News of World: sideshows and political opportunism

The News of the World phone hacking scandal has spiralled out in a dozen different directions.

No wonder.  It's fun to talk about Rupert Murdoch.  And for the British Labour Party, it's exciting to tie David Cameron to the News of the World.

But from a political economy perspective, it's the role of the London Metropolitan Police in the hacking which should be the most concerning.

That's because we expect politicians to be craven, and to coddle up to media proprietors.  And we expect many journalists to be opportunistic and tasteless.  As long ago as the 1730s, Montesquieu was complaining about the immorality of English newspapers.

But we expect -- well, require -- the police to be lily white.

In a free society, the police are not just any institution.  Only they can use force against citizens.  The purpose of the police is to prevent crime.  There's no clearer breach of the social contract than police being complicit in criminal activity.

Operation Elveden is the investigation of the Metropolitan Police into officers suspected of aiding the phone hacking.  It was sparked by News International documents which mentioned payments to police.

Elveden is being conducted side-by-side with the investigation into the hacking itself, and given similar priority and prominence.  Officers from both operations have conducted the few arrests so far.

Some survivors of the 2005 London bombings believe the only way their contact details would have been accessible to News of the World is if survivor lists -- full of telephone numbers and addresses -- had been leaked by Met officers.

If true, that would suggest some of this scandal's most ethically egregious violations would not have been possible without the complicity of the Metropolitan Police.

And Operation Elveden has not been the only investigation into police corruption in recent years.

As Graeme McLagan, a former BBC home affairs correspondent, pointed out in The Guardian earlier this month, accusations of inappropriate and corrupt relationships between the police and journalists have been a regular feature of the last decade.  In 2002, McLagan was documenting the existence of a private detective agency which funnelled information from corrupt police to News of World and the Sunday Mirror.

Obscuring these serious issues are a number of sideshows.

The police commissioner Sir Paul Stephenson resigned last week because of the ''embarrassing'' fact he hired a former deputy News of World editor as a public relations consultant.  But, justified or unjustified, that seems to be just a matter of impropriety -- the same sort of impropriety which David Cameron must regret for having hired Andy Coulson.

Impropriety may have political significance, but has little policy significance.  Bad judgment is not a crime.

Much more important is the statement made by former Assistant Police Commissioner John Yates to the House of Commons committee that ''I confidently predict that, as a result of News International disclosures, a very small number of police officers will go to prison for corruption.''

Then there are suggestions that the police failed to adequately pursue the hacking story when it first arose in 2005.

Focusing on the police does nothing to diminish the ethical and criminal seriousness of what News of World did.  Journalists, editors, private investigators, political advisors -- anybody who has committed a crime should, and no doubt will, be prosecuted to the maximum extent of the law.  That's what a legal system is for.

But a legal system cannot function if its enforcement arm is anything less than scrupulously clean.

It's not surprising that Australian commentators haven't focused on police corruption.  Scotland Yard doesn't own two-thirds of our newspapers.

But accusations of phone hacking have spread well beyond News International.  Thirty-one separate British newspapers are now under investigation.  They're not all Murdoch's.

And there has been no serious suggestion anything remotely similar has happened in this country.  (If you think The Australian's antipathy to the Greens is at all like hacking the phones of terror victims, or even vaguely connected, your moral compass is way off.)

Yet Australian politicians and partisans have tried to make the scandal fit an existing set of hobbyhorses -- anti-government hostility in News Limited papers, journalistic ethics, and media consolidation.  Australia's political class can be as opportunistic as any tabloid.

Australian commentators can wax lyrical about media ethics and regulation only because we don't have to face the implications of law-breaking journalists working in tandem with law-breaking cops.

For the public and for the press, police corruption isn't as thrilling as allegations of widespread criminality in their favourite newspapers.

And hauling the world's biggest media mogul before a panel of politicians was great theatre.

But it wasn't Rupert Murdoch's evidence in front of the House of Commons committee which was most important.  It was the police commissioner's.

Slim chance of global carbon market post Kyoto

Irrespective of whether Julia Gillard succeeds in selling her carbon tax plan to the public, eight months before the next federal election the policy and political foundations for its introduction will dissolve.

The market-based policy foundations for cutting emissions through a carbon tax or emissions trading scheme follows from the 1997 Kyoto Protocol.

Under Kyoto, developed countries are allowed to establish domestic and internationally linked emissions trading schemes and purchase emissions reductions in developing countries and count them as their own.  But on December 31 next year (eight months before the next federal election) Kyoto will expire without a successor agreement.

Since the 2007 Bali summit countries have been in a negotiating deadlock over different paths for a post-Kyoto agreement.  Developing countries want a second Kyoto emissions reduction period because it puts the entire onus on developed countries.

Non-European developed countries want a new non-binding agreement that brings all the leading emitters into the tent.  European countries want a mix of both.

The failure to agree over what was being negotiated, let alone the detail, led to the eruption at the 2009 Copenhagen summit, modestly repeated in Cancun last December.  To have an unbroken period between Kyoto and a successor, agreement countries would need to conclude negotiations at this year's Durban summit.  And that's extremely unlikely.

A recent survey by the World Bank's Carbon Finance Unit found that less than 20 per cent of carbon market participants questioned were optimistic that a new Kyoto-style, legally binding emissions reduction framework would be negotiated by 2020.  Optimism dropped further to a few per cent when they were offered a 2015 deadline.

The absence of a global framework undermines the political and policy case for prioritising emissions cuts.  It's a message that has not been lost on international carbon markets.

According to the World Bank's recently released 2011 State and Trends of the Carbon Market report, for the first time since 2005 the international carbon market went into recession last year.

The cause of its decline was the lack of clarity ''urgently needed on the post-2012 international climate change regime and on other countries' plans to use market-based mechanisms to meet domestic greenhouse gas [reduction] objectives''.

While Australia goes headfirst to introduce a market-based scheme, other countries aren't following our lead:  Japan and South Korea have effectively shelved their trading schemes until a post-Kyoto framework is established;  New Zealand is watering down its scheme;  participant states in regional US emissions trading schemes are withdrawing;  and China has flagged the possibility of trialling a scheme, but to date its carbon pricing experience has been to profit, having secured 42 per cent of Europe's offshore emissions reduction projects.

Even in Europe, with its operational emissions trading scheme, its ''year-on-year declines in greenhouse gas emissions ... now appear to be over'', with emissions on the rise again after recent dips in its floating carbon price.

Instead of pursuing their plan, Gillard and Climate Change Minister Greg Combet should be listening to the advice being sent by carbon markets, especially when the market and its message is put into context.

There is no global carbon market.  There is only a European one.

According to the same World Bank report, 84 per cent of the $142 billion global carbon market is made up of emissions permits sourced from within the European Union.  Europe's reach extends to 97 per cent when its purchased emission reductions in developing countries are included.  With the government allowing half of all permits to be purchased offshore, Australia's floating carbon price could be heavily influenced by European policy.  Europe's dominance is set to be the status quo until a post-Kyoto framework is established that could possibly bring China, India and the US into the fold.

Australia's scheme, covering the emissions of 22 million people, is also likely to be eclipsed by the size of a scheme for hundreds of millions Europeans and their centralised decision-making based on European policy and economic priorities and interests.

With a ''global'' market designed by Europeans for Europeans who are disconnected from the needs of a small, emissions-intensive economy, Australia's economic interests will be exposed and with it the political viability of continuing to accept an economic impost while international action is waning.

Equality for all couples won't destroy society

The extension of marriage to same-sex couples needn't come at the expense of a stable society or religious human rights.

In its fashionably early 1996 article on opening marriage to same-sex couples The Economist magazine correctly argued ''marriage remains an economic bulwark [because] single people (especially women) are economically vulnerable, and much more likely to fall into the arms of the welfare state ... [and] call sooner upon public support when they need care''.

For these reasons and many more the legal and societal confirmation of consensual, stable relationships remains an entirely desirable public policy objective.

However, the value governments have placed on matrimony has been devalued during the past 30 years.

The latest Australian Bureau of Statistics data identified the number of marriages registered each year dropped by one-quarter between the early 1980s and mid-2000s.  Since that decline the rate has stumbled at about 5.5 registered per 1000 people annually.

Marriage is under threat.  But it isn't from those locked out.

Turning the tide requires government and society making marriage a preferable norm rather than unmarried alternatives.

The significant decline of marriage shouldn't come as a surprise.  The creation of legally comparable de facto relationship recognition undermined marriage's cultural role as the determiner of an established relationship.

But no matter how much reform advocates argue otherwise, broadening the definition of marriage to two people is a radical departure from the mainstream tradition.

From a conservative perspective significant societal change should be treated warily, especially when it is led by government.  But that doesn't justify holding back societal change and adapting when it occurs organically.

The Australian experience is that societal attitudes have changed organically in support of same-sex couples.  And this is likely to continue.

It might have taken until the age of 60 for former High Court justice Michael Kirby to be open about his relationship, but the same isn't applying for those generationally younger.

As a consequence the deprivation of legal formalisation and equality is compounding beyond couples directly affected and changing their family and friends' attitudes as well.

Conservative philosopher Edmund Burke argued that a ''state without the means of some change is without the means of its conservation''.

Similarly, British conservative Michael Oakeshott argued that conservatism was about the manner of ''accommodating ourselves to changes''.

In light of a clear societal shift, the challenge for preserving the important status of marriage is to ensure the tradition survives the risks of calls for reform and the consequences of not doing so.

Fortunately, other countries have already undergone the experiment.

