Alan  Pears (and Macchiavelli): those who fear change are loud, while those who aim to profit from change quietly and strategically reposition themselves

– By Alan Pears –

I thought this issue had been resolved in 2000, when it was extensively debated. But it seems to have re-emerged.For some it is a serious debate. For others it’s yet another convenient way to delay action on climate change.

Only about 1000 entities will be actively involved in an emissions trading scheme.

So the reality is that for the bulk of Australian business and households, a trading scheme will effectively be a tax. Liable Parties will pass through permit costs with the same effect on their customers as a tax.

And, in most cases, it will be a small tax: Treasury estimates the impact on CPI of around 1 per cent. And for many businesses for whom energy is only 0.5-2 per cent of input costs, the predicted energy cost increases are ‘in the noise’.

So the core issue is how a tax or trading scheme affects Liable Parties.

Much discussion has occurred on the economics of the options. But what is at least as important is the psychology of business response.

Past experience shows that when most Australian businesses see an issue as a problem and as a compliance issue, their response is weak. They do enough to manage it. When they see an opportunity to advantage themselves relative to competitors, gain strategic benefit, and reduce risk, they are much more engaged.

An emissions tax is a weak motivator. It’s just another predictable business overhead that will be factored into business decisions. A trading scheme is quite different psychologically.

First, it involves variable risk. The price may vary, so flexible strategies must be developed, and constant vigilance is required to manage the risk. This necessarily focuses the organisation on climate issues in a way that a tax doesn’t. So far we have seen this in the form of hysterical and aggressive efforts by high emitters to argue that their worlds will end. But there is a lot of quiet work being done to manage the risks, and to transform them into opportunity.

That’s the second point: a trading scheme involves opportunity. The smart businesses will work out ways of not just minimising the costs, but creating business opportunity.

This may be through building reputation, or driving innovation to combine emission reduction with improved or changed products or services.

If our aim is to transform our economy, then my preference is a trading scheme over a tax. Our leaders just need to remember the observations of people like Macchiavelli: those who fear change are loud, while those who aim to profit from change quietly and strategically reposition themselves. And, in any case, those who are loudly complaining are very likely to be working on contingency strategies to advantage themselves if they fail to gain the concessions they seek.

Alan Pears is winner of the Centenary Medal for contribution to climate change and environment policy in 2003 and currently Adjunct Professor at RMIT