InSight | June 2008 edition

Photo: Powerhouse Museum.

Climate Change and Human Rights

Climate change has been increasingly in focus in the national policy agenda with the establishment of a number of government departments at both the State and Federal level mandated to respond to climate change. Despite these advances, climate change continues to be viewed primarily through an ecological or economic lens, with the social and human rights implications of climate change receiving little recognition.

Yet the human costs of climate change directly threaten internationally accepted human rights: rights to life, to food, to a place to live and work. As Kyung-wha Kang, the UN Deputy High Commissioner for Human Rights has stated:

Global warming and extreme weather conditions may have calamitous consequences for the human rights of millions of people...ultimately climate change may affect the very right to life of various individuals...[countries] have an obligation to prevent and address some of the direst consequences that climate change may reap on human rights. (1)

Indigenous communities in Australia are also significantly affected by climate change, due to their close relationship with the environment. Friends of the Earth International have predicted that northern Aboriginal communities will bear the brunt of climate change, with more than 100,000 people facing serious health risks from malaria, dengue fever and heat stress, as well as loss of food sources from floods, drought and more intense bushfires.

Climate change and human rights are further intertwined because of the potential of climate change to exacerbate existing threats to human rights. The impact of climate change is that it increases people's vulnerability to poverty and social deprivation. Populations whose rights are poorly protected are likely to be less equipped to adapt to climate change effects.

These consequences mandate a response. Recognising this, governments have been providing support for affected communities to adapt to the impact of changing conditions. In one sense, adaptation measures are already focused on protecting human rights, even if they are rarely articulated in such terms. For example:

However, adaptation measures themselves can have a detrimental impact on human rights and exacerbate already existing social inequity. At the Equity in Response to Climate Change Roundtable 2007, Australia's peak environment and welfare groups highlighted that low-income and disadvantaged people will not only be at the forefront of climate change impacts, but also may be disproportionately affected by the adaptation measures designed to minimise the risks associated with climate change. For example, shifting energy sources to low carbon alternatives is likely to increase the use of minimum energy performance standards for electrical appliances, cars and buildings. Pricing carbon into energy means unit costs will rise. The most disadvantaged will struggle to live with increased costs.

The challenge in the climate change debate, therefore, is to find a way to equitably distribute responsibilities and rights. What, then (if anything) does human rights discourse offer governments when developing appropriate responses to the impacts of climate change? This is a question that the Australian Human Rights and Equal Opportunity Commission (HREOC) considered in its Background Paper Human Rights and Climate Change. And the answer, it appears, is a lot.

In essence, a human rights-based approach to climate change refocuses and re-centres the debate on individuals and communities. By viewing climate change through a human rights lens, the question is framed in different terms. Interpreting scientific predictions become a matter of asking who: who is likely to suffer what and why?

Image: Thomas Hawk

By focusing on individuals as rights-holders, a human rights-based response places responsibility on governments to allow participation and input from affected members of society into the development of climate change policies. This means making specific channels available for the participation of the poorest and most marginalised groups in the community, with sensitivity to social and cultural context. At a procedural level, this approach requires transparent and participatory decision-making, implementation, monitoring and evaluation. For example, if it was necessary to forcibly relocate communities in disaster or flood-prone areas, a human rights-based approach to such a policy would require a thorough and proper consultation with the affected communities to ensure that its impact was proportionate.

Beyond these procedural benefits, a human rights-based approach would also guide policy makers on the substantive elements of adaptation measures, by providing core minimum human rights standards that guide decision-makers when weighing competing demands on limited resources. The general comments of the United Nations human rights treaty bodies are relevant here. To take one example, in accordance with General Comment 15 of the Committee on Economic, Social and Cultural Rights, the relocation of a community would have to ensure that the minimum requirement of fresh water (currently calculated by the World Health Organisation at 7.5 litres per day) would be available to every adult and child. That water must be physically and financially accessible to all, without discrimination on the grounds of sex, age, or economic or social standing, and without threatening personal security when the water is obtained.

The HREOC paper identifies areas where a human rights-based approach can make a positive contribution to the development of climate change responses. Specifically, it looks at domestic adaptation measures, aid for overseas adaptation and disaster management. It also examines what a human rights based approach to ‘climate change refugees' would look like. Without providing immediate answers, the paper aims to provide the tools for advancing policy in these areas as those policies evolve.

(1) Laura MacInnis ‘Climate change threatens human rights of millions: UN.' Reuters, 19 February 2008.

Emissions Trading: Good Governance Requires 100% Auctioning

Every day seems to bring demands from yet another industry group or large corporation saying they should be compensated for the introduction of a national Emissions Trading Scheme (ETS). The usual argument goes that to refuse compensation would penalize these industries and their shareholders unfairly, and send a chill message to potential future investors.

In truth, such claims have little merit. However, it's hardly surprising that industry players are making the ask - governments are proven suckers when it comes to emissions trading. The EU ETS (the world's first and largest emissions trading scheme) initially gave almost all its permits away to large emitters, free, as compensation for the impact of introducing the scheme in the first place. Typically these corporations promptly charged their customers the full market permit price and pocketed the difference. So while the EU ETS may not have had much impact in reducing greenhouse emissions, it has certainly delivered extraordinary windfall profits to many of the EU's largest emitters, especially electricity generators.

The EU now seems determined to enforce 100% auctioning of permits for the electricity sector as soon as possible, while the key States in the US Regional Greenhouse Gas Initiative Scheme (an initiative starting in 2009) have also mandated 100% auctioning.

In Australia, the clearest case for 100% auctioning has been made by the Garnaut Review. They note that giving large emitters free permits will almost certainly have adverse equity impacts - as seen in the EU. Auctioning all permits, instead, makes government revenue that they can use to compensate those most in need of support - households, communities in painful transition and some Trade Exposed and Energy Intensive (TEEI) industries competing against international producers that do not face an equivalent carbon price. For its efforts, the Review now finds itself under attack from a growing number of industry players and the occasional State Government.

In truth, however, Garnaut has (if anything) understated the adverse impact of compensation for large emitters by arguing that compensation is largely an equity issue - who pays and who profits. In practice, compensation will also have an impact on the cost-effectiveness emission reducing scheme. Firstly, it puts the focus of industry players on trying to maximise their compensation rather than finding new and cheaper ways to reduce their emissions, encouraging the 'victim mentality'. Even more importantly, compensation for large emitters risks undermining the good governance that is essential to deliver an effective ETS.