According to Gay Marriage for Better or Worse:  What We've Learned from the Evidence, by William N. Eskridge Jr and Darren Spedale, the Danish experience found reforming marriage coincided with a reversal in declines of heterosexual marriage rates, lower divorce rates and fewer children born outside of wedlock.

Similar trends have also been identified in Sweden, with heterosexual marriage rates increasing by 30 per cent.  The correlation doesn't prove causation, but it is clear the reforms haven't undermined heterosexual marriages.

With some US states also changing their laws, culturally comparable evidence is also emerging for Australia.  Former speechwriter for George W. Bush and anti-same-sex marriage reform advocate, David Frum, recently acknowledged ''the case against same-sex marriage has been tested against reality [and] the case has not passed its test''.

The remaining arguments against change also lack consistency.  A primary argument against allowing same-sex couples to marry is that it's an institution for raising children and should be preserved for those who procreate.

Therefore Bob and Jill who've been married for years and chose international holidays over school fees shouldn't have been able to get married, even more so if they are past a procreative age.

Instead reform increasingly appears inevitable, with polls finding three-quarters of Australians across all age groups believe marriage will eventually be extended to same-sex couples.  The same level of support for reform exists among younger Australians.

Therefore the risk to preserving marriage is ensuring an elite-driven, but increasingly broad-based, civil rights proposal isn't advanced while impinging on religious human rights.

At its most basic level, much of the marriage reform debate is an elaborate trademark dispute over the divergence between government and private religious certification terms for conferring a contract between two people as well as the state, their God, or all four.

Religious faiths have a legitimate ownership claim over marriage for historical and cultural reasons.  Dismissing that ownership disrespects their contribution in maintaining the institution.  But is it not just a religious institution.  It is also a public one.  And the best way to resolve this impasse is to disentangle ownership, ensuring that civil relationship recognition and religious marriage celebration aren't one and the same.

There are two options.

The first is to follow France and privatise marriage, where government offers civil unions for all couples, and religious faiths set the conditions in their tradition for celebrating marriage.

The second is to adapt the spirit of ''covenant'' marriages that exist in some US states.

These marriages have stricter rules for entry and divorce, based on religious values, and effectively compete against a more secular marriage also offered by government.

But rather than establishing a singular covenant alternative the commonwealth could establish a competitive marriage market where private religious faiths register their own marital contract based on private rules and traditions set by the appropriate hierarchy of the faith.

Government could then offer a civil marriage alternative between two people reflecting societal standards.

An example of a private religious marital contract could include that it only be accessed by heterosexual couples who attend religious services regularly, have undergone preparatory relationship counselling and can only be conferred by that faith's celebrant.  Couples could then choose the marriage model appropriate for them.

Under either scenario all couples would be treated equally for public purposes, but not for private religious ones.

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Energy costs, labour power block road to productivity

A recent AcilTasman report shows Australia's productivity performance has slowed, with Victoria, post-2005, collecting the wooden spoon.

One cause of this in Victoria is increased regulation, including requiring higher spending on expensive renewable energy.

A second factor is reduced labour productivity.  Union power was re-entrenched by the Brumby Government with decisions, like on the Wonthaggi desalination plant, which favoured contractors who would tolerate efficiency being undermined by union dominance.  The Rudd/Gillard Government has aggravated this with workplace legislation that reduces employers' abilities to manage.

Much of Victoria's productivity dip also reflects lower infrastructure spending, especially on roads, which dominate the commercial infrastructure that governments directly provide.  Other commercial infrastructure, like ports and power lines, saw high costs and lousy service under public ownership and had been privatised.

Even roads are built by independent contractors and sometimes privately owned.

Roads account for much of freight transport and 87 per cent of personal travel.

After the ALP came to power in Victoria in 1999, road spending fell from 20 per cent to 15 per cent of the national total.

Last month, the Commonwealth Government's Infrastructure Australia report Communicating the Imperative for Action called for better targeted spending on infrastructure.  But, in practice, the report favoured spending in areas that provided relatively low productivity payoffs.

It offered strong support for ambitious city rail systems, including one proposed by Infrastructure Australia chairman Sir Rod Eddington in work he conducted for the Brumby Government.  None of these would pay for themselves in the way that roads do.

Priority is also placed on cycle tracks, which, offer no infrastructure benefits.

Infrastructure Australia rejected major roads financing except for toll roads.

While it may be fairer to charge motorists for some of their road use, governments spend far less on roads than they collect in vehicle taxes on fuel and licences.  And there is nothing in Infrastructure Australia's report that suggests other taxes should be reduced to compensate motorists for increased receipts from tolls.

Like so many other planners, Infrastructure Australia represents elitist opinion.  This has given us prohibitively expensive desalination plants, solar panels that require a subsidy of five times their cost, a $44 billion white elephant in the National Broadband Network, and other wasteful expenditures.

Much of Infrastructure Australia's proposals pander to trendy green opinions.  These include costly and wasteful measures that respond to the alleged dangers of climate change, including water recycling with higher water prices to discourage use.

Infrastructure underpins productivity.  But, to avoid misuse of taxpayers' money, government provision should be limited to areas where its presence is unavoidable.

Ports, airports, gas and electricity supply and much of rail are now mainly private sector activities and require only a passive government role.

Continued government ownership and decision-making is probably inevitable in provision of roads, water and elements of rail.  To avoid duplicating advisory structures on infrastructure and to improve accountability, oversight should be with the tier of government closest to the users.  This means restricting the Commonwealth's activities to interstate networks, which are largely confined to roads.

Too many economists in the carbon kitchen

There's a lot of interesting material in the survey of Australian economists released last week.

But the results are not much use as a guide for developing public policy.  Few political issues can be reduced to technocratic questions of policy design.

Conducted by the Economics Society of Australia, nearly 600 economists were quizzed about an array of policies.

The one which gathered all the attention asked whether they agreed ''price-based mechanisms'' (clearly the Government's carbon tax and emissions trading scheme) were better than ''direct regulation'' (Tony Abbott's direct action plan).  Only 11 per cent did not.

It should have come as no surprise.  Abbott has been unable to find any economists which back his plan, because direct action is obviously a bad idea.

That the overwhelming majority of economists support a price mechanism over direct action probably has as much to do with the clear deficiencies of the latter as opposed to the virtues of the former.

But does that mean emissions trading is the right thing to do?  Not quite.

Economists are often ridiculed for making unrealistic assumptions in order to model human behaviour.  But the first assumption policy designers make is the most crucial one:  assume your policy is enacted wholesale, uncompromised by the brutish political process.

When asked how to tackle climate change caused by pollution, most economists would likely recommend a trading scheme or tax.  Price the externality and move on.

But as a 2007 paper in the Natural Resources Journal concluded, ''the introduction and implementation of [emissions trading] policies is explicitly political and should be recognised and analysed as such.''

Politics, not economics, decides how much pollution will be allowed.  Politics decides who will be allowed to pollute.  Politics decides the conditions under which the pollution permits will be traded.

In an unguarded moment in December 2008, Ross Garnaut complained that Kevin Rudd's interpretation of his emissions trading scheme had been captured by ''vested interests'', and wondered about the ''wisdom of how far it's gone''.  Rudd's legislation had deviated from his policy ideal.  But what did he expect would happen?  Economists must not assume that their ideas will be implemented untarnished by political calculus.

So while there is an economists' consensus the ideal price mechanism is better than the ideal regulatory approach, its existence doesn't take us very far.  Policy is all about implementation.

The academic study of policy implementation -- as opposed to policy design -- only goes back a few decades.  The title of the 1973 book which sparked this field is succinct -- Implementation:  how great expectations in Washington are dashed in Oakland:  or, why it's amazing that federal programs work at all.

As the authors argue, ''The separation of policy design from implementation is fatal''.  No matter how well designed and elegant a policy may be it will be useless, even counterproductive, if it is implemented ineffectively, inconsistently, or has been whittled down by the political process.

For the ideal model of emissions trading to achieve its goals, international action is the difference between successful implementation and failure.

You can't resolve a commons problem simply by taking independent action.  The tragedy of the commons is a tragedy for a reason.  Perhaps global action is imminent.  Nevertheless, that's a question for diplomats, not for economists.

The results of last week's survey are less useful than they appear in other ways.

The economists were asked if aid spending should be reduced, if jail sentences were an appropriate punishment for those convicted of price fixing, if corporate boards should have gender quotas, if non-government schools should receive funding, and so forth.  Some they were for, some they were against.

These questions have their economic aspects.  But most of all they involve questions about morality, liberty, equality, and social justice.

The discipline of economics can have insight into the effectiveness of policy, but it cannot define our values.

Should -- as another question asked -- governments ''provide greater economic incentives to improve diet''?  If we decide that as a society we want governments to make our eating habits a question of high public policy, the design of those incentives will be important.  Yet it is far from obvious that's the case.

Values pervade questions about climate policy as well.

Public choice economists (a sub-branch of economics which studies incentives in the political arena) have long recognised voters tend to prefer command-and-control approaches like Tony Abbott's direct action.  Economists protest regulation is less efficient than pricing mechanisms, as they should.  But for many voters, regulation still seems ''fairer''.

This accounts for the fact that regulation has always been more prominent in environmental policy than pricing.  It may also explain the great political oddity of 2011:  the extremely popular Coalition has an inferior policy for a problem the public believes is real and should be tackled.  It's just that, given the option, voters prefer regulations to price signals.  Even when price signals are less costly overall.

In the 20th century, many economists and politicians thought technocrats were only limited by the amount of data or computing power they could muster.  If we could assemble enough information, experts would be able to design perfect policy and run an economy to its maximum efficiency.

But we know better.  The technocratic dream has very real limits.  No matter how many specialists and experts agree on the way forward, effective policy may still be far out of reach.

