Kyoto, coming ready or not
The Kyoto protocol on climate change is coming, whether the United States and Australia like it or not. The Federal Government argues there are flaws in the deal, which commits the world's industrialised economies to a collective 5.2 per cent reduction on 1990 levels of greenhouse gas emissions. And it's right. Any international agreement to combat pollution, on a global level, cuts across national economic interests. No government should cede competitive advantage lightly, especially if, as Kyoto prescribes, the cost of cutting these gas emissions is to be born, initially, only by advanced industrial economies.
That said, Australia's Kyoto stance is confounding. The Environment Minister, Ian Campbell, says: "The Howard Government sees climate change as a serious global threat ... the evidence is real and cannot be ignored." Yet, Australia and the US are the only industrial nations to refuse to ratify Kyoto, which comes into force in February. At the same time, Canberra has publicly committed to meeting the emissions reduction targets set by Kyoto - at a net cost to the Australian economy - even though it won't sign. Non-signatories, however, are locked out of new international carbon trading schemes, so Australia can't access funds intended to ameliorate the costs of emission reduction. Australia gets a new cost, but no new income.
Under the Kyoto protocol, governments and corporations can use carbon trading to offset emissions. Pollution is a global problem, so "carbon credits" can be purchased from other countries. Forests, for example, are considered "carbon sinks", because they absorb carbon dioxide, the main greenhouse gas. The Dutch Government, facing high-density land use, has bought into forestry in New Zealand, for example. Spain is shopping for credits equivalent to 40 million tonnes of carbon dioxide and has 205 million euros ($358 million) put aside. Australia's state governments want direct access to new carbon markets but have been unable to circumvent the Federal Government's stance. Ironically, it was Australia - in early Kyoto negotiations - which insisted on the "carbon sink" concept, because of its potential to turn Australia's large land mass into profitable carbon credits.
Kyoto's most glaring flaw is that it neither imposes pollution controls on developing countries, nor sets a firm timetable to do so. Emerging industrial giants, such as China and India, are committed to vague future action but can, in the meantime, pollute with impunity; just as Brazil and Indonesia can continue to clear their carbon-absorbing tropical forests - unless it proves more profitable to retain them as tradeable carbon sinks. Any hard-won gains in Europe, Canada and Japan may be virtually wiped out by soaring emissions elsewhere.
The Federal Government accepts that global warming is a fact. The time to act is now. Kyoto is far from perfect, but it is the only deal on the table. Australia's valid desire to bring developing economies into a truly global emissions reduction timetable can be most effectively addressed at that table. Attacking, from the outside, is counter-productive. If the first phase of Kyoto fails, then there really is an excuse for developing nations to do nothing.
Challenges of skills market
It was one of those freewheeling question-and-answer sessions the Treasurer submits to when he's got good news to amplify and the festive spirit has fanned the bonhomie of Canberra's Parliament House. Issues jumped from child-care rebates to the Prime Minister's longevity in the job, from corporate takeover struggles to the private takeover of Telstra. Two issues touched on by Peter Costello at his fiscal outlook news conference, however, have the appearance of disparity but the reality of interdependence. They demonstrate Mr Costello has been listening closely to the lobbying of Australian industry which is concerned that a trades skill gap threatens business expansion, particularly in manufacturing. Now that the coffers supervised by Mr Costello are again confirmed as overflowing, the prospect of more assistance for apprenticeships is looking healthier.
Mr Costello urged school-leavers to tackle trades because "we want more tradesmen and women today and we want a situation where it is highly prized and highly valued". Schools and others needed to change attitudes to trades, he said. On manufacturing, Mr Costello's message was specialisation. China was sucking low-cost manufacturing from all corners of the world. "So, for our manufacturers, we've got to find speciality, niche and higher value add."
The difficulty for business, however, is that it must continue adapting to this stark global realignment with an arm tied behind its back because not enough highly skilled workers are being trained to meet that challenge. A survey of 760 Australian manufacturers by the Australian Industry Group revealed between 18,000 and 21,000 vacancies for skilled tradespeople. The lobby argues that the 130,000 apprentices in Australian manufacturing are way too few to meet the skills gap over the next five years. That is one factor which has brought down the utilisation rate of the manufacturing sector from 78 per cent of capacity two years ago to 75 per cent.
Australian Industry Group, of course, represents the interests of business. Its assessments may need discounting because any training for which industry can get someone else - read taxpayers - to pick up the tab is good for business. The deputy head of the federal Treasury, Martin Parkinson, for instance, is openly sceptical about industry's assessment of the extent of any skills shortage.
So Mr Costello must listen to competing camps, each probably with worthwhile points of view. Australia, however, cannot afford substantial understatement of skills needs. Lost opportunities are unlikely ever to be recovered.