Will US power plan put wind up Abbott?
Barack Obama this week set the political agenda for more than just the United States when he announced his clean power plan, targeting a one-third reduction in US emissions of carbon dioxide by 2030 from a 2005 baseline, principally by shifting power generation from coal to natural gas and renewables.
It will put the first limits on carbon emissions from power plants, forcing the shutdown of hundreds of coal-fired generators. The states will be set targets and asked to work out ways to achieve them, by switching to low-emission sources, cutting demand, and emissions trading. If they refuse, as several state governors are threatening, the federal Environmental Protection Agency will impose a program.
The Republicans are lining up against it already, along with state politicians in coalmining states and power industry groups. They have a legal challenge prepared, arguing that Obama’s plan exceeds the powers conferred by the Clean Air Act. The political argument for the plan comes on one side from wilder weather patterns, and on the other from the abundance of domestic gas, falling costs of solar panels, storage batteries and wind turbines, and employment opportunities in the new-energy economy against the already declining importance of coal. It will be a major theme of the US presidential election campaign next year.
With China increasingly likely to start cutting its carbon emissions ahead of 2030, Europe aiming for a 40 per cent reduction by then, and even the Pope calling for climate change action, the American policy removes the last cover for reluctant participants in the United Nations climate change conference in Paris in November-December, Tony Abbott’s government being the most glaring case among developed nations.
Obama is having less luck with another part of his legacy, the Trans-Pacific Partnership trade pact that would set rules with 11 other Pacific Rim countries, including Australia.
Projected as setting the field for the knowledge economy of the 21st century, talks in Hawaii last weekend stalled over protection for agricultural industry.
With the Nationals holding a pitchfork to his back, Trade Minister Andrew Robb had to dig in for more access to the US sugar market. The New Zealanders insisted Canada had to allow dairy access. There were more wrangles over cars and motor components involving other countries, at least a step up into the 20th-century manufacturing world.
But we are still left waiting for the shape of agreement on the 21st-century bit, particularly the extent of data protection for pharmaceutical discoveries. The US wants the other TPP partners to adopt its existing 12-year protection. They all oppose this, including Australia, which has a five-year data protection regime. The longer limit would blow out the cost of subsidising biologics that can cost up to $500,000 a patient while under protection from generics. Robb argues that changing Australia’s protection would be impossible to pass through the senate anyway.
The other big point of contention has been inclusion of an investor-state dispute settlement (ISDS) mechanism, whereby foreign investors can take host states to arbitration over later changes to regulation that affect them adversely. It has finally emerged that Robb’s team is seeking a “carveout” for the various federal health insurance and pharmaceutical schemes, and he’s talked of a wider carveout for “public policy on health and the environment”. But it’s unclear, even if Robb gets Australia’s position accepted, whether this would head off challenges such as the Philip Morris suit against Australia’s cigarette plain-packaging law using an ISDS clause in an old free-trade agreement with Hong Kong.
At least Robb has plenty of allies with a bid to discourage foreign investors from trying it on too easily in ISDS arbitration. According to The New York Times, Australia is among the 11 countries lined up against the US with a proposal to include a clause that their courts can force a company that “abuses enforcement procedures” to compensate a party “wrongfully enjoined or restrained” if a case is lost. With the cost of defending the Philip Morris case in a Singapore panel reaching a reported $50 million, that would be something.
The smokescreen is an old naval manoeuvre that lost its usefulness when radar arrived. But it’s still valuable in political warfare, as Abbott showed when he rushed down to Adelaide on Tuesday after his cabinet signed off on a long-term naval shipbuilding program to be centred in South Australia.
His announcement was that South Australia would build replacement fleets of 10 patrol vessels from 2018 and eight anti-submarine frigates from 2020. All good pork-barrelling to save the seats of worried South Australian Liberals, and to hell with the torpedoes from shipyards in Melbourne and Newcastle that lose out and will probably close.
This is almost certainly cover for a decision that the Royal Australian Navy’s future submarines will be built overseas, with Adelaide’s existing submarine and shipbuilder, ASC, getting some of the fitout and through-life maintenance. Abbott was poised in January to announce that Japan’s Mitsubishi and Kawasaki shipyards would get an order to build versions of the Japanese navy’s Sōryū-class submarines for the RAN. Then with South Australian colleagues joining a caucus groundswell against him, Abbott backed off and announced a “competitive evaluation process”.
This week Abbott repeated that three submarine builders in Germany, France and Japan had been asked to submit options for a local build, a hybrid build, and construction entirely offshore. “What we have announced today does not preclude any of the options in respect of submarines,” Abbott said.
Canberra defence circles think the process is tipped in favour of the Japanese bid. Though the Sōryū has the size and propulsion sought by the navy, questions remain about its long-distance range and how US combat systems could be fitted. Some experts think all three contenders for the contract should be funded to undertake substantial work on design before a decision is made. As it is, a contract now being priced at $49 billion for purchase and maintenance is being decided on little more than brochures in the case of the German and French proposals. At least the Japanese have an existing submarine to show.
But in naval glory and fawning on British royalty, Abbott has met a fierce opening shot from New Zealand counterpart John Key ahead of the November visit of our future king and queen, Charles and Camilla.
This week Key announced that Prince Charles would be installed as admiral of the fleet of New Zealand’s two-frigate navy, field marshal of its 4300-strong army, and marshal of its air force, which has maritime patrol and transport aircraft and helicopters, but no air combat wing. Can another captain’s call, on the lines of the Australian knighthood for Prince Philip, be resisted by our prime minister?
This article was first published in the print edition of The Saturday Paper on Aug 8, 2015 as "Will US power plan put wind up Abbott?". Subscribe here.