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War to end war drugs gains allies on right flank

In 2011, the war to end the war on drugs is now being led by conservative voices, not radical ones.  In March, three federal Liberal backbenchers -- Mal Washer, Judi Moylan, and the Victorian Russell Broadbent -- came out against the criminal status of drug use, going so far as to argue that heroin and cocaine should be legalised.  Dr Washer described the war on drugs as a ''crime against humanity''.

Indeed, those Liberals have been more vocal than the apparently radical Greens, who abandoned their support for drug decriminalisation after they found it brought more controversy than was comfortable.

And the backbenchers join a global phenomenon -- conservative voices coming out against the drug war.

Last month the Global Commission on Drug Policy concluded that drug prohibition has been an abject failure.  The panel includes Sir Richard Branson and Nobel laureate in literature Mario Vargas Llosa.  Both hold right-of-centre economic views.

Two commission members, one a former US Secretary of State, the other a Federal Reserve chairman, had their argument featured on the conservative Wall Street Journal opinion page.

Little has changed in a practical sense, only that the pointlessness of the approach to drugs has become even more obvious over time.

Julia Gillard and Tony Abbott have admitted using marijuana when they were young.  So have Malcolm Turnbull, Wayne Swan and Peter Garrett.

This would all be harmless fun but for one thing.  Last financial year, according to the Australian Crime Commission, 57,170 people were arrested in Australia on marijuana-related charges -- a drug that Australia's most senior politicians happily admit to having used.

Their confessions are typically made with a sheepish grin, followed quickly by a stern parental admonition -- ''It was a mistake to do so,'' said Malcolm Turnbull.  Julia Gillard:  ''Tried it, didn't like it.  I think many Australian adults would be able to make the same statement, so I don't think it matters one way or the other.''

Well, it would matter if you were one of the almost 60,000 Australians arrested for holding, consuming, or supplying cannabis to aspiring politicians last year.

In Australia, marijuana is treated with a degree of leniency, at least compared to other drugs.

Nevertheless, Australian police made more drug-related arrests last year than at any time in the past decade.  And about 20 per cent of Australians report having used an illegal drug.  These are not the typical indications of policy triumph.

Outright prohibition has been no more a success at reducing the harm caused by drug use in the 21st century than alcohol prohibition was in the 20th.

Melbourne's cycle of gang warfare has been fuelled by the illegal industries that have grown up around prohibition.  In 2001, Portugal decriminalised everything from marijuana to heroin.  Drug trafficking remained a crime, but possession and use became nothing more than administrative violations.  Providing drugs to minors remained illegal, as did providing drugs to people with a mental illness.

According to a study by the Cato Institute, an American free-market think tank, the results of this experiment have been positive.  Drug use didn't go up, contrary to the nightmare scenarios predicted -- particularly among 13 to 18-year-olds.

This is unsurprising.  As a product comes out of the illegal underground, it is easier to regulate, control and manage.  Cato found that almost every single measure of progress -- HIV rates, drug-related mortality -- had gone down since 2001.

Obviously decriminalisation is very different from full legalisation.  The latter would be an understanding that individuals had the right to ingest whatever they liked.  The former balances the criminal and the individual responsibility approaches.

Portugal chose to decriminalise because they didn't intend to normalise or encourage drug use.  And none of the conservative voices who have joined the chorus against the drug war are pro-drugs.

But Portugal's strategic retreat has done more good in its 10 short years than 30 years of criminalisation.  The United States, which has the harshest penalties for drug possession, also has the highest levels of cannabis and cocaine consumption.

Portugal's model is one Australia could -- and should -- adopt.

Unfortunately, governments get easy political mileage out of looking tough on drugs.  Ted Baillieu wants to crack down on the sale of the bongs -- an entirely symbolic gesture -- but one that apparently resonates with a certain type of voter.

And social reform can take a long time.  One of the intellectual heroes of the free-market movement, Milton Friedman, called for an end to the war on drugs way back in 1972.

Yet conservative scepticism about the criminal approach to drug use is spreading.

If both sides of politics are starting to doubt the wisdom of the drug war, there's a chance -- a chance -- we may eventually take Portugal's lead and call a ceasefire.

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Sincere, but often wrong

In March 1981, 364 economists signed a letter to The Times.  They were the luminaries of the British economic establishment.  The previous year the inflation rate in the United Kingdom reached 18 per cent and Margaret Thatcher, elected prime minister in 1979, was determined to reduce inflation through higher taxes and government spending cuts.

The economists protested there was ''no basis in economic theory or supporting evidence'' for such a policy in the middle of a recession and the country's social and political stability was threatened.

In question time in the House of Commons, the leader of the Labour Party, Michael Foot, asked Thatcher to named two economists who agreed with her.  She named Alan Walters and Patrick Minford.  Walters was her economic adviser and Minford a professor at the University of Liverpool.  After question time on her way back to her office, Thatcher apparently told an aide:  ''It's a good job he didn't ask for three.''

By 1983, the UK inflation rate fell to less than 5 per cent.  Most of those 364 economists are now long forgotten.  They're famous only for being so wrong.  One of them was Mervyn King, now governor of the Bank of England.

A fortnight ago, Tony Abbott was asked why most leading economists in this country supported a carbon tax or an emissions trading scheme rather than the Coalition's direct action plan.  He replied ''maybe that's a comment on the quality of our economists rather than the merits of the argument''.

On Wednesday, a survey of 140 local economists by the Economic Society of Australia showed 60 per cent of them thought the carbon tax was good economic policy.  Twenty-five per cent thought it was not.  It's a popular misconception that anyone calling themse1f an economist is therefore somehow imbued with a belief in free markets and economic liberalism.

Franklin Roosevelt's New Deal, which socialised vast tracts of the American economy, was the brainchild of economists.  Presumably Barack Obama is being advised by economists.

The most brilliant economist of the 20th century, John Maynard Keynes, provided the excuse for governments to wield unprecedented power in Western economies after World War II.

Membership of the Economic Society of Australia is open to anyone of good character interested in economics.  Karl Marx would qualify for membership.  He had an interest in economics, although his treatment of his family might mean he'd fail the character test.

Abbott was being altogether too kind about economists in this country.  He could have accurately said the only thing a survey of economists in Australia would ever reveal is that most of them are inclined to the left and centre-left of politics.

In 1974, before the federal election, 130 economists signed a letter supporting Gough Whitlam's economic policies.  The major economic reforms in Australia of the past few decades have been championed by a handful of individuals, some of whom were economists, but many who weren't.

A brief survey of recent economic history demonstrates that as a whole the economics profession has contributed little to the debate on how to liberalise the Australian economy.

Probably the most important economic reform of the 1980s and 1990s was deregulation of the labour market.  The seminal analysis that shaped policy for a generation was an article by Gerard Henderson, ''The Industrial Relations Cub'', that appeared in 1983 in Quadrant.  Henderson was a political scientist, not an economist, and Quadrant is not an economics journal.

Another example of economists missing in action is privatisation.  In the 1980s, during the arguments about the privatisation of government assets, most economists were nowhere to be seen.  Privatisation was an agenda driven almost exclusively by politicians.

In the mid-1970s, as stagflation was demonstrating the failure of the policy consensus, most Australian economists continued to cling to the Keynesian orthodoxy.  When Milton Friedman first visited Australia in April 1975, Friedman was treated as a celebrity because his views were so far outside the mainstream.  (Friedman's performance on the ABCs Monday Conference program was so popular it was screened again six weeks later).

No doubt the 364 economists who attacked Thatcher, and the 130 who thought Gough Whitlam was a good economic manager, were sincere in their beliefs.  No doubt all those economists who in 2011 think a carbon tax is a good idea are sincere in their beliefs too.  But sincerity doesn't stop them being wrong.

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Brown's global parliament: scary proposition

Bob Brown's call for a global parliament isn't crazy.  That's the problem.

Speaking at the National Press Club in late June, the Greens leader asked ''Why shouldn't we now join vigorous moves in Europe and at the United Nations for a global people's assembly based on one person, one vote, one value?''

Brown gave this future parliament a wide range of responsibilities -- from financial policy to defence to wealth redistribution and third world development.

He's hardly alone.  Woodrow Wilson, Jeremy Bentham, H.G. Wells, and Albert Einstein all proclaimed their desire for a parliament of the world.  Nominal conservatives too:  in 1947, Winston Churchill claimed ''unless some effective world super-government can be set up and brought into action, the prospects for peace and human progress are dark and doubtful.''

Sure, there are lots of reasons why a future world parliament is unlikely;  reasons which were quickly cited after Brown's speech.  (And one wonders why he chose to explore this fantasy in a major forum just days before the Greens took the Senate.)

But to understand why a world parliament is undesirable, we have to ask why the Greens leader would want a world parliament in the first place.

Such a parliament would not be a forum for diplomacy.  We already have one of those.  Instead, its purpose would be to impose binding legislation on every corner of the globe.

A carbon price enacted by a global parliament would remove the potential for firms to simply shift across national borders to avoid the cost increases.  And the parliament would be able to impose a ''Robin Hood'' tax without fear that finance simply goes elsewhere.  There would be nowhere else to go.

But Brown might discover such a parliament might pass laws he doesn't like.  One cannot assume a global legislative structure will always share the policy preferences of a minor antipodean political party.

And whatever legislation it did pass would be binding for the entire world, no matter how misguided or illiberal.

It should be needless to say, but there are advantages having lots of jurisdictions -- countries, states, provinces -- with lots of different legislative bodies.

We frequently look to other countries for policy ideas to adopt.  Or avoid.