"Compensation" is generally understood to mean righting a wrong or imposition placed upon some party. Putting a price on emissions doesn't represent an additional imposition on emitters, but rather, the removal of a public subsidy. Emitters have been knowingly receiving this subsidy since at least the Rio Declaration in 1992. The public actually has a pretty good case for reparations from those industry players that played a role in delaying action to end this subsidy through their lobbying and other efforts.

Furthermore, arguing that introducing an ETS without compensation will have an adverse impact on investor confidence in good governance has it the wrong way around. Large emitters are typically owned by investors through their shareholdings. Most investors over the last decade have made the judgment that climate change is a problem, and that ‘polluter pays' policies were coming. Presumably, some other investors have judged that there wasn't a problem or, worse, that governments would inevitably yield to corporate demands for so-called compensation. Paying such compensation therefore rewards the wrong group of investors - those taking a bet against good governance.

As for industry leaders, governments should be supporting those trying to do the right thing. If good corporate citizens see others being rewarded for claiming victim status they are almost obliged to attempt the same thing. After all, when governance is weak you'd better be at the table in Canberra or you'll probably end up on the menu.

And what of the public? If governments can't stand up to unreasonable demands for compensation then people have every reason to question its ability to respond effectively to the climate change challenge. Public cynicism and disengagement are a likely and understandable outcome.

For all these reasons, a Federal Government decision for 100% auctioning of permits is one of the key decisions on which their wider policy success lies. It will provide revenue and a more equal platform for those who really do need help in the transition to a carbon constrained Australia. If such a decision is beyond Government, we can't expect even good corporate citizens to waste time thinking about how to reduce their emissions - they'll all be booking their tickets to Canberra to fight for a seat on the gravy train.

Fencing Wire and Mirrors: the World of the National Energy System

The National Electricity Grid and Market: The Basics

You go home in the evening, in Rockhampton, say, and turn on the light. There is a tiny flicker in Whyalla and Hobart and Narranderra and everywhere else around the national power grid - the system of energy suppliers and wires and pipelines and switches running pretty much across the nation.

How big is the national grid? Since the late 1990s the grid covers everyone from far North Queensland down through the eastern states to Tasmania, and across to South Australia, well over four thousand kilometres. Western Australia and the Northern Territory, so far, have independent systems because they are a bit too far away.

What's in it? Over thirty major power generating companies, with over a hundred power plants, mainly coal-fired or gas-fired turbines. Twelve companies run networks of transmission lines on the steel towers you see striding across the country. Sixteen local distributors and retailers use the poles and wires in our streets to transfer it from the big towers into our houses, and then send us the bill for it all.

How is the whole thing managed? With difficulty, the whole system is kept in balance by the central operator, NEMMCO (the National Electricity Market Management Company). Every disturbance - whether it is you with your little switch, a storm in Queensland, a fire in Victoria or a run on air-conditioners on a hot summer afternoon - is absorbed. The signaling system that NEMMCO uses to keep everything in sync is called the National Electricity Market, the NEM. Generators - the people who make and sell the electricity - and retailers - the people who buy it from them and sell it to consumers - tell NEMMCO what prices they will sell and buy for, every minute of the day, using an auction system, rather like the Stock Exchange. It has to be in balance every second because electricity can't be stored in grids. You can't put some aside for a rainy day when you have more than you need and use it later when you have too little.

That's it, briefly. A more precise description would take several hundred pages and lots of math, as the Americans say.

Why a National System?

Until the 1990s, Australia had a series of separate regional power grids. We now have a system linked almost across the nation - a system which, when well managed, is cheaper and more reliable. In the late 1980s, governments finally came to see that the existing State monopoly power commissions were amazingly inefficient and hungry for great gobs of capital for new power stations and coal mines. The greater reliability of a connected system is just as important as the cost savings. With a national grid and a national market, it is possible to provide softer cushions against natural or man-made catastrophes: a spiraling cyclone, a stinking hot afternoon (one of the worst risks), the collapse of a transmission tower, or, to take a gloomy view, a terrorist attack.

So it is hardly surprising that State governments should have looked for a new way to keep the lights on. Of course, when talking to their voters back home, they still kept assuring their constituents - and still do - that they were looking after their power, that they were making sure that their State's power supply is in good shape. The fact is that now all of the connected States rely upon each other and NEMMCO, to keep the whole show firing.

As a result, much the same amount of base generating capacity can meet our needs now as twenty years ago. And, when precarious episodes have arisen, the wizards at NEMMCO managed to keep the system up, and you, good citizens, probably neither heard nor worried about it.

The Fencing Wire and Pliers

In the early 1990s, with a national system now technologically possible, economically cheaper and socially more secure, governments faced a constitutional question: is it legally possible? A national electricity system wasn't an option considered by the writers of the Constitution. There were no Commonwealth powers allocated for this, so what was to be done? Improvise, came the call. Out came the great tools of Australian innovation - fencing wire and pliers.

Officially, it was part of ‘Creative Federalism'. This was the name given, you will recall, by Paul Keating, and taken up with gusto by John Howard and now by Kevin Rudd, to a new method of Commonwealth/State relations whereby the legal and regulatory systems of our engagingly diverse communities would be brought into greater ‘harmony'. The very first cab off the rank was the National Electricity Market, the NEM. It had pride of place in the first couple of meetings of COAG and has hardly been heard of since.

There were, however, problems in getting it all together. One law covering all that was needed couldn't be passed by the Commonwealth, because the Constitution didn't allow it. And at any rate the States wouldn't accept it. They were jealously guarding their energy assets, which were, in fact, milch cows, each year providing steaming flows of public revenue.

Bring out the fencing wire and the lawyers. The energy ministers of each State and Territory, and the Commonwealth, could agree on a draft bill establishing a set of rules, a central operator (NEMMCO) to manage the show, and an administrator to oversee the regulations. Each government could pass the bill without amendment and the scheme could be run as though it really was a national system. Such legislation, identical in all jurisdictions, is called template legislation. It had been used before for other, relatively minor matters, to bring regulation into ‘harmony' across the country.

