer demand, and the consumer is therefore the principal polluter. Even if the revenue raised by the carbon tax goes to the most important climate change mitigation programs, it is still raised in effect by a regressive flat tax on consumers. Think GST. It doesn’t just let polluters off the hook, it lets the rich dodge it by investing in solar panels and hybrid cars (or homes in the public transport rich inner city) while the poorer parts of the population are stuck with a skyrocketing cost of living.

4. Will it drive a renewable energy transition?
The carbon tax is a market mechanism. While it is in itself an intervention into the free market by government, it still seeks to alter behaviour in the market rather than provide an impetus for action regardless of market (price) signals. Essentially, a carbon tax makes carbon-intensive activities more expensive. As the price of the carbon tax is imposed on the consumer, they will seek out cheaper alternatives over time – ideally. Of course, those alternatives need to be provided so that the consumer dollar can flow to them. As alluded to above, there is every chance that in the current capitalist market the clean alternatives will (or already do) provide a niche market for the better-off while others are simply forced to pay more. And thus allowing the fossil fuel industry a continuing market for its polluting product.

Consider what happened as petrol prices began to rise in the last decade. It certainly drove a section of people onto public transport – but without extra investment in public transport by the pirates who run the privatised network, this shift very soon hit the absolute limit because only so many people can fit into a train. And for everyone who didn’t have a convenient public transport route to commute by, this option was never available anyway. So for many, the rising cost of petrol was a pain they simply had to bear. This is known as inelastic demand: people have to travel regardless if they are going to get to work, so price changes have little impact on their behaviour.

If the revenue from the carbon tax were directed to ensuring equitable access to clean alternatives, then it is possible that this unfortunate effect of inelastic demand may be side-stepped. However there are still difficulties.

Price controls would be one way to implement this, but it is likely the private operators of the power industry would simply abandon ship and let the government have the infrastructure back as soon as it became obviously unprofitable. Price controls in tradable commodities also raise the possibility of a damaging black market emerging, as with the current GST and tax system being side-stepped by cash-in-hand and undeclared payments.

Concessions or price tarriffs to cushion poorer households may also be a a viable strategy, but the danger here is that the net effect will be that rich will invest in a cleaner lifestyle (solar panels etc) and the poorer will be cushioned enough not to move to renewables. Once again, the fossil fuel industry retains a significant market share, whereas we aim to have it phased out not merely reduced.

Investing the carbon tax into construction of industrial scale renewable energy generation and public transport (and so on) would start to provide the actual means for the poor and rich alike to transition to fully renewable energy and zero (or minus) net emissions. This is the optimum outcome and an essential element for the success of a carbon tax.

Begging the question
If government can invest into renewable energy construction, why not simply do it regardless of where the tax revenue comes from? We need to remember some basic history.

First, while power privatisation occurred in Victoria in the 1990s, it is still being staved off by union and community activists in NSW. There is no reason to see private owners of these vital industries as being natural or inevitable.

Secondly, who built our existing power industry? The power stations and Snowy Hydro? The power grid? And who built the railways? The roads? The telecommunications network? All were built by the government, simply because they were necessary for the overall economy (and society), but no investor would have the capital (or patience) for such a large and long-term investment when quicker, larger profits could be had elsewhere. Even if only to prop up the capitalist economy, this has long been a role for government.

We should not be afraid to demand a new program of government works to build our new power sources. Nor should we be afraid to demand the closure of the privately-owned coal power stations. This is Socialist Alliance policy, but one need not be a socialist to advocate these ideas.

And if these key industries (like transport and power) are owned by the public, with more rational planning determining investment in zero-emissions industry (rather than market signals), why bother with a carbon tax?

Balancing immediate gains against overall goals
We need the zero-emissions industry to grow as fast as possible. We need a renewable energy sector that can stand on its own two feet, in terms of building the infrastructure and providing the power. Transport is similar; agriculture – our other big source of emissions – is much more complicated and will have to be dealt with more sensitively.

Any measure that contributes to the growth of the renewable industry, even while it remains in private hands, has a positive side to it. This should not blind us to negative sides.

A regressive tax on poor people is not just inequitable. It is a free kick to the climate denial lobby who seek to reduce public support for action against climate change. If a proposed carbon tax will have this effect it should be opposed.