A few weeks ago I argued the only reason gay and lesbian people in New York are now able to marry is because legal power over marriage is held by New York State, not Washington DC.  A small jurisdiction is able to be more progressive than a large one.

A global parliament -- with an inevitably expanding mandate -- would slowly erode the possibility of policy experimentation.

(This is an expanded version of the Australian argument between those who would like Canberra to assume more power and those who think decentralised government is better government.)

The idea that democratic power should be as close to the people it governs is an old one.

A global parliament is one of the most liberty-threatening proposals ever suggested by a mainstream Australian politician.

The most important and most undervalued insight of liberal philosophy is the concept of ''exit''.

David Hume said ''every man ought to be supposed a knave''.  We ought to suppose governments, parliaments, corporations, societies, and communities are knaves as well.  Through brute force or just subtle social coercion, each can oppress us, limit our individual freedom, or just make life tougher than it should be.  Not that they always will.  But that they could.

So our most important freedom is freedom of exit.  People should be able to escape the clutches of one group, if they have to, and move to a more desirable one.

In a competitive marketplace, this means shifting from one firm to another if we're unhappy with their service -- or starting a competing firm.  And in the social sphere, it means having the freedom to build our own relationships and communities.

If a government is oppressive -- if it taxes too much, if it limits our civil liberties, if it provides insufficient protection or quality services -- we're stuck.  Democracy is little comfort to those suffering under the tyranny of the majority.

Yet we still have a limited, emergency power of exit -- we can emigrate.  If we don't like a new law, we can move to another jurisdiction.

So exit still restrains government.  If government gets too coercive or unreasonable, people and businesses will leave.

When the British government imposed its income ''supertax'' -- levied at a whopping 95 per cent -- high earners like the Rolling Stones jumped ship.

Even if freedom of exit is rarely exercised, its possibility is a vital check on government power.

The purpose of a world parliament is to eliminate the possibility of exit.  You couldn't migrate away from the parliament's jurisdiction.  No matter how onerous its laws.

That's what makes it so appealing to those who want to expand the power of the state.

And that's what makes a global parliament such a scary proposition to those who do not believe legislative power is always benevolent.

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Suffocating the economy one tax at a time

If implemented, Julia Gillard's proposed carbon price starting at $23 per tonne will push us closer to economic stagnation.

If the Government wanted to make the 159 million tonnes saving in 2020 it seeks, it would not attempt to do this with a domestic tax.  According to the Government's Securing a Clean Future report, half of the saved emissions are domestically derived.

If the price is $30 per tonne this will involve an annual cost of $2.385 billion incurred in overseas buying.  The cost of achieving the emission reduction locally if the price is $30 per tonne is incurred on all the remaining emissions (336 million tonnes).  That comes to $10.08 billion.  This begs the question that since carbon dioxide is the same the world over why not buy all our emissions overseas?  At $30 per tonne, 159 megatonnes of emissions costs $4.77 billion, which is far less costly than striving to do it with the mix of local ($10.08 billion) plus overseas ($2.385 billion) giving a total of $12.465 billion.

Even without a carbon tax, Australia's energy price regulator has reported an expected increase of 30 per cent in electricity prices over the next three years, largely due to higher ''poles and wires'' costs.  For New South Wales, the state's pricing tribunal has announced a 17 per cent electricity increase for next year, a third of which is for ''green schemes''.

Against this backdrop last month's Productivity Commission (PC) report, Carbon Emission Policies in Key Economies examined over 1,000 abatement reduction schemes across eight countries.  These are overwhelmingly focused on electricity, and the PC converted them into carbon tax equivalents.

The PC's analysis illustrates that taxes are high and substantial abatement is taking place in the European Union (EU).  In Germany and the UK carbon dioxide emission programs bring increases of 12-17 per cent in electricity prices (though the recent slump in the EU carbon price will reduce this considerably).

For Australia and New Zealand the emission control programs currently bring electricity price increases of 1-2 per cent, while in China, US, Japan and South Korea the effect is negligible.  And Australia's main scheme, the 20 per cent Renewable Energy Target, is only just gearing up to cost levels that by 2020 will be perhaps tenfold those of today.

Australia's trading rivals are among the 170-odd other countries which the PC did not examine.  In fact, exporters of fuel and raw materials in Canada, South Africa, Brazil, Indonesia, India and the Middle East face negligible carbon abatement costs and already have tax advantages over Australia's exporters.  Carbon taxes figured prominently in the Canadian Liberal Party's platform in that country's recent election and the party suffered its worst defeat in a century.

Although no country has a carbon tax, the PC's material demonstrates that cap-and-trade market mechanisms offer cheaper means of bringing about abatement than specified regulatory measures like renewable programs.  Thus Germany's costs under the European Union's cap-and-trade carbon tax were about $20 per tonne of CO₂ (for shifting from coal to gas) but costs under specific measures requiring wind and solar use on average $137 per tonne.

Australia's schemes involving feed-in tariffs for small scale renewable systems come at a CO₂ price of up to $425 per tonne.  Wind farms cost $37-69 per tonne.

The PC estimates that a carbon tax set at $9 per tonne could replace all existing Australian measures and notes that a tax is less inefficient than ''direct action'' approaches favoured by the Opposition.

However, the current abatement measures requiring renewables are also direct action approaches and the Government wants these to be retained alongside a carbon tax.  Moreover, it is negotiating for another direct action proposal, involving closure of Victoria's Hazelwood power station.  That closure could reduce emissions by 3 per cent but only in the unlikely event that the station's output is not replaced by output from other fossil fuel sources.

The Productivity Commission estimated the cost of Australian emission reduction programs at $473-694 million in terms of total subsidy equivalent.  But this excludes direct government subsidies.  The Department of Climate Change and Energy Efficiency (DCCEE) provides an ''A to Z'' of (Commonwealth) Government initiatives.  Ranging from Advanced Electricity Storage Technologies to the World Bank Clean Technology Fund, these comprise 93 separate programs.  DCCEE put Australia's budget expenditures on abatement measures totalled $1.069 billion in 2009/10.  The Government's package budgets for $4.2 billion in 2014/15 in the Clean Energy Finance Corporation and other supports for green energy and conservation.

In addition to excluding direct budgetary spending in estimating Australia's carbon tax rate, the PC also does not count the effects of a range of standards.  A previous commission report had put the annual costs of greenhouse abatement measures embodied in the national five/six-star building standards at $3 billion a year.

Clearly Australia outlays much more than the $473-694 million the PC used to estimate Australia's greenhouse abatement costs.  Our expenditures are much higher than those of our competitors and the carbon tax would further increase the baggage we have to carry.

The outcome would be a spiralling down of our living standards relative to those of other resource rich countries.

But the carbon tax is only the latest blow.  To restore the nation's competitiveness, a future Coalition government must both revoke any carbon tax that is introduced and purge the economy-killing measures that have been gathering moss over the past few years.

To start this ball rolling, the O'Farrell Government is calling for the repeal of the Commonwealth's 20 per cent Renewable Energy Target.  And the Nationals Senator Ron Boswell has made similar moves in the Coalition party room by seeking to have support for the target reviewed by a policy committee.

With his ''direct action'' approach Tony Abbott expects to achieve the Government 5 per cent reduction in emissions but at a lower cost than a carbon tax involves.  That is implausibly optimistic.  But more significantly he has announced a review of policies for 2015, an action which foreshadows an unwinding of the green juggernaut.

Boon for the carbonocrats

The Gillard government's carbon tax package is a triumph for fiscal churn and bureaucracy over wealth creation and, for that matter, the environment.

The animating principle of the package is to use the $27.2 billion of revenue raked in by carbon permits and associated measures over the first three years to spread handouts across favoured constituencies.

And one major beneficiary will be a new army of carbonocrats.

The centrepiece of the Gillard government's bureaucratic empire building is a $10 billion clean energy finance corporation to invest in renewable energies and energy efficiency technology.

This agency, already dubbed the Brown Bank, is a throwback to an era in which governments maintained financial corporations bankrolling politically favoured, yet inefficient, ventures.

Think of the State Bank fiascos in Victoria and South Australia to recall how government acting as banker all panned out.

Closely aligned with Brown Bank is an Australian renewable energy agency, announced last week by the Greens deputy leader Christine Milne with no government minister in sight.

It will dole out $3.2bn in government research and development grants displacing the market for the commercialisation of renewable energies.  This is the ill-fated policy of picking winners and risks a repeat in the realm of environmental policy of the NBN fiasco, with its rollout of unnecessary infrastructure.

An energy security council will be set up to advise government on emerging risks to energy security, including from carbon pricing, and to recommend financial support measures for electricity generators.

If you think that these new entities are more than sufficient to manage our new climate change state, wait, there is more.

A clean energy regulator will assess liability to pay carbon tax, manage an Australian national registry of emissions units, and educate the public about carbon pricing for good measure.

Charged with the responsibility of measuring the emissions of the invisible, tasteless and odourless gas of carbon dioxide, there are obvious risks of carbon trading fraud directly affecting the integrity of that body's future work.

Finally a new climate change authority, chaired by former RBA governor Bernie Fraser, will advise government on medium and long-term pollution reductions and conduct reviews into aspects of carbon regulation.

The creation of this overseeing commissariat, that removes emissions abatement policy from the hands of government, was a major focus for the Greens in their negotiations over the carbon tax design.

As the experience of many independent regulatory bodies show, there is a risk that the authority may become overzealous, in this case, in recommending abatement trajectories at the expense of national economic welfare.

Ironically it would be exactly this kind of regulatory bias, for the sake of environmental precaution, that any political adherent of climate change action would want.

While the authority would maintain a veneer of independence, a future government could game future abatement paths by appointing an authority head with similar attitudes towards the anthropogenic climate change narrative.

