Green policy reversal on cards as Australia goes to the polls

On the face of it, Australian prime minister John Howard should be a shoe-in to win this weekend's federal election. During his 11-year tenure the man affectionately known as "little Johnnie" has led the country to its strongest period of economic prosperity in history. Unemployment is at just 4.3 per cent and GDP is set to grow for the 16th consecutive period thanks to an ongoing resources boom.

But the reality is that Australia's 14 million voters are likely to dump the Liberal leader in favour of front-runner Kevin Rudd when they cast their votes on Saturday. The reason can be summed up in two words: Climate change.

Australians are increasingly concerned about environmental issues because the effects are already having a direct impact on their day-to-day lives and their economy. The country's intensifying drought means most households are living under tight government-enforced water restrictions. This means they can't wash their cars using a hose or water their gardens. The water shortages have pushed up suicide rates among farmers, with one occurring every four days. And as the world's driest continent already, the intensifying problem is threatening Australia's agriculture industry and ultimately the economy.

In the eyes of voters, Howard simply has not done and will not do enough to combat the issue. Following the lead of US president George Bush, he has refused to ratify the Kyoto Protocol, claiming it will slash jobs, push up the cost of living for low-income earners and damage the economy. He has also indicated that environmental issues are a lot further down on his political agenda than things like education and tax cuts. The Coalition has pledged to spend $1.5bn on green initiatives compared to the opposition's $5bn and it aims to get 15 per cent of the country's energy from renewable sources such as wind, solar, wave and geothermal power by 2020 compared to Rudd's pledge of 20 per cent.

That's not to say Howard won't act on green issues if he defies the polls and is re-elected. His Liberal party plans to introduce a Climate Change Fund from 2012 with $75m worth of grants to boost the development of renewable and low-emission energy. It has also proposed to launch a National Urban Water Plan to help conserve water usage and to reduce Australia's reliance on pollution-rich coal for energy.

Furthermore, Howard said he would "work towards an effective international climate change framework" to obliterate Australia's record as one of the world's worst polluters per capita. However, many of these announcements have only come to the fore in the past couple of months - meaning it could be a case of 'too little too late' in the eyes of voters. As Labor's water spokesman, Anthony Albanese, articulated: "It took an election year for the government to acknowledge that climate change and the water crisis existed."

Rudd on the other hand has made climate change his key selling point. The Labor leader reaffirmed during his final pre-election speech this week that he would immediately sign Kyoto if elected and make tackling global warming his party's "number one" priority. The former diplomat who is 18 years Howard's junior also pledged to personally attend next month's United Nations climate change meeting in Bali, Indonesia. "Australia needs new leadership on climate change," he said. "Mr Howard remains in a state of denial."

The opposition's basket of green initiatives - aimed at cutting greenhouse gas emissions by 60 per cent before 2050 - includes a $500m Renewable Energy Fund, $240m Clean Business Australia Fund and $150m Energy Innovation Fund. The business fund will deliver energy and water efficiency projects aimed at boosting GDP by $38bn a year by 2050. This will include a $75m grants programme for eco-friendly manufacturers.

However, the opposition's green campaign is not without fault. It is expected to heap an extra $40 onto the annual electricity bill of the average family and there are concerns ratifying Kyoto could hammer the economy. Other countries to sign the 1997 agreement, which expires in 2012, have been hit with massive bills for their excess carbon emissions. Australia's neighbour New Zealand this month announced that signing Kyoto in 2002 had cost taxpayers $1bn. The National party described ratifying as a "huge stuff up" and pledged to pull out of the accord if elected. On the flip-side, Australia's decision to remain outside Kyoto means its businesses can not take advantage of the booming international carbon market, estimated to be worth around US$100bn a year, according to Greenpeace

Labor has also sent mixed messages about its green plan. Environment spokesman Peter Garratt - the former lead singer of Aussie rock band Midnight Oil - told reporters in October that the party would ratify the Kyoto accord even if developing nations like China and India did not agree to cut their emissions. He was then forced to back-track, claiming the consent of developed nations would be a condition of the Liberals' endorsement. In a final twist, just days later Rudd announced the party would ratify Kyoto immediately if elected regardless of support by developing nations. Howard was quick to jump on the blunder: "This was meant to be the piece de resistance between us and the Labor Party on policy," he said. "It's the most unbelievable capitulation this election campaign so far."

This apparent lack of clarity and the extra costs of Labor's policies do not appear to have harmed Rudd's election chances, however. He has consistently led opinion polls, with the latest Roy Morgan figures showing just 44 per cent of voters support Howard, compared with 56 per cent support for the opposition.

Regardless of which way the vote swings on Saturday, pressure will continue for Australia to do more to curb its pollution output. A report by Washington-based Centre for Global Development this month found that it produced more carbon dioxide per person than the US and five times that of China. Greenpeace Australia's clean energy campaigner Mark Wakeham told BusinessGreen that even Labor's more rigorous green policies would not go far enough.

"Greenhouse pollution is going to continue to increase over the coming decade," he said. "Whoever is elected needs to do much more. Neither major political party is responding to the scale of the threats and is putting on the table solutions that will limit dangerous climate change."

He added that it was not simply a case of throwing more money into green industries - it meant cleaning up our existing power plants: "We need to increase regulations and ensure that old power stations either meet much better standards or close. The need for drastic action on climate change needs to be urgently addressed."

But regardless of how the Australian response to climate change evolves over the next decade, the election campaign's focus on climate change and the environment highlights for businesses the world over the speed with which green investment levels, policies and legislation can change. If a late shock is avoided and Labor then delivers on its green pledges Saturday's vote could well see Australia take a giant leap forward in the journey from climate change pariah to world leader. And with the environment now playing a crucial role in political elections worldwide businesses need to be mindful that such drastic policy reversals will become increasingly common place.