A neat trick - except there was a snag and, wouldn't you know it, it was the South Australians. Years ago they decided that they wouldn't pass or even consider template legislation. In this case they would only come to the party if they could debate and vote on the legislation before anyone else did. If they passed it first, they judged that it would be original, not template, legislation. Even then, for the scheme to work, the South Australians had to agree that the South Australian Parliament wouldn't amend the draft that the other Ministers had agreed to. A bit more fencing wire was unwound, but in the end everyone signed.

South Australia could have the debates and voting and all that carry on, and everyone else, including the Commonwealth, would pass what is called an Application Act. All the pollies could get around a table somewhere, agree on the exact terms of the new electricity law for a linked, centrally administered system, and South Australia would pass it. All the others would then pass their own Application Acts making the South Australian electricity law, which is called the National Law, also the law of each of the other States or Territory. No sweat.

And Now the Mirrors

Not only that - watch this one: those Application Acts also provided that if the South Australians amended the law at any time, after agreement with all the other jurisdictions, then those amendments would apply everywhere else, without further debate in any of the other Parliaments, including the Commonwealth. So that's what they all did, back in 1997 and 1998, with very little worry anywhere, because everybody thought it was such good housekeeping. If all the energy ministers wanted something changed, the South Australians would obligingly amend their law and it would automatically come into force in all the other jurisdictions.

Every so often the minister responsible in South Australia gets up and fires the starting shot for something new. Adelaide passes it, sometimes with a few squawks from Democrats or Libs or Nats then all the Application Acts click home and the system changes. And so it has gone: amendments to the South Australian National Electricity Law, wholesale changes to the way the system is run. There have been far too many changes even to list here.

On 9 April 2008, Mr Condon, the Energy Minister in the South Australian Parliament, introduced the National Gas Law - yes, a South Australian national gas law:

The Government is again delivering on a key energy commitment through new legislation to improve the governance arrangements for the regulation of natural gas pipeline services, for the benefit of South Australians and all Australians.

And he went on to outline a vastly complex and important new legal and economic system for gas access modeled, as he said, "on the changes made to electricity regulation in the 2005 and 2007 amendments to the National Electricity Law". Application Acts in other Parliaments were duly passed, with the same provisions as for electricity that the South Australian law could be amended without debate of the issues in other Parliaments, including the Commonwealth.

Here is part of what the NSW Parliament's Legislation Review said about the National Gas (New South Wales) Bill after it was introduced on 11 April:

What appears remiss in the scheme is the absence of any realistic scrutiny role for the NSW Parliament... Although the NSW Parliament has the present Bill before it there is no scope to debate the need for any modification of the National Gas Law as it has already been signed off by all parties including NSW.

Exactly. We have all been disenfranchised.

Some constitutional lawyers, including most (but not all) of the official ones, think this is legally OK. Some don't. There's been no High Court case to test it yet. But don't let us get confused. Whatever the lawyers might say about it, we - you, me, all of us, even the South Australians - have been dudded on democracy. Do you think they would use this malarkey for, say, a national child care system, or a national medical scheme? Of course not - the mums and dads would be in the streets. But in as crucial an area of policy as energy, they use it because they think it's too technical for the punters to notice.

Another Way?

What if, one day, the government of South Australia changes and won't play ball, or another government decides there is something it doesn't like? What if, when Professor Garnaut walks in with his report on what is to be done about climate change, the Commonwealth decides that it is really going to set up an Emissions Trading Scheme and do other things to reduce greenhouse gas emissions? The energy laws and the NEM will have to be changed, and generators and networks and retailers will have to do things differently, and we all might have to pay more. There'll be many ructions. Are we all going to sit on our hands while whatever is needed is debated and perhaps passed in South Australia?

Don't get me wrong - if anyone is going to make up my mind for me I couldn't imagine anyone better to do it than a South Australian. But you get the point, don't you? We've been disenfranchised. Full credit for ingenuity to the legal eagles, the sparks engineers, the hard men of the public service who got the system up. This is no way to run a national energy system, or a nation.

Is there some alternative? For several years, governments have been moving towards what they call national regulation whereby, under cooperative arrangements between the States, Territories and Commonwealth there will be central bodies administering all the laws and running the market. At present the individual jurisdictions still decide on quite a lot - what bills you pay, for example; but, under what is proposed, the central bodies will run the NEM completely. Some lawyers think that, now, following a fairly recent decision of the High Court, it wouldn't be too difficult legally for the Commonwealth, under the corporations power of the Constitution, to take over those bodies, and policy, and thus the whole caboodle. The Feds wouldn't own the assets, of course, but many, including the States, would regard it as a power grab, no pun intended. You can see the headlines now. But at least then we would have the national power system we need, the issues would be debated in Canberra for everyone to hear, and we'd all get a chance of voting on them when the Federal elections came around.

More About the Author

Professor Gavan McDonell has directed four public enquiries for State and Federal governments, including the NSW commission recommending, as subsequently implemented, abandonment of planned power stations worth $12 billion, restructuring of the power industry and development of linked regional markets. He designed the economic principles for the NEM's Ancillary Services Markets, probably the world's first, and gave the National Electricity Tribunal decision which resulted in the rewriting of the ACCC's regulatory test of major network investment. With long international experience, including as a former senior investment banker supervising energy and transport investments in the Caucasus and Central Asia, he is currently advising on Asian energy markets research. See also: Gavan McDonell.

A Just Transition

Climate scientists are saying that global warming, as evidenced by melting polar ice caps, is worse than predicted by the Intergovernmental Panel on Climate Change and that global emissions must peak by 2015 if climate chaos, and resulting human social chaos, is to be avoided. Government policy needs to be driven by this science, not by political and economic expediency, no matter how challenging the transition to a clean energy economy might be. The Garnaut Review needs to rise to this challenge if it is to drive energy futures towards sustainability.

Yet as the global warming threat grows, many Australian political leaders remain under the spell of the coal industry and its ‘greenhouse mafia'. Indeed, despite the obvious risks some are still advocating new coal-fired power stations and a massive increase in coal-exports. The federal and state governments are gambling that carbon capture and storage (CCS) technologies will save the industry, even as growing numbers of experts note that this technology is likely to be too little, too late and too risky to be commercialised and installed widely enough to make a difference in the short window of opportunity needed for action. They are throwing billions of dollars in subsidies towards CCS and the mythical ‘clean coal' at the behest of the industry.