A significant omission from the carbon tax package is a detailed explanation as to how these new entities will relate to existing bodies, such as the 1000 strong Climate Change Department or the Climate Change Commission headed by Tim Flannery.

While the details will hopefully be spelled out in legislation later this year, the fact is that the government has not explained how the spaghetti strands of new agencies will fit into the existing bureaucratic structures.

Whether the plan has a coherent structure or not, Canberra's army of bureaucrats can rest assured that the tax presents a boon for existing agencies as well.

For many households, carbon taxes collected by Treasury will boomerang back towards low and middle-income households.

But while raising the income tax free threshold will provide relief for lower income earners, this will only be temporary as bracket creep will erode those gains.

And contrary to the stated policy objective of boosting workforce participation, there will actually be an increase in effective marginal tax rates for many low income earners.  Combined with an increase in benefits this may encourage many Australians to remain on welfare.

The only clear winner from this unsatisfactory outcome would be Centrelink, doling out additional payments to households.

There will also be an increase in corporate welfare as some industries affected by the carbon tax receive handouts, in the name of saving jobs and installing clean energies.

This includes $9.2bn for a jobs and competitiveness program, a $1.3bn coal jobs package and $1.1bn for manufacturers such as steel makers and food processors.

It is questionable that these handouts will avert employment losses in energy intensive industries particularly as domestic firms move offshore avoiding payment of the tax.

What is certain is that the Department of Innovation and Industry will increase its influence within the government and over industry as it selects applicants for the fiscal largesse.

Other departments, such as Environment and Sustainability, will receive new program toys such as the Biodiversity Fund to alter the general direction of industry activities.

Prime Minister Gillard has vowed to wear out her shoe leathers in a quest to persuade voters across the country of the merits of her plan.

But adjustment problems for directly affected industries, cost of living increases, a long-term reduction in national income and negligible temperature change will make the tax a hard sell.

And the fiscal churn enterprise sapping welfare handouts and an enlargement of Canberra's bureaucracy, the carbon tax will compound the government's difficulties.

The danger for the government is that environmentalism has already become a dirty word for middle Australia, and no amount of carbon tax detail will overcome that.

Gillard is no Hawke or Keating: in economic policy or market economics

Julia Gillard has adopted a polar extreme policy approach to the Hawke-Keating Governments.  The ALP regained power in 1983 on the back of Bob Hawke, who was catapulted to the party's leadership on the very day the election was announced.  Having solid recognition and facing a haughty, unpopular Malcolm Fraser he sailed into office. 

In contrast to the turmoil of the Whitlam period of office, Labor in 1983 courted solid performance as a key to parliamentary longevity.  To assist its policy development it recruited a host of friendly economic rationalists into a government think tank:  the Economic Planning and Advisory Commission (EPAC).

This, and Fraser's largely pro-regulatory stance (with a notable exception of the labour market), gave Hawke an opportunity.  He could outflank the Tories from the right, in all areas except industrial relations, while he would use the Accord with the unions to harness their militancy.  Imitating Benjamin Disraeli who as a Tory Prime Minister famously ''dished the Whigs'' by dressing in the leftish Liberal Party's clothes, after an initial socialistic spending spree Hawke and Keating adopted a deregulatory agenda.

Hawke announced his radical new approach in an address to the Business Council of Australia in September 1984.  He said:  I am convinced that after eighty-four years of federation, we have accumulated an excessive and often irrelevant and obstructive body of laws and regulations.  We will examine critically the whole range of business regulation, most importantly with a view to assessing its contribution to long-term growth performance.  We will maintain regulation, which upon careful analysis, clearly promotes economic efficiency, or which is clearly an effective means of achieving more equitable income distribution.  And we will abandon regulation, which fails these tests.

The Hawke policy led to tariff reductions, freeing up financial regulations, and a culling of restraints on exports.  Eventually it morphed into Competition policy, a huge part of which involved privatisation or its poor relation, corporatisation.  As Craig Emerson has pointed out, this process did much to generate higher productivity that has underpinned increased living standards over recent years.

The Hawke-Keating approach almost from the outset was adopted by the Liberal Party but as the Howard year rolled on, Labor abandoned the regulation-light approach, especially under the affable but economically illiterate Kim Beasley.  Kevin Rudd and Julia Gillard continued this course.  Rudd, a hands-on apparatchik, outlined his view of the world in his two articles in The Monthly.  While doffing his hat to the Hawke-Keating approach, Rudd argued:  The social-democratic state offers the best guarantee of preserving the productive capacity of properly regulated competitive markets, while ensuring that government is the regulator, that government is the funder or provider of public goods and that government offsets the inevitable inequalities of the market with a commitment to fairness for all.

Although his often contradictory statements sometimes applauded a lighter governmental touch, all of Kevin Rudd's major decisions involved vast expenditures that were ostensibly designed to correct for an inadequate market -- Building the Education Revolution (the BER), the cap and trade, the Green Car strategies, the NBN.  Rudd eagerly seized on the ideas about the effectiveness of a Keynesian fiscal stimulus promoted by a Treasury that has lost its economics bearings. 

Julia Gillard has intensified this movement and further weakened its market dimension.  Her political philosophy, by her own acknowledgment, was inspired by the extreme left wing Welsh Labour Party MP Aneuren Bevan.  She had no quibbles with any of the Rudd policy stances and was actually responsible for the maladministration of the BER.  Undaunted she has shown every confidence in government as an efficient business machine. 

Indeed, more regulation and controls appears to be the one thing she genuinely believes in.  Thus, the legislative agenda she set herself late last year involved new bureaucracies:  to set national safety and quality standards for Australia's hospitals and health services;  to improve access to services and representation for university students;  and a brand new body for National Preventative Health.

Her plans also include more bureaucratic controls over the ozone layer at a time when the danger this may have posed has diminished.  Also envisaged is water efficiency labeling, more powers for bureaucracies regulating therapeutic goods and fighting corporate crime and parliamentary legislation to ensure consistency with the multifarious human rights constantly being invented by international agencies. 

There was no area where she felt government could become smaller.  Although her budgets forecast a balance in the future, even if this is achieved, it will be accomplished by higher personal taxation (through bracket creep).  Higher taxation may well balance a budget in the near term but over the longer period it undermines investment and the rewards for risk taking in business that are the true drivers.

Meanwhile, whether it is energy issues, live cattle exports, refugee processing or almost any problem that arises, the reflex action is to feed more money into its resolution or into lessening the burden on those most directly affected. 

The Gillard philosophy stems from an unerring faith in the ability of business to make adjustments and to innovate in the face of measures imposed by the government.  And a view that economic production and productivity is impervious to the measures that government takes represents an optimism that is demonstrably false -- failed states demonstrate the ability of governments to destroy economies and many Latin American economies show how interventionist politics has undermined prosperity. 

While Hawke and Keating recognized the regulatory glue as an impediment to the forward motion of the economy, the Prime Minister calls this a reform agenda.  With regard to the government's current legislative program she adds:  ''this legislation ... step by step ... will make a difference to the lives of families across Australia''. 

This vote of confidence in more control over the economy, flies in the face of evidence about the creation of prosperity.

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Government's carbon skeleton

If there are any undisclosed details left for tomorrow's carbon tax announcement, taxpayers can be sure Australia's dirtiest secret, that the government is one of Australia's largest, growing greenhouse gas emitters, won't be included.

Since 1998 the federal government has documented its energy use in the Australian government's operations report that quietly details its annual greenhouse gas emissions.

The latest 2007-08 report shows that despite her anti-greenhouse gas rhetoric, Julia Gillard runs one of the biggest emitters in the country with the federal government's carbon footprint amounting to 2.8 million tonnes in that year alone.  To put the federal government's emissions into perspective, its reported emissions parallel those of the Australian operations of international oil company Exxon Mobil.

But the government's reported data excludes key sources of emissions such as public sector employee flights and taxis, as well as Defence Department fuel used outside Australia.

Based on my conservative calculations, the combined emissions of flights and defence force fuel adds another 700,000 tonnes, taking the government's total footprint to at least 3.5 million tonnes of greenhouse gases.  Compared with an equivalent calculation for the 2001-02 financial year, the government's emissions increased during that time by 300,000 tonnes or nearly 10 per cent.

Under the National Greenhouse and Energy Reporting Scheme, Australia's largest emitters report their greenhouse gas emissions, which is converted into the equivalent volume in carbon dioxide, providing the basis for the carbon tax companies will pay.

Based on NGERS reported data a carbon footprint of at least 3.5 million tonnes would rank the federal government as Australia's 30th largest emitter.

More than half the government's emissions are directly sourced from electricity consumption and they reach 70 per cent with international and domestic flights.  Most of the remaining emissions result from burning defence force fuel.  Removing the defence component and replicating the federal government's carbon footprint on an emissions-tonnage-per-dollar basis calculates the carbon footprint of local, state and federal government to about 9.5 million tonnes.

A footprint this size ranks just outside the nation's top 10 emitters and would squeeze big government's emissions between the emissions of Woodside Petroleum and brown coal electricity generator Loy Yang.

The government's numbers show that it's not changing its behaviour, despite it imposing a carbon tax to drive change in organisations and households that have much smaller carbon footprints than its own.

Instead, the federal government should at least be leading by example instead of perfecting the lingo of ''do as I say, not as I do''.

But the evidence shows otherwise.  In the two years of purchasing expensive renewable electricity, the federal government offset 156,000 tonnes of electricity emissions, but concurrently increased overall consumption by 216,000 tonnes.  The government's overall consumption of electricity continued to rise during the noughties and spiked considerably after the 2005 financial year when the government introduced a more accurate reporting system.  In that timeframe, total emissions consumed by public sector employees were 22.8 tonnes, whereas Australians averaged 15.3 tonnes.

