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Business-environment conflict now intense, Garnaut says

Economist Ross Garnaut has predicted “trench warfare” over development projects, given the influence business now has with…

Economist Ross Garnaut says there is need to reconcile business, economic and environment objectives. AAP/Lukas Coch

Economist Ross Garnaut has predicted “trench warfare” over development projects, given the influence business now has with government.

Delivering the John Freebairn lecture in Melbourne, Garnaut said it had become difficult to place scientific assessments at the centre of policy in Australia in recent times.

“Big business has never been so directly influential with government and senses that it might be a winner which takes all on environmental matters,” he said.

“The difficulty is compounded by an extraordinary fact - that the four business leaders who have been given the most senior advisory roles to the current Commonwealth government share a strong view that the science is wrong on the most important of the environmental issues under current discussion – climate change.”

Garnaut did not name the business leaders, but was obviously referring to Dick Warburton, heading an inquiry into the renewable energy target; David Murray, in charge of the financial system inquiry; Maurice Newman, chairman of the Prime Minister’s Business Advisory Council, and Tony Shepherd, who headed the Commission of Audit.

“We can expect trench warfare over development projects, delays, increases in the supply price of investment and damage to all relevant interests until this phase of Australian management of the interface between the environment and the resource sector is brought to an end,” Garnaut said.

Conflict between business interests in the energy sector and environmental values was now intense over climate change, the application of unconventional gas production technologies, wind power, geo-sequestration of carbon wastes and local environmental damage from coal production and export.

Garnaut – who was advisor to the Labor government on climate - said the Abbott government’s move to repeal the 2011 carbon laws and replace them with an ineffective Emissions Reduction Fund did not make sense to anyone who understood the implications of modern science on climate change.

Senate consideration of the repeal bills was now bound to be caught up in disputation over the budget, he said.

The disputed budget tax increases and spending cuts that would be at the new Senate’s mercy totalled $12-18 billion over four years. Retaining carbon pricing and rejecting the government’s Emissions Reduction Fund would reduce the deficit by $6-7 billion in 2014-15, and a total of $6-12 billion in the following three years.

“By coincidence, retention of carbon pricing would more or less precisely fill the gap from Senate rejection of some budget measures,” Garnaut said.

“To put it another way, Australia can stay within the boundaries of fiscal responsibility over the next four years as defined by the government in this year’s budget by retaining carbon pricing rather than the array of changes that are at risk in the Senate.

“Which set of measures would be better in their effects on the economy, income distribution and Australia’s contribution to the global effort to reduce the costs of climate change?”

Garnaut said that if the carbon laws were repealed we could expect less effort to match the increasing ambition of the rest of the world.

“We can expect reversal of the recent tendency for total greenhouse gases in Australia to fall and emissions from the electricity sector to fall rapidly,” he said.

“Failure to match the efforts of other countries or to meet even weak targets will have negative consequences in international relations. We will be working strongly against one of, if not the foremost of, the international diplomatic objectives of the President and Secretary of State of the United States of America.”

Garnaut said the rest of the world was “moving awkwardly towards much less carbon-intensive economic activity just as Australia is talking about moving the other way.

“This has the potential to generate tensions between Australia and important international partners and also to separate us from new opportunities in a low carbon world.”

He said Australia needed to restore broadly supported arrangements for reconciling business, economic and environment objectives.

“Reconciliation requires honest science in a central place in official policy.”