Meanwhile investment and incentives for markets for renewable energy and energy efficiency technologies in which Australia could be a world leader are being seriously frustrated.

Tackling climate change means our dependency on coal as an export earner and as a domestic fuel must be phased out over the next decades, rather than ramped up. This will mean a huge change in the national economy, and for coal-affected regions such as the Hunter and Latrobe Valleys. The challenges associated with this change are significant, but not insurmountable. Indeed, a transition to clean, renewable energy promises to revitalise Australian manufacturing and create thousands of new jobs in many rural, regional and urban communities.

Environmental organizations and labour unions refer to the process of economic restructuring from non-sustainable industries to a sustainable economy as a ‘Just Transition'. A just transition links ecological sustainability with issues of work, equity and social justice. A just transition process recognises the needs of both current and future generations for safe, secure and satisfying jobs. Participants in a just transition seek to build collaborations rather than conflict, and in particular, to avoid a false ‘jobs vs the environment' conflict. A just transition is needed to ensure that the costs of change do not fall on vulnerable workers and communities

The Canadian Labour Congress (CLC) was a pioneer in the theory and organizing around the just transition concept and noted in their report, Just Transition for Workers During Environmental Change(2000), that:

"Just transition will ensure that the costs of environmental change will be shared fairly. Failure to create a just transition means that the cost of moves to sustainability will devolve wholly onto workers in targeted industries and their communities."

The CLC also noted in this report that Green job creation - secure, stable, quality jobs which are clean, healthy and stress-free - is the flip side of a just transition.

The Australian Council of Trade Unions in their 2007 position paper on global warming also noted that a just transition is needed to deal with the challenges of climate change, and this requires new partnerships of the labour movement and other sectors, including government, industry, local communities and training providers to retrain and re-skill workers into jobs in the renewable energy industry.

The ACTU policy recognises the tremendous potential of renewable energy to create additional jobs in development, installation and operation phases:

Increasing the share of renewable energy in the total energy mix is possible without damaging existing industry and with continuing growth in high quality jobs, as the EU experience demonstrates. (1)

A just transition to a renewable energy economy is possible, based on currently-available low-risk energy efficiency and renewable energy technologies (solar, wind, geothermal, hydro and biomass) with gas as a transitional fuel. Research shows that these technologies can meet energy needs in Australia and the developing countries of our region (2). Renewable energy systems are more resilient and flexible than big centralised coal-fired power stations which require massive investment in a single piece of infrastructure that creates a supply, rather than demand-driven energy market. Renewables' flexibility comes through the technologies being decentralised to multiple sites where solar, wind and geothermal resources are available - often in rural communities where investment and economic revitalisation is urgently needed.

Shifting investment towards energy efficiency and renewable energy industries would revitalise Australian manufacturing industry and create many more new jobs than in current fossil fuel industries per dollar invested. Installation of solar hot water systems and insulation in households and workplaces would cut carbon emissions, create jobs and reduce energy bills, and particularly assist low-income households.

A report, A Bright Future: 25% Renewable Energy for Australia by 2020, commissioned by the Australian Conservation Foundation, Greenpeace and the Climate Action Network Australia (CANA) found that a 25% renewable energy target by 2020 would deliver 16,600 new jobs to Australians, as well as generating $33 billion in new investment and enough renewable electricity to power every home in Australia.

A just transition needs government interventions - setting environmental goals and establishing regulatory frameworks, market incentives and regional development support. Research (3) on successful green industrial restructuring processes in Europe have identified key policies as including:

This is all possible in Australia's coal communities. Active government intervention that anticipates and plans for change, provides education and training, and invests in infrastructure for industries of the future in coal communities will offer pathways to sustainability, rather than leaving coal communities' environments degraded and economies locked into dinosaur technologies.

Coal communities need alternative employment opportunities in well-paid, secure and satisfying jobs. Workers in transition between jobs need redundancy entitlements, income maintenance and opportunities for retraining tailored to individual skills, needs and local opportunities. Workers who relocate to seek work elsewhere should receive relocation assistance. Research shows that workers with less formal education, older or disabled workers need special targeted support.

The Garnaut Review has the opportunity to identify energy policies that can respond to the global warming threat and drive a just transition to a sustainable energy economy. The Review needs to support:

A shift to a renewable energy economy would revitalise Australian manufacturing industry and create thousands of new jobs, including in coal communities. Renewable energy and energy efficiency technologies could be boosted if governments:

A moratorium on new coal-fired power stations and on extensions to existing coal fired power stations, and a phased withdrawal of existing coal-fired power stations - beginning with the most polluting - is needed, matched by a shift in investment to alternative clean energy technologies

Energy security can be achieved in Australia and globally by investing in energy efficiency and renewable energy, with gas as an interim fuel. A switch to clean energy-based economy in the Hunter Valley and other coal communities, and in Australia's global energy markets, can provide thousands of new Green jobs while protecting local and global environments. Green-labour alliances can inspire the broad-based community campaigns needed to make a just transition to renewable energy and new Green jobs.

References

(1) Australian Council of Trade Unions (ACTU) (2007) Principles and Policy on Global Warming: ACTU Position Paper. Melbourne, Australia: ACTU, p. 6.

(2) Teske, S., Zervbos, A. & Schäfer, O. (2007) Energy (R)evolution: A Sustainable World Energy Outlook. Greenpeace International, European Renewable Energy Council; Mallon, K., Bourne, G. & Mott, R. (2007) Climate Solutions: WWF's Vision for 2050, Gland, Switzerland, World Wildlife Fund.

(3) Binder, M., Janicke, M. & Petschow, U. (Eds.) (2001) Green Industrial Restructuring: International Case Studies and Theoretic Interpretations, Berlin, Germany, Springer

See also:

Energy (R)evolution scenarios have also been developed for 10 global regions, based on the International Energy Agency's breakdown of world regions, as used in the ongoing series of World Energy Outlook reports, including China, East Asia, South Asia, Europe, North America and OECD Pacific (Japan, South Korea, Australia and New Zealand). A Clean Energy Scenario specifically for Australia is forthcoming.

Brofenbrenner, K. and Juravich, T. (1998) It takes more than house calls: organizing to win with a comprehensive union building strategy, in K. Brofenbrenner, K. Friedman, R.W. Hurd, R.A. Oswald and R.L. Seeber (Eds), Organizing to Win: New Research on Labor Strategies. Ithaca, NY, USA: ILR Press.