Part of the reason the government may not be changing its behaviour is because the Gillard government has excluded itself from being hit with a direct carbon tax bill.  But the government will still have to pay for the cost of rising electricity prices for the carbon tax it imposes on other large emitters.  That price will then flow through in increased prices to final consumers, whether they are households, businesses or government.  Similarly, even without a direct carbon tax on petrol, fuel prices will rise through non-petrol industry business inputs that will also increase defence fuel costs.

As a result, the cost of running government will also go up as the carbon tax price increases annually.  Considering taxpayers finance government, it doesn't take sophisticated Treasury modelling to figure out who'll pay for the federal government's carbon emissions hypocrisy.

A policy failure on three fronts ... and counting

The details of the Government's carbon tax have been released.  Now the debate will move onto dissection of the gory details.  For all the talk about compensation and the like, the Government has left itself very little wiggle room.

We're told, on average, that household costs will increase by $9.90 per week and average compensation will be $10.10 per week.  That's 20 cents before average households will be worse off as a consequence of the tax.

When evaluating policy, there are three important questions to consider.  Will the policy work?  Will there be perverse outcomes?  Will it benefit consumers?  All up the carbon tax fails all three tests.

The policy objective is to reduce emissions by 5 per cent on 2000 levels by 2020 and 80 per cent by 2050.  The Treasury modelling released yesterday suggests that the 2020 target cannot be achieved.  Even with a carbon tax emissions will increase from 578 megatons of CO2 in 2009-10 to 621 megatons of CO2 in 2020.

As the Productivity Commission recently reported, no other country has an economy-wide emission trading scheme.  As yet no global market for emission permits exists.  In all of its modelling Treasury assumes that market exists and Australian business can buy international permits to offset their emissions.  That drives the cheapest form of abatement -- but when the market doesn't exist local carbon prices must be much higher than Treasury estimates and the domestic cost of carbon tax much higher too.

Treasury also relies very heavily on assumptions about technology.  Electricity generation is expected to move from being predominately coal-generated to renewable energy with some coal being used in combination with carbon capture and storage technology.  Right now that technology is not viable;  Treasury assumes it will be viable after 2021.  Renewables are expensive and unreliable.  Treasury imagines the greatest growth will be in geothermal energy -- again a technology that is unproven.

Of course technological improvements occur all the time and these technologies may well be viable in future.  Yet the Government is betting our economic prosperity on these technologies becoming viable in the very near future.  If those assumptions do not work out, electricity prices will be very high and very likely Australians will experience rolling black-outs.  This is a policy that undermines our domestic energy certainty.

All up it is very likely that the Treasury estimate of a $3.30 per week increase for electricity is far too low.

The Treasury modelling is strangely quiet about the employment consequences of the carbon tax.  When modelling the Carbon Pollution Reduction Scheme the Treasury admitted that they couldn't actually model the employment consequences of the policy and had to assume full employment in the long-run while admitting ''temporary unemployment'' of up to 10 years.

This time Treasury simply argues that labour will move across industries due to the structural change to the economy but that this will be low compared to normal employment churn that normally occurs in any given year.  Here Treasury is saying that the number of people involuntarily losing their jobs is unimportant given the number of people who voluntarily change jobs each year.  But people choosing to change jobs usually go to a better job, people being retrenched usually don't.  It also ignores the fact that people being retrenched as a result of the carbon tax will be over-represented in some regions of the country and in particular industries.  Will the 20-cent differential compensate households for lost employment?

On a regional basis the early loser from the carbon tax is Victoria.  By 2050, however, the biggest losers will be Queensland, New South Wales and Western Australia.

The tax cuts that the Government proposes are poor policy too.  Increasing the tax-free threshold is a good idea and should be implemented anyway.  But the Government is increasing the tax rates on low-income earners.  True in the early years they gain from the increased tax-free rate but over time those gains will be eroded by bracket creep.

Before becoming Treasurer, Wayne Swan used to talk a lot about effective marginal tax rates (EMTR) and the poverty traps they create.  This policy increases the EMTR for taxpayers earning between $68,000 and $80,000.  That is just above average full-time earnings.

All up this is a complex policy that doesn't deliver on its primary objective of cutting emissions by 5 per cent on 2000 levels.  It is very likely to be more expensive than Treasury has estimated.  It relies heavily on technology that doesn't exist and global permit markets that don't exist.  Finally it increases the disincentives for average income earners in the labour market, while avoiding any careful and rigorous discussion of the labour market impact of the policy.

For 20c a week more, on average, there are a lot risks in this policy.

Green plan hurts our reputation

Recent political opposition to foreign investment in mining will damage Australia's reputation as a safe haven for global capital.

Before taking the balance of power in the Senate, the Greens served notice to the Government over their key policy priorities.

A return to Kevin Rudd's resource rent tax model is one of these, a 40 per cent broader tax on mining with revenues funnelled into a sovereign wealth fund (meaning, no future tax cuts).  And what are the Greens leaning on to reheat the Rudd mining tax plan?  Capital xenophobia, or the fear of the foreigner in the investment realm.

Antipathy towards foreign investment has long struck a chord within the Australian psyche, or at least for people with a predisposed inclination against market forces.

Today the hostility towards foreign interests in mining exploration and resource development comes in two related forms.

First there is a widespread, but misplaced, view that mining is aggravating a ''two-speed'' economy leaving families in Australia's south-east behind in the wealth stakes.

Second, a concern has emerged that foreigners are looking to ''buy up the farm'' to mine it.

Because of our historical shortfall in domestic savings to finance big investments, Australian miners have had to marshal foreign savings to build up our mining to be the big employer and export earner today.

The Greens' suggestion that this is a bad thing does not square with the reality of the substantial benefits mining brings to Australia.

With the backing of foreign capital, miners can purchase specialised capital equipment.

Even so, this machinery cannot operate alone.

This is why the mining sector employs thousands across many occupations, from managers and engineers to mine workers and truck drivers.

Mining profitability is an economic signal of success, drawing in even more miners to work the earth.

This growth benefits more Australians, including mining company white-collar workers, shareholders and workers in allied industries.

It seems Greens' policies are inspired by the idea of equalising national wealth by levelling down activities undertaken by a successful sector of the economy.

The effect of a proposed federal mining tax with a higher rate and broader base will be to further reduce the economic returns accrued from mining, making Australia less attractive for investment and reducing national income.

At least the Australian Greens are consistent in that they not only oppose the importation of capital but skilled migration as well.

They are even suggesting tighter regulation of a foreign investment policy regime assessed by the international economic organisation OECD as already one of the most restrictive in the world.

But deterring mining foreign capital, through higher taxes or more intrusive regulations, is the last thing that a presently fragile Australian economy needs.

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Giving up on national classification

There's an air of unreality about the Senate's review of the National Classification Scheme.

Its final report was released in late June.  On the face of it, many of its recommendations are overdue.

For instance:  classification should be consistently applied to all mediums of delivery.  The same classification system should apply to TV, radio, videogames, mobile devices, and so on.  Better that than our current odd and incoherent array of government and self-regulatory codes, which seem to have been developed entirely from scratch for each individual medium.

Then there's lots of recommended tweaks to the classification system, and a call for more funding for classification bodies.  All this is standard for a Senate committee report.

But, meanwhile, the entire foundation of Australia's classification system has collapsed.

As the committee's report acknowledges, ''the committee would prefer that the National Classification Scheme treat all content equally, regardless of the means used to access it.  However, the scale and borderless nature of the internet complicates the practicality of this preferred approach.''

The word ''complicates'' seems to understate the problem somewhat.

Under no circumstances could an Australian classification agency even begin to categorise online content against any rating scheme.  In 2008, Google was indexing 1 trillion separate webpages.  YouTube claims its users upload the equivalent of 150,000 full-length movies every week, and it would take 1,700 years for one person to watch all of its content already online.

And under no circumstances could the Australian Government apply the principles which animate our classification system to online material -- one of which is ''everyone should be protected from exposure to unsolicited material that they find offensive''.  Even if you thought protection against offence was a worthy goal of public policy, there's simply no way to do so.

The committee just gave up, writing in its report it ''did not receive enough evidence to make specific findings on this issue'', presumably hoping other government inquiries might be able to sort it out where they could not.

This was the first major inquiry into the National Classification Scheme since it was introduced more than a decade ago.  And they squibbed it.

The internet challenge should be an opportunity to rethink the purpose of the government classification programs as a whole.

The committee's failure is all the more acute considering potentially classifiable film and television is increasingly being distributed online, aided by consumer plug-in interfaces which allow Australians to connect their television to the internet.

Media consumption is rapidly moving out of the reach of government classifiers.

As a consequence, attempts to quarantine film, television, or computer games from the Australian market do little but encourage piracy.

Take videogames, whose censorship has been so thoroughly circumvented that reform seems more formality than necessity.  Yes, it would have been nice if gamers were able to purchase adult-only games at retail stores.  But with online shopping, international shipping, and, of course, downloading, there are few serious barriers to getting hold of banned games like Mortal Kombat or Left 4 Dead 2.

And for online and mobile videogames, classification is in practice voluntary.

It took five years for World of Warcraft -- one of the most popular games in history -- to be classified by Australian regulators, because, it was an online game.

It's easy to forecast similar situations occurring with film and television, once a) Australians become more comfortable downloading or streaming film and television from overseas, and b) entertainment business models adjust to a world where most media consumption is online.

That's not a question of if, but when.

