The grim reaper of Australian politics is back. Finally

With pretty much every other participant at the forthcoming productivity summit avoiding the issue, it’s been left to the Productivity Commission (PC) to draw attention to one of Australia’s biggest, most obvious, and easily fixable productivity solutions: a carbon price.

With Labor too scared of the Coalition to embrace serious emissions abatement policies, business content to do as little as possible to reduce emissions, and the labour movement dominated by climate-denialist unions like the CFMEU and the AWU, there’s been a conspiracy of silence on climate ahead of the government’s productivity and tax summit this month.

Ross Garnaut broke the omerta last week by criticising the looming failure of the government to meet its renewable energy targets and calling for a carbon price — and was criticised by Energy Minister Chris Bowen for his troubles.

The intersection of emissions abatement and productivity arises from Labor’s refusal to fix nine years of Coalition climate denialism by restoring a carbon pricing scheme, and instead use a shambolic mix of less efficient policies involving regulation, subsidies, tax concessions and the scientifically discredited Australian Carbon Credit Unit system of offsets. The result is, and will continue to be, a transition to a zero-carbon future made slower, costlier and more prone to gaming.

Given how hyped the media and political class is about all things productivity at the moment, you’d expect this obvious, and easily rectified, policy failure to be centre stage in debate, with think pieces every other day from Financial Review commentators, position papers from unions and business, and government ministers ostentatiously declining to “play the rule-in-rule-out game”. Instead, zip.

So it’s been left to the PC to politely draw attention to the problem everyone else prefers to ignore and issue its own set of suggestions. And you can choose from either a macro takedown or a micro takedown from Danielle Wood and co. Not that the commission is interested in bagging the government — indeed, it goes out of its way to avoid doing so — but it’s impossible to read the interim report without reflecting on how utterly stupid successive governments have been, and continue to be, on emissions abatement.

The micro takedown is to point out how inadequate Labor’s “signature” Safeguard Mechanism really is. Slightly adapted by Labor from the Coalition’s original version (the only positives were introduced by the Greens in the Senate), the Safeguard Mechanism fails to cover one-fifth of heavy emitters. Lower the threshold, the PC says. And its rules to prevent “carbon leakage” — heavy polluters moving offshore — “will limit heavy industry’s ability to contribute to Australia’s emissions targets” and make it “harder to lower baselines and thus to strengthen incentives”. The mechanism doesn’t apply to heavy vehicles, which incentivises shift from modes like rail, which are covered, to trucks, which aren’t.

And it depends on a credible system of carbon offsets. Because the PC are economists, not scientists, they don’t dispute the government’s propaganda about the validity of human-induced regeneration and other forms of “soil magic”. But it notes concerns about their legitimacy. “It is important that, going forward, ACCUs represent genuine reductions in atmospheric carbon.”

We know for a hard fact, however inconvenient, that they don’t.

But the PC has a macro takedown as well, of the entire shambolic system of overlapping and inconsistent emissions abatement schemes. It declines to follow the lead of previous generations of PC leaders — most notably Peter Harris, who when asked by Scott Morrison for advice on how to “shift the dial” on productivity, listed a carbon price as an important tool — and recommend a return to an economy-wide price on CO2 emissions. But it’s come up with a kind of next best thing: a virtual price.

The Australian government should task an independent agency with relevant expertise with developing national carbon values. These values — estimates of the implied carbon prices needed to meet Australia’s emissions targets — should be used consistently as policy benchmarks across government and in regular reporting on the cost-effectiveness of emissions-reduction policies.

That is, work out how much it would cost to efficiently meet our internationally committed targets, and then you’re able to compare all the other policies you’re using instead of a carbon price and see how much extra they’re costing us to achieve instead of a carbon price.

The result is likely to be none too complimentary either to the current suite of policies or to the governments pushing them.

It’s nowhere near as good as having an actual carbon price. It’s like having Infrastructure Australia, when its independence hasn’t been nobbled by the Coalition, pointing out that the business case for a major infrastructure investment is rubbish. All it can do is shed light on how bad the policy being pushed by politicians is. But it gives us some transparency on the costs of those bad policies.

So much of the debate about productivity ahead of the roundtable is, frankly, bullshit: bullshit from business lobbyists demanding everyone else be forced to subsidise them, bullshit from unions with a wishlist of ever more regulation and punitive higher taxes, bullshit from economists peddling economic models which offer nothing beyond what they assume are the benefits of their favoured policies. And bullshit from Labor, which is too timid to pursue good policy. In the case of emissions abatement, the fact that it isn’t being debated speaks volumes as well.