Reiss, J. (2005) Social Movement Unionism and Progressive Public Policy in New York City, Just Labour, Vol. 5, pp.36-48.

Tattersall, A. (2005) There is power in coalition: a framework for assessing how and when union-community coalitions are effective and enhance union power, Labour and Industry, Vol. 16, pp.97-112.

United Nations Environment Program, World Health Organisation, International Labour Organisation (2007) Labour and the Environment: A Natural Synergy. Nairobi, Kenya: UNEP.

Competition: Too Much of a Good Thing?

In last month's edition of InSight, I suggested that the notion that more choice is always better can be taken too far. Too much choice can overload our capacity to choose wisely, and there are markets, such as education, where expanding choice for some means constraining choice for others. There are other markets, such as electricity and health insurance, where there is "choice" without variety.

Expanded choice results, in part, from our economy having opened up to expanded competition - an expansion resulting from deliberate public policy. It is useful, therefore, to ask whether competition policy has been pushed past the point where it confers net benefits.

Older Australians remember an era of much less competition. Buying a washing machine or a television didn't require much search, for all retailers offered the same price - a price set by the manufacturer or importer, with the threat of refusal to supply retailers who discounted. International airfares were set by the International Air Transport Association, while domestic fares were set within the Two Airline Policy. The Commonwealth Government, armed with tariffs and import quotas, was vigilant in protecting us from access to cheap clothing, cars and electronics. And to make sure we didn't shop around too much, state governments enforced restricted trading hours; anyone with a full-time job had a window of two and a half hours on a Saturday morning to do a whole week's shopping.

Image: Thomas Hawk

It was not until 1974 that Australia got its first Trade Practices Act, outlawing, among other practices, collusive pricing and retail price maintenance. In 1995 the Commonwealth and states got together to endorse a national competition policy, which committed governments to remove most remaining constraints on competition. It is notable that both these moves, aimed at promoting market competition, were the initiatives of Labor governments.

There is no question that we have benefited from these reforms. But have they gone to the point that there are diminishing, or even negative returns? Does all competition bring benefits, or are there some areas where the costs outweigh the benefits?

Competition policies, enforced by Commonwealth and state regulators, can outlaw practices such as collusion and overt deception, but these safeguards, in themselves, do not ensure consumers enjoy all the benefits competition is supposed to bring. These regulations are aimed mainly at ensuring suppliers compete with one another and that they are truthful in their claims - but there are many other conditions to be met before consumers enjoy the full benefits of competition.

The main demand side condition to be satisfied is that buyers are well-informed as to the price and quality of goods on offer. In some markets this happens with only a little nudging from the regulators. In supermarkets prices are posted, foods have ingredient labelling, and a poor purchase is not very costly; one can switch brands on the next visit. A product like superannuation presents a different situation: prices (mainly agents' and fund managers' commissions) are opaque; comparisons are difficult, and by the time one realizes a bad decision has been made, it is usually too late. In these markets regulators can (and do) require firms to disclose information, but that in itself is problematic, for the more information is provided, the more difficult it is for people to compare offerings.

Competition authorities, such as the Australian Competition and Consumer Commission (ACCC), generally prohibit false claims by suppliers. A company cannot lie about its products, and there are prohibitions on deliberately misleading claims, but there are many grey areas where suppliers can exploit known consumer biases.

For example, a "98% fat-free" claim carries a different message from "2% fat". A $100 cashback offer on a $900 appliance is more attractive than a straight offer of $800. Fear is used to sell insurance - often far more insurance than consumers need. Marketing experts know the efficacity of immediately attractive offers with later costs pushed into the background - "teaser" rates on credit cards and repayment holidays for major appliances. Competition policy in Australia, as in many other countries, has tended to focus on ensuring firms are competing and are not engaging in outright deception, but they have been slow to intervene where firms deliberately exploit consumer biases.

Sometimes the wrong sort of competition thrives in markets. In the financial services sector, for example, firms often use commission-based selling. The salesperson (glorified with names such as "financial planner" or "insurance broker") is rewarded on the basis of the value of product he or she sells, rather than the quality of the transaction. In large part such overselling has been responsible for the present subprime mortgage problems. Mortgage brokers competed vigorously to transact mortgages; they were concerned simply to sell as much as they could, rather than to sell profitable business. Banks and other financial institutions had taken their eyes off the road, for they were seeking growth ahead of profit. In the economists' pure model, firms compete to sustain profitability, but when firms compete to maximize market share, to grow, or to benefit from political favours, consumers are usually worse off.

In some cases vigorous competition can deliver price reductions, but with sacrifices in quality. Airlines provide a case in point. In the US, ever since the Carter Administration deregulated airlines in 1978, there has been intense competition in the industry, and, on some routes at least, there have been steep price reductions. But over the last twenty years indicators of customer dissatisfaction - number of complaints, number of passengers bumped, lost bags, cancelled flights, delays - have risen steeply.

In most competitive markets poor quality suppliers are weeded out by consumers switching to other suppliers, but this is difficult in airlines. Most people do not fly often enough to establish reliable experience, and even frequent travellers find it hard to judge - "was that five hour delay at Dallas due to weather, mismanagement by the airport or was it because of slack maintenance?" Also, intense competition results in airlines going out of business and new airlines replacing them - hardly helpful for establishing a sound base of experience. As Nobel Prize winning economist George Akerlof points out, when customers cannot judge quality, poor quality tends to dominate; even if consumers are willing to pay a premium for quality, competitive pressures force a race to the bottom.

Poor supplier behaviour is also found in industries where customers do not have an ongoing relationship with suppliers. Dealings with used car yards, package holiday operators, real estate agents and undertakers are generally "once off". They contrast with the more enduring relationships consumers establish with local stores and regularly used tradespeople.

In fact, the more firms there are in a market, the harder it becomes for firms and consumers to form ongoing relations. Research by David Laibson of Harvard University suggests that the benefits of competition rapidly diminish as the number of firms in an industry increases. The benefit of a fourth or fifth supplier in a market is much less than the benefit of a second or third supplier. In other industries, firms compete strongly for new customers but once customers make a choice they become locked in to one supplier. If switching is difficult, the supplier enjoys a degree of monopoly power. Consider the difficulty in changing a bank (with mortgages, periodic payments and deposits) or an internet service provider (changing all those addresses).