The inevitable slide of government media classification into irrelevancy does not mean classification will disappear entirely.  It'll just go private.

Non-profit groups which rate films according to ethical or religious criteria have been around for a long time.  There's a cottage industry of conservative Christians in the United States judging Hollywood films for nudity and swearing and unethical behaviour.  Sites like www.commonsensemedia.org provide far more information and greater detail than the Australian Government.  Parents looking for kids films or games in the new media world have a wealth of resources to assess appropriateness.

And, of course, there are the wide range of filters one can install on a home computer that's used by children to control their internet use.  Parents have had to take matters into their own hands already.

The Senate committee's air of unreality is most dense when it discusses the location of adult magazines and films being displayed in retail outlets near products which appeal to children.

Pornographic magazines and over-the-counter DVDs are almost the definition of an industry in decline.  They are not the classification system's biggest issue right now.

It seems clear the purpose of the Senate review was not simply to assess the efficacy of classification, but to dredge up the usual claims that the media is ignoring community standards.

This is a Senate hobby.  In the past few years, the Upper House has solemnly investigated issues like swearing on TV after some people complained about Gordon Ramsey and Big Brother.

Many politicians use discussion about classification as no more than opportunity for moral grandstanding.

But that's not the real game.  If our classification system cannot deal with the fact that entertainment is moving online, then its long-term viability must be seriously in doubt.

Opening door to an outlaw

China is a sleeping giant, Napoleon once warned.  ''Let her sleep, for when she wakes she will move the world.''  The sleeping giant awoke to the modern world 40 years ago this week, when two leading political figures from the West visited Beijing for high-level meetings.

From July 4-6, 1971, Gough Whitlam led an opposition Labor Party delegation to meet the communist leadership;  and from July 9-11, Richard Nixon's national security adviser, Henry Kissinger, led a secret US mission to complete plans for the first presidential visit the following year.  Both events set the scene for Canberra and Washington to normalise relations with the People's Republic.

To the US, the 1949 Communist Revolution meant the free world had ''lost'' an ally and acquired a dangerous enemy that belonged to the monolithic and centralised Soviet bloc.  Australia still sold a substantial amount of wheat to the mainland, but, unlike Britain, had backed the US in isolating ''Red China''.  For years, the real China was instead recognised as the island of Formosa, now known as Taiwan, where Chiang Kai-shek's defeated Nationalists had fled after the civil war.  That all started to change in July 1971.

Since Australia's Liberal and Country parties won power in 1949, Labor had been in opposition, wedged between left-wing advocates of accommodating the Soviet bloc and the anti-communist Democratic Labor Party, whose preferences helped prop up coalition governments.

The Cold War political climate reached its zenith in 1966 when Harold Holt, backed unashamedly by Democratic US president Lyndon Johnson, won one of the biggest landslide victories over the issue of Australia's involvement in the Vietnam War.  In this environment, for any Labor leader to challenge the prevailing wisdom by supping with the devil in Beijing was heady stuff -- the sort of thing that Sir Humphrey, the character from the BBC series Yes Minister, would have described as ''very brave, minister''.

Whitlam's visit culminated in a two-hour midnight meeting with Chinese premier Zhou Enlai on July 5.  On the previous day, Liberal prime minister Bill McMahon said the establishment of Australian diplomatic relations with Beijing was ''a long way off''.  Zhou was more interested in Whitlam's position on Australia's security alliance with the US as well as the Vietnam War.  Whitlam told his host that ANZUS was ''entirely defensive'' and that Labor supported the withdrawal of Australian and US troops from Vietnam.  Zhou naturally agreed and said he would welcome back Whitlam as prime minister.

The domestic response, initially, was hostile.  McMahon railed against this ''instant-coffee diplomacy'', warning that ''in no time at all Mr Zhou had Mr Whitlam on a hook and he played him as a fisherman plays a trout''.  One Liberal MP, Malcolm Fraser, said of Whitlam:  ''This man is a disgrace to Australia.''

But the Labor leader had the last laugh.  On July 15, Nixon revealed not only Kissinger's meetings with the same premier Zhou whom Whitlam had met days earlier, but that he, Nixon, would also visit China in early 1972.  Suddenly, the political ball game had changed.  Far from being demonised, Whitlam was lauded for his diplomatic decisiveness.  It was Whitlam who had played McMahon as a fisherman plays a trout.  The episode presaged Australia's recognition of the People's Republic of China in December 1972 when Labor took office, ending 23 years in the political wilderness.

Meanwhile, here was Nixon, whose rise to the presidency had been defined by his relentless opposition to communism, accommodating the very outlaw nation he had helped to ostracise since 1949.  During the early 1950s, the young senator endorsed Joe McCarthy's charge that treasonous US diplomats had ''lost China''.  In his television presidential debate with John Kennedy in 1960, he declared:  ''Now, what do the Chinese Communists want?  They don't just want [the offshore islands] Quemoy and Matsu.  They don't just want Formosa.  They want the world.''

And as a private citizen in the mid-1960s, he defended the US escalation of the Vietnam War on the basis that it represented a ''confrontation, not fundamentally between Vietnam and the Vietcong or between the United States and the Vietcong, but between the United States and communist China''.

The Sino-Soviet split, combined with the collapse of the Cold War consensus at home, provided ''Tricky Dick'' with an opportunuty to do a volte face.  But just as Whitlam's gambit led to a backlash from the right, so too did Nixon's China initiative.  William F. Buckley, the widely acclaimed patron saint of American conservatives, lamented:  ''We have lost -- irretrievably -- any remaining sense of moral mission in the world.''  Even Oscar-winning actor John Wayne deplored Nixon's China overture as ''a real shocker''.

Today, there is no denying the merits of the rapprochement.  It was probably the most significant foreign policy initiative since the launch of the Marshall Plan and the creation of NATO in the 1940s.

It set the stage for the development of two important bilateral relationships that continue to shape regional economics.  It also helped the Chinese move away from the nightmare of the Cultural Revolution.

By opening the door for China, Whitlam and Nixon helped open the eyes of a billion Chinese to the world.

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The world today, foretold by Nixon

''When we see the world in which we are about to move, the United States no longer is in the position of complete pre-eminence or predominance [and] that is not a bad thing.  As a matter of fact, it can be a constructive thing. ... We now have a situation where four potential economic powers have the capacity [to] challenge [the U.S.] on every front.''

So said Richard Nixon, 40 years ago today.  Addressing media executives in Kansas City on July 6, 1971, the 37th president predicted ''in 5 years, 10 years, perhaps it is 15, but in any event within our time,'' America's global hegemony would be replaced by a multipolar world, in which the United States, the Soviet Union, Western Europe, Japan and China would be leading powers.

Not only had the Soviets matched U.S. military might, the old cold warrior conceded, but Japan and Western Europe were competing vigorously with U.S. companies for markets.  The American Century had ended.

''I think of what happened to Greece and Rome, and you see what is left -- only the pillars,'' Nixon concluded somberly.  ''What has happened, of course, is that the great civilizations of the past, as they have become wealthy, as they have lost their will to live, to improve, they then have become subject to decadence that eventually destroys the civilization.  The U.S. is now reaching that period.''

Imagine if President Obama or leading Republicans today welcomed the end of U.S. pre-eminence and the rise of global multipolarity.  The American body politic would denounce them as declinists, defeatists, perhaps even un-American.  Yet Nixon's speech sparked no outrage in July 1971.

Nor was it an isolated incident.  A few months later, he told Time magazine:  ''I think it will be a safer world and a better world if we have a strong, healthy United States, Europe, Soviet Union, China, Japan, each balancing the other. ...''

Nixon's agenda reflected his nuanced world view:  détente and arms control with the Soviets;  the Guam doctrine in 1969 that emphasized limits to U.S. power;  the abandonment of Bretton Woods in 1971, thereby canceling the direct convertibility of the dollar to gold;  and rapprochement with China.  (As Nixon spoke on July 6, his national security adviser, Henry Kissinger, was secretly en route to Beijing to complete plans for the first presidential visit, which Nixon announced on July 15.)

Here was Nixon, a longtime champion of a Pax Americana, acknowledging what no president since has been willing to acknowledge:  that we live in a plural world and that U.S. power is past its apogee.

Instead of looking at the post-Vietnam world through the prism of American exceptionalism, Nixon and Kissinger envisaged it as an emerging multipolar system to be structured and regulated by a balance of power à la 1815 Congress of Vienna, the subject of the latter's doctoral dissertation.

''It is when one nation becomes infinitely more powerful in relation to its potential competitor that the danger of war arises,'' Nixon declared in language more reminiscent of Metternich and Bismarck than Truman and Kennedy.

The distinguished liberal journalist Walter Lippmann had spent much of the 1950s and 1960s railing against Nixon's strident anti-Communist views, but he caught the significance of the new Nixon.  ''His role,'' Lippmann recognized in 1973, ''has been that of a man who had to liquidate, defuse, deflate the exaggerations of the romantic period of American imperialism and American inflation.  Inflation of promises, inflation of hopes, the Great Society, American supremacy -- all that had to be deflated because it was all beyond our power.''

Reading the article in his White House daily briefing, Nixon noted:  ''Wise observation.''

Of course, Nixon's prediction about the end of U.S. global predominance was premature.  And his assessment of Soviet military power was exaggerated.  But he did recognize the limits to the U.S. role as world policeman in a multipolar system that is starting to become more evident.

Bloodied by quagmires in Iraq and Afghanistan, crippled by a $14 trillion debt and near-double-digit unemployment, shattered by swelling home foreclosures, the United States is struggling to impose its will and leadership across the globe.  Meanwhile, the rise of China, India and Brazil, taken together with the formidable presence of Japan and the European Union, suggests that power is becoming more diffuse.