A system that increases carbon prices without providing enough growth in the renewable energy (and public transport, etc) industry is likely to crash simply because it will settle into a new equilibrium with a significant level of fossil fuel use remaining (or only declining very slowly).

A carbon tax that we could support tactically would have to firstly protect poorer households (I don’t just mean the destitute, either). It would also have to come with a serious program of growing the capacity of the zero-emissions sector of the economy. Preferably, also restrictions on fossil fuels – for example, phasing out the export and domestic use of coal, our biggest pollution source.

Tactical support only, or a pro-active policy?
This outlines only a position of tactical support for carbon taxes. That is, we support them (subject to conditions), only until we can get something better and more direct. But that’s not to say that a Socialist Alliance government would want (let alone be able) to nationalise every polluting business overnight. Key industries like power and transport can be relatively easily brought under rational planning regimes. But at the opposite pole we have agriculture, which is far more complex. Here I outline two areas where market-intervention (rather than directly anti-market) measures may have some use.

1. Agriculture
Agriculture retains a high level of small business ownership and participation in the primary production core of the industry. This is not merely because of some kind of feudal throwback. As Richard Lewontin explains in Hungry for Profit (Monthly Review, 2000), farming involves an interaction between natural systems (plants, animals) and the capitalist economy. The natural systems cannot be regimented in the same way as factory production, despite comprehensive efforts to move in this direction. Hence a residual role for independent farmers – even though many increasingly resemble subcontractors, who own only the land, their crop, seed and schedule all being determined by the agribusiness cartels. In the US farmers are increasingly proletarianised, as Lewontin documents, but less so in Australia (so far).

If the agribusiness cartels are broken up or nationalised by a Socialist Alliance government, what role for the small to medium farmer? Simply nationalising their land would alienate a significant and strategic part of the rural population and a vital link in the production of food. Further, smaller farmers could be an important ally in defeating the current system. So how to drive their transition to a zero-emission farming system? Some regulation and assistance in the matters of pesticides, fertilisers and land clearing is inevitable, but you can’t forcibly change a farm’s practice to low-impact sustainable agriculture overnight: it requires a transition in how the natural systems work as much as the mentality of the farmer. Price signals, such as a tax on diesel (or biodiesel) fuel, pesticides and fertilisers could help to give impetus in the agricultural sector.

2. Consumerism
Let’s not underestimate the pernicious and ubiquitous mentality of consumerism. You are what you buy. Habits persist. Let’s say we establish strict efficiency regulations that eliminate SUVs, McMansions and plasma screen TVs. What about all the “venial sins”, like driving one’s biofuel car more than needed, or buying up resource-intensive consumer gewgaws, or leaving the airconditioning on all the time? They may not strictly fit into the carbon tax niche (there may not be direct carbon emissions involved) but if they keep energy use at an unsustainable high, they make the transition to a zero emissions society that much harder. And remember, I doubt that the most strict socialist government or popular mobilisation could abolish every little wasteful consumer-oriented enterprise overnight, or in a year; probably not in several years.

How to address this pervasive consumer mentality? Putting a price on the less sustainable consumer items that can’t be immediately removed from the shelves (soft drink production for example? Cheesy pizzas?) can intervene into consumer consciousness more or less on its own terms.

Che Guevara of course was emphatic about the problem of trying to use a capitalist consciousness to build socialist people. In other words, we want to challenge people to step outside their consumer consciousness. But material incentives to change weren’t ruled out by Che and we shouldn’t rule them out either. A carbon tax (or perhaps individual carbon rationing) could also work in this sphere.

Socialist policy
A socialist policy on a carbon tax, in my view, should not rule it out categorically. Firstly, it is possible that (for example) the Greens or unions may campaign for a version of a carbon tax that is good enough for us to lend support to the campaign. We don’t want to shut up about our overall aims in doing so, but if it’s going to be an overall positive reform we ought to support such a campaign.

Secondly, as socialists interact more with both the sustainable agriculture movement and the rural population more broadly, we need to have policies that reflect the need for a transition to sustainability in the countryside yet can win the support of small farmers and farming communities alike.

Thirdly, socialists must have a dynamic approach to the problem of consumerism which recognises it as the dominant ideology and mentality of today, and that while we cannot eradicate it overnight we can look at ways of ameliorating its effects as long as it remains.

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