Governments and competition authorities can become fixated on situations where only slight gains can be made from improving an industry's competitive structure. As a case in point there is presently a huge emphasis on competition in gasoline, but even the most rigorous application of competition policy will deliver benefits of only a few cents a litre, or about $100 a year. In the meantime consumers are paying dearly for financial services, spending too much on health and general insurance, and are facing high prices for privatized toll roads, electricity and water.

The Organization for Economic Cooperation and Development (OECD) has been examining the question of whether traditional competition policies are adequate to ensure consumer welfare. In Australia the Productivity Commission has recently released a report on Australia's consumer policy framework, which, among other recommendations, suggests more useful disclosure of information, improved consumer education and more consumer input into policy making.

These steps are cautious, however, for there is still a strong belief among policymakers, particularly in treasury departments, that competition, having delivered so many benefits, is the be all and end all of public policy. And politicians are adept at raising distractions, such as gasoline prices, while leaving untouched many areas where businesses are enjoying significant privileges. We need to be on the lookout for those distractions.

Rethinking Social Investment

The Federal Government is to be commended for its early steps to redress disadvantage, such as the creation of a Social Inclusion Unit, its commitment to reduce homelessness, and its overall policy theme of investment in people as the key to a successful future for the nation. But it is vital that this policy thrust includes a strong focus on investment in all disadvantaged Australians. Moreover, the chances of such investment occurring shouldn't depend upon the inclination of one particular government.

Rather, there is a need for initiatives that build evidence for such an approach and thus gain support for it among the general public, across the political spectrum, and at all levels of government. A ‘social investment institute' focussing on investment in the disadvantaged is one such initiative. A ‘social investment institute' would ideally be an independent governmental authority (more independent than the new Social Inclusion Unit), and it could have a broad watching brief over policies affecting the most disadvantaged - however defined. Its overall goal would be to assess the costs and benefits of existing and alternative policies relating to the disadvantaged - that is, costs and benefits for both the disadvantaged themselves and the broader society. This brief could cover all levels of government - if governments at these levels could be persuaded to agree, and with coast to coast governments of the same hue now is a better time than most - as well as covering government instrumentalities and NGOs funded by government.

The social investment institute would initiate policy evaluation and research that could either be done in-house or contracted out to universities or specialist bodies like the Institute for Family Studies or the Australian Institute of Criminology. It would also collect existing research from Australia and abroad. There are many precedents for this sort of body: statutory organisations having advisory, review or research functions - such as the two just mentioned. It would, however, have a different brief to bodies such as these, with its focus on all disadvantaged Australians and a specific focus on social investment yielding broader social benefits.

If it couldn't be set up as a government agency, a second option would be to set it up as an independent body - like a think tank. Questions of unstable funding and access to government departments render this option less desirable. Furthermore, there would be no imperative for the government to ‘own' the body's recommendations.

Image: Powerhouse Museum.

Having a social investment institute producing independent, well-researched and publicly accessible data and policy recommendations would have the following advantages:

Of course an obvious question here is: What would motivate governments or parties to support the creation of such a body? Wouldn't they be making a rod for their own backs? I don't believe so. Most politicians on the left, and a fair proportion in the centre and on the right, have gone into politics because they see government action as potentially beneficial in whatever spheres of life concern them. The same could be said about many middle-level to senior public servants. Once in their positions, however, politicians and officials become very aware of the competing demands for the public dollar, and of the political costs (real or perceived) of increasing the size of the pie through increased taxation or borrowing, which lead them to focus on what can be cut or stopped from growing as much as on what can be introduced or expanded.

If there were some authoritative body that legitimised both the sort of spending they believed in and ways of raising the necessary funds, they may welcome it. It would be both generating greater policy certainty and reducing the political costs of implementing that policy. In this regard, it's interesting to reflect on Ross Garnaut's reports on climate change. These have substantially shifted the centre of gravity of acceptable climate change solutions in a radical direction, thus reducing the political cost of advocating radical solutions. Labor's proposed target of a 60% cut in carbon emissions by 2050 seemed quite forward looking in comparison to the Coalition's policy, but tame when compared to Garnaut's proposed 70-90% cut, and yet the media have been broadly positive about Garnaut's recommendations. A social investment institute could produce a similar shift in its policy area.

But to build initial support for greater investment in the disadvantaged - and for the creation of something like a social investment institute - there would need to be a broad-based national campaign. I can imagine such a campaign having two stages.

The first stage would entail reaching and involving the ‘conscience' constituency - people motivated by compassion and a desire for social justice, people from churches, welfare agencies, unions, community organisations, green groups and some political parties, as well as other concerned citizens. This campaigning would be different from the day-to-day advocacy work of organisations within this group in two respects. First, it would be a nationally coordinated campaign with overall goals, strategies and materials, and second, it would focus on a very specific message, namely, that the right quantity and kind of spending on the disadvantaged is a form of investment that can generate net economic and social benefits for the whole society.

Members of the conscience constituency - once persuaded, activated and equipped with information and materials - would then take this campaign message to those not so motivated by social justice or compassion, but capable of appreciating the economic and social benefits that accrue to the broader society. This would constitute the campaign's second stage.

Some may think it a naïve idea that this latter sector of society could be persuaded to support such investment on these grounds. But there is the precedent of the Business Council of Australia - not an organisation known for its particular concern for the disadvantaged or its support for increased government spending - which teamed up with Dusseldorp Skills Forum to commission a report into the training needs of young people dropping out of school early, and older workers. This report predicted significant economic benefits from such investment far exceeding costs. (1) If the Business Council can see the benefits of such investment there's no reason why other Australians can't.

There's a wonderful opportunity here to demonstrate to the broader Australian community how we would all be better off in the medium to long term (and sometimes even the short term) if as a society we invested substantially in all Australians, including the most disadvantaged. We shouldn't let that opportunity slip by.

(1) Access Economics, The Economic Benefit of Increased Participation in Education and Training, Business Council of Australia & Dusseldorp Skills Forum, 2005.

Rob adds: I have written these articles as part of a project - as yet unfunded but with some institutional support - that seeks to research and disseminate the ideas discussed. I would welcome your feedback on the articles and your ideas about how this project might be advanced, supported and resourced.

 

Is Australia's Climate Policy Gender Literate?