In the past two decades, the accepted wisdom in Washington has embraced several expressions about the U.S. place in the post-Cold War world, from ''indispensable nation'' and ''sole remaining superpower'' to ''benign hegemony'' and ''A New American Century.''

Richard Nixon recognized the perils of such grandiose visions.  For U.S. foreign policy, the key word was not ''and'' but ''or,'' and the key question was not ''how'' but ''why''.  Democrats and Republicans could do worse than reflect on Nixon's remarks 40 years ago.

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The science is not settled

Ian Chubb says the climate change debate is not about politics but science.  Would that it were so.

But it is not that simple, for there really are two matters at hand, namely the science relevant to global warming and the principle of sound empiricism and calm rational thought to determine important affairs of state (politics).

Alas, in the public debate about global warming, these principles of sound science and sound governance have become entwined with political self-interest by well-funded lobby groups of both the ''save the world'' and ''let's make money'' variety.

First, the science.  The scientific method is a brilliantly successful technique for discovering, understanding and managing the world around us, born out of the fire of the European Enlightenment.

Sound science is based upon observation, experiment and the testing of hypotheses in the context of the principle of simplicity (often termed Occam's Razor).

The unvalidated computer models that now dominate the public face of climate ''science'' are a jungle of complexities, and represent speculative thought experiments not empirically tested science.

In support of these methods, the former director of the British Meteorological Office, Professor John Mitchell, has said that ''people underestimate the power of models.  Observational evidence is not very useful ... Our approach is not entirely empirical''.

The last part of this statement is only too true, and leads to the discomfit expressed by those such as the British engineering professor John Brignell:  ''The ease with which a glib algorithm can be implemented with a few lines of computer code, and the difficulty of understanding its implications, can pave the path to cloud-cuckoo land.''

Climate science is not primarily about modelling, albeit a powerful tool, but about testing hypotheses against key empirical facts, including:

• Atmospheric carbon dioxide is a mild greenhouse gas that exerts a diminishing warming effect as its concentration increases;
• We live in a carbon dioxide-starved world (levels 15 times higher having been reached about 500 million years ago and diminishing since);
• Carbon dioxide is a vital plant fertiliser;
• The world warmed in the earlier and latter parts of the 20th century;  and
• The world has cooled slightly over the past 10 years despite a 5 per cent increase in carbon dioxide.

These facts are consistent with the conclusion that enhanced levels of carbon dioxide are good for the environment, and do not cause dangerous global warming.

Professor Chubb claims:  ''Ross Garnaut has summarised the state of climate science in his recent report.''  But what Professor Garnaut in fact summarised were the official findings of the UN's Intergovernmental Panel on Climate Change (IPCC), an undeniably political body.  Professor Garnaut also said that IPCC views are supported ''by the learned academies of science [all disciplines] in all of the countries of scientific accomplishment''.  Which invites the obvious response, ''Well, they would say that, wouldn't they?''

The ''IPCC and most academies'' line is, of course, the argument from consensus, which raises the question:  When did you last hear a scientist say ''there is a consensus that the sun will rise tomorrow''?

Never, of course, for the very use of the phrase ''consensus'' in science tells you that a matter is not settled.  Global warming science is not just unsettled but profoundly uncertain and controversial.

Consensus is a political, not scientific, concept.  As Michael Crichton wrote:  ''There is no such thing as consensus science.  If it's consensus, it isn't science.  If it's science, it isn't consensus.  Period.''

Returning to real science, Professor Chubb said that when ''science is conducted properly, and interpreted after extensive, and critical, analysis, knowledge and understanding is increased and improved.  We shift [our views] or confirm what we think.''

Quite so, and nothing about consensus there.  But the problem remains of improper science, which is now widespread.

In particular, the IPCC -- which was set up to advise only on the climatic effect of human greenhouse emissions -- has shown repeatedly that it is not in the business of shifting its beliefs, whatever the evidence;  instead, facts contrary to its convictions are either ignored or neutralised by adjusting the models.

For example, the sun recently entered a quietude unknown since the Little Ice Age.  Accompanying this, planetary warming has ceased despite still increasing carbon dioxide emissions.  Some solar physicists have issued warnings that strong cooling may be imminent.

Has the IPCC revised any of its views as a result?  Fat chance.

Professor Chubb also points out the impossibility of waiting for certainty (Godot arrives more quickly) before setting climate policy, and the need for insurance against climate change, two points with which I entirely agree.

Good governance on scientific issues is based on the twin principles of prudence and do no harm, especially to society's most disadvantaged.  Everything that we know about climate change tells us that it is both dangerous and uncertain.  The appropriate insurance is a national policy based on preparing for and adapting to all climate events as and when they happen, irrespective of their cause.

If, instead, political pressure from lobby groups defeats contestable scientific advice, then Australia will get a swingeingly expensive, regressive and environmentally ineffectual carbon dioxide tax -- and live to regret it.

Failure is an Orphan

In any endurance sport, punters are unlikely to put money on a prime minister who swans around the nation in the back of a limousine over an opposition leader who annually pedals his way from Melbourne to Sydney for charity.

But if you believe recent Canberra gossip, Julia Gillard is spruiking her ''long game'' strategy that will reconnect her electorally with the western suburbs of Sydney and the entirety of Queensland.

And what's the central thesis to Gillard's argument?  That public opinion concerning her carbon tax will turn once the tax is implemented and supported by generous taxpayer funded compensation.  Then, the heat will be turned back onto Abbott and any plans to roll back the tax.

But Labor has made a core strategic error if, as identified by the Australian's Dennis Shanahan, it is ''implement[ing] a political strategy to once and for all deal with climate change as an issue and implement a carbon price''.

Unlike Gillard, John Howard had a tax he was happy to sell.  It simplified fiscal arrangements, was truly revenue-neutral and didn't go up annually.

But introducing a carbon tax won't put the screaming baby safely to bed.  On 1 July 2012, Gillard's carbon tax will be born at a likely weight of $20 per tonne of emissions and will celebrate its first birthday a year later with a rate growth spurt expected to be around 4 per cent plus 2 per cent CPI, taking it to $21.2 per tonne.

And at each carbon tax baby's birthday the rate compounds, so by age two it has already grown to nearly a hefty $22.50 per tonne.

Consequently, in the weeks leading up to the likely August 2013 poll, Gillard will have the awkward task of explaining that her broken ''no carbon tax under a government I lead'' commitment won't be replicated when she argues ''carbon tax compensation will increase every year''.

It begs the question of how taxpayers will vote after being fooled that Labor took the morning after pill once, let alone twice.

For the past few months Gillard and her climate change minister, Greg Combet, have quietly dropped revenue neutrality as part of their carbon tax narrative.  It's likely they have finally realised paying off nine out of ten households, trade-exposed industries and electricity generators won't fit neatly into the $11 billion they'll collect in the first year.

The window of public support has also snapped shut.  The latest Lowy poll into Australian foreign policy attitudes shows the public's support for cutting emissions has collapsed from 75 per cent in 2007 to a mere 46 per cent this year.

In part, the government is paying the price for Kevin Rudd's claim that the Howard government's failure to ratify the Kyoto Protocol was the barrier to taking action on climate change.  Rudd's support for ratifying the failed treaty was symbolism over substance, and left the Australian public unprepared for the true cost of emissions reduction.

Similarly unrealised hysterical ''scientific'' claims about climate change's impact and misleadingly rosy rhetoric about the outcome of the Copenhagen climate conference have further eroded public trust.  The lack of international political and economic will to cut emissions can only continue to harm the Gillard government's claims.

The recent Productivity Commission report concluded that Australia is carrying high carbon costs, and would have to remove existing climate change programs while introducing a carbon tax if it didn't want to steal Europe's self-flagellation carbon whip.

The Australian's Greg Sheridan sourced from Senior House Republican Jim Sensenbrenner that he thinks Australia's carbon tax is ''unilateral economic disarmament'' and the US won't be following suit.

At least there is an off-chance the Chinese might one day introduce an emissions trading scheme if they can find a way to profit from it.  But without similar economy-wide schemes, Australia is left trying to design a carbon price software package without the Chinese Windows and US Apple operating systems having been designed yet.

The problem is exacerbated without an international treaty negotiated to succeed the expiring Kyoto Protocol at the end of 2012.

Since the 2007 Bali climate change summit, governments have squabbled over extending the protocol or creating a long-term non-binding emissions reduction cooperative agreement.

The subsequent Poznan, Copenhagen and Cancun summits all failed to resolve this deadlock, and the 2011 Durban summit is also likely to leave a carbon tax at risk of being born a bastard.

But despite the shaky foundations of Gillard's tax, its introduction will foster rent-seekers to defend it.  A risk for Abbott is that the Press Gallery becomes bedazzled by industrial support for a legislated carbon tax when they argue business certainty will be undermined through its removal.

The problem is that the companies doing so are likely to be AGL, General Electric, Better Place and Pacific Hydro, all of whom have significant business interests in turning non-viable assets into profits if the government punishes their competitors through a carbon tax.

It's the reason these companies, with a smattering of others, recently released an open letter ''strongly support[ing] the introduction of a well-designed carbon price to support the transition to a low-carbon economy''.

Attacking Abbott's carbon tax rollback will actually play into his hands.  After all, doing so will keep the issue alive throughout 2012-13 as other government policies are debated.  Meanwhile, Abbott will seek to argue with the same legitimacy that every weather event is connected to climate change, and that any cost-of-living price rises will be the carbon tax's fault.

By that time, love for the carbon tax baby will have gone cold.  The public will more than likely want to see it put to bed.

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