When governments and think tanks deliberate on strategies for combatting climate change, they'll very likely bypass one highly salient variable. This variable is that global warming's causes, effects, and solutions, are gendered. Do those who frame Australia's climate change policy take into account that women's ecological footprint is negligible in comparison with men's or that women and children will be the main victims of global warming? Will Australian climate change policy rectify women's under-representation at every level of climate change negotiations?

Sociological factors are rarely considered in the climate change dialogue, although the United Nations Framework Convention on Climate Change does have potential in this respect. The phrase 'common but differentiated responsibilities' acknowledges socio-economic differences and the historical role of the industrialised North in causing unsustainable greenhouse emissions. However, this phrase 'common but differentiated responsibilities' might also be given a gendered meaning. For it is quite apparent that decisions about development models and energy consumption are driven overwhelmingly by high resource-consuming males.

Gendered consumption, transport, and leisure

One way to illustrate the systematic gender difference of the impact of climate change is to use the ecological footprint indicator. This measure compares the food, shelter, mobility and waste disposal area required to maintain the standard of living of an average individual in one country against another. In the USA, for example, the individual footprint is 12.5 hectares, while in India it is 1 hectare.

High tech economies likewise reveal gendered patterns of resource use. Swedish research finds men's ecological footprint in that nation to be remarkably larger than women's. On average, men (as a social category) are found to be big consumers of energy expensive manufactures and durable assets like houses, cars, and computers, while Swedish women are mainly purchasing weekly domestic consumption items - nature's perishables. Women's ecological footprint is smaller again, if adjusted for the fact that most shop for other household members.

A European Parliament report, Women and Transport in Europe, shows that EU men make trips by car for a single purpose, and over longer distances than women do. Conversely, it is mainly women who travel by public transport or on foot. When women use private cars, it is for multiple short journeys meeting several purposes on the one outing. The reason for this complex activity pattern is that even among women in the waged workforce, most undertake reproductive or domestic labour for husbands, children, or elderly parents: the double shift. Women's days are characterised by multi-tasking and so their transport needs have 'spatio-temporal scatter' - from office to kindergarten to supermarket, for example.

Of course, it is important to not ignore class and generational differences between women. Around the world, the number of childfree career women is increasing, with their transport footprint becoming more like that of men in the waged productive sector. But these emancipated women remain a statistical minority. Generally the pattern in industrialised economies is that men have determinate job hours and simpler schedules than working women, so could more easily use public transport options, but they don't - at least in Europe.

Again, this choice is a gendered one, having to do with structural differences in earning capacity. Internationally, women are concentrated in lower salaried jobs, and even when they enjoy the same careers as men, their wages are lower. Thus, it is mainly men who have money available for purchasing big status cars, as well as time available for leisure pursuits. Here they favour high energy consuming recreations like motorbikes, computerised entertainments, speed boats, and golf courses. Speed and technology are associated with the psychology of masculine prowess. By contrast, due to the time consuming double shift of work and home, women's leisure footprint is all but non-existent.

Internalised or externalised responsibility?

Economic scarcity and ecological stress extract more time from women's lives. But women tend to meet fewer resources by using good organisation and time management. This internalised response to environmental conditions contrasts with the standard political practice of externalising or displacing problems on to less powerful sections of the community. The Kyoto Protocol's Clean Development Mechanism (CDM) is one such approach, in this instance, costs of the North's consumer lifestyle are displaced on to lives in the global South.

Meike Spitzner, an author of the Women and Transport in Europe study, says that men interviewed about solutions to social and environmental problems, prefer technological end-of-pipe remedies. (2) This policy choice is another form of deferred or displaced responsibility. Thus, whereas women readily adjust their own energy consumption habits, far too many men opt for risky responses to climate change like nuclear power, or ecologically untested solutions like ocean sequestration. This high tech tunnel vision is encouraged by the fact that many collateral impacts of industrial growth are not experienced by men. They are remain uncounted as 'economic externalities' and left for women to pick up. A greater awareness of social consequences therefore, leads women to resist risky technologies. As feminists say: 'the personal is political!'

Women's socially reproductive labour results in their having expertise in the management of living resources - ecological and human ones. These skills derive from subsistence agriculture in many regions of the global South, and from domestic care giving work in industrialised countries. Most women's up front precautionary perspectives on climate change support an eco-sufficiency model of economics, one that internalises responsibility for economic provisioning in a cradle to cradle way. By contrast, the dominant masculine public model is fast forward production, externalisation of responsibility, then ad hoc bandaid repair.

These observations on the asymmetry of learned gender norms, responsibilities, and capacities, apply just as much in the global South as in the North, and so an international cohort of women is now monitoring the IPCC, aiming to bring the Kyoto Protocol into line with international agreements on women's rights. To help governments synchronise their international treaty commitments, Women for Climate Justice enlists the Beijing 1995 Platform of Action, inviting nations and international agencies to get their heads around the multiple structural links between gender and environments; to empower women in research and program design and at decision making fora. But first, it is critical to provide gender disaggregated national statistics for the energy sector.

In Australia, it is promising that the interim report of the Garnaut Climate Change Review seeks to distance itself from 'business as usual' approaches and is receptive of alternatives. But at this stage, it does not look as though the Garnaut Review will be able to consider the crucial dimension of gender in its report. Professor Garnaut's open agenda is compromised by his terms of reference. The first of these terms (1) 'the maintenance of rising living standards' is snared by the contradiction which underpinned World Commission on Environment and Development convened by the United Nations and chaired by Gro Harlem Brundtland in 1983 - the thermodynamic nonsense of 'growth plus sustainability'. This undermines the feasibility of term (2) 'contribution to a global approach', and (3) 'fair distribution of burdens among individuals and nations'. It is twenty years since Brundtland's report, Our Common Future appeared, and the Garnaut team deserves an opportunity to demonstrate how environmental understanding has evolved since then.

Women want public transit systems not subsidies for hybrid vehicle design. Women want prior community impact assessments of CDMs for our neighbours in Indonesia or PNG. The methodology of 'contraction and convergence' supported by Garnaut is an excellent guide, as long as it is read through the lens of 'common but differentiated responsibilities'. Thus, in a geopolitical sense, nations of the global South should not be obliged to carry the externalised costs the North's growth. And, in a gendered sense, women should not be obliged to carry the externalised costs of bad economic decisions made by powerful men.

Global warming causes, effects, and solutions are gendered, and therefore, gender justice is a prerequisite of sound environmental governance. - Will Environment Minister Penny Wong be in a position to take on board findings about the ecological footprint? Can the Rudd Government climb over the flawed logic of Brundtland? The absence of gender literacy among policy analysts, academic researchers, and even many climate change activists in Australia indicates that urgent 'capacity building' is wanted. For without a grasp of basic sociological notions like gender difference, it will be impossible to identify accurate long term global warming strategies or to implement workable short term ones.

 

References

(1) See the research housed at GENANET and Women for Climate Justice.

(2) Meike Spitzner, 'How Climate Change is Gendered' in Ariel Salleh (ed.), Eco-Sufficiency and Global Justice (London: Pluto Press, forthcoming).

More About the Author

Ariel Salleh is a Research Associate in the School of Social and Political Sciences, University of Sydney. She has taught at NYU; Institute for Women's Studies, Manila; York University, Toronto; and was Associate Professor in Social Ecology at UWS for a number of years. Her ideas are widely debated in eco-politics and ecological ethics. She recently served on the Australian Government's Gene Technology Ethics Committee and is a co-editor of the international journal Capitalism Nature Socialism. Some of her work can be accessed here. 

 

5 ideas in 5 minutes

The Electric Car

The idea is the all-electric car, meaning that it is powered completely by electricity drawn from batteries and does not rely on a fallback combustion (fossil fuel powered) engine. Renault-Nissan has committed itself to having such a vehicle available in the US market by 2010. It will also introduce all-electric vehicles and charging points in Israel and Denmark by 2011.

It's interesting because electricity having been one of the first methods used to power cars (the first electric vehicle was built sometime around 1832), they are now making a resurgence thanks to concerns about climate change and rising fuel costs.

Thomas Edison and an electric car, 1913. Image: National Museum of American History.

The all-electric car offers transport without the emissions that current combustion powered vehicles produce. However other environmental concerns still persist as the batteries are often made with a host of toxic chemicals.

Nevertheless, as the popularity of owning your own form of transport does not appear to be diminishing in any way, it seems logical to tackle the problem of green house gas emissions by changing the type of engine that is used to power so many millions of vehicles.

They tried it in a bunch of cars and places. Electric cars have a chequered history that has filled the pages of many books and even inspired an awarded winning documentary by Chris Paine and Martin Scorsese, entitled "Who killed the electric car?"

Read more at the site that informs us all, Wikipedia.

Freecycle

The idea is "Freecycle", a community-based network of people who give away unwanted stuff so that it doesn't end up in landfill. It's kind of like a philanthropic ebay.

It's interesting because it's free and is driven by members of a local community. A moderator who is from the local community runs every Freecycle group.

This is a simple idea with a strong democratic message. Sure, it might take a while to find something that you want or it may be a hassle to keep an old belonging on the balcony for a few extra days. But the end result is that something is kept out of the ground that will otherwise take a long time to biodegrade, and that people are provided with useful goods without cost. On the off chance you might get to know someone from your local community.

They tried it across the globe. There are approximately 4,378 Freecycle groups around the world.

Read more at Freecycle.

AGRA - Alliance for a Green Revolution in Africa

The idea is AGRA, which is actually eight interconnected initiatives operating to improve agricultural production across Africa while maintaining environmental sustainability.

It's interesting because it addresses the problems of poverty, nutrition and sustainability as distinct issues but within a holistic framework. AGRA has identified eight areas which makeup the African agriculture "value chain": seeds, soils, water, markets, agricultural education, African farmer knowledge, policies, and monitoring and evaluation.

In many cases aid policies, designed to address certain issues, are implemented in isolation to the broader economic and political context of the issue. AGRA is trying to overcome this by looking at each stage of the agricultural ‘cycle' to understand what can be improved. Adopting this strategy can only lead to better designed policies that are not undermined by issues further down (or up) the line. Unfortunately in the case of Africa there are plenty of factors that can have this effect.

They tried it across Africa, although mainly in sub-Saharan areas where poverty is most acute. See the grants section on the AGRA website.

Read more at www.agra-alliance.org

Decentralised Energy

The idea is decentralised energy, which broadly defined, is energy (whether thermal or generated electricity) produced at, or very close to, its place of consumption or use. For example, solar panels or wind turbines for a home or small community built within the community or a micro-hydro generator on a small river. Typically it is associated with renewable resources although this is not necessarily always the case (for example, it could be a diesel generator).

It's interesting because it represents a very different way of delivering what have traditionally been state-provided and highly centralised utilities. In this sense it tries to break away from large scale and often high-impact infrastructure projects that are often located far away from where the energy will be used. This reduces the need for expensive and wasteful systems that are needed to carry the energy to where it's needed.

With increasing fuel costs and the threat of global warming, decentralising energy production has positive benefits on many fronts. Provided the energy is produced using renewable resources it can save immense amounts of energy that are otherwise used in the energy production and transportation. In theory it also means that if a power line is cut whole neighbourhoods (or essential services) aren't affected by black outs.

They tried it most vigorously in Denmark where over 50% of power is generated close to where it is used.

Read more at World Alliance for Decentralised Energy (a truly excellent and very informative website).

The Shadow Price of Carbon

The idea is the shadow price of carbon (SPC), a way of measuring the cost of carbon released into the atmosphere as a result of a particular action. It is reputedly more sophisticated than the previous model, the Social Cost of Carbon (SCC).

It's interesting because it seeks to address the full carbon impact rather than focusing on clearly definable inputs and outputs. For example, instead of just looking at energy used directly in the manufacturing process and the associated emissions, SPC would demand that the carbon emitted by transportation, labour and even administration be taken into account. SPC is intended to have the dual purpose of providing a guide to the full cost of emissions but more importantly, actually incorporate the cost of carbon into the cost-benefit analysis of a particular action.

Some might argue that this approach is cynical. However such a position simply ignores the cumulative impact of increased emissions. Taking into account the aggregate amount of carbon released provides a better (although perhaps at times more confronting) understanding of how and where change is needed.

They tried it in the UK, where the idea is being promoted - and is gaining pace - on the back of SCC.

Read more at the UK Department for Environment, Food and Rural Affairs, which put out a paper that has resulted in significant government uptake of the idea in the UK.