How not to introduce a carbon tax: The Australian experience

With 0.3% of the world’s population, Australia produces 1.8% of the world’s greenhouse gases

Australian prime minister Scott Morrison says Australia will meet its Paris Agreement target of a 28 per cent reduction in emissions on 2005 levels by 2030. Photograph: EPA/ Joel Carrett

Australian prime minister Scott Morrison says Australia will meet its Paris Agreement target of a 28 per cent reduction in emissions on 2005 levels by 2030. Photograph: EPA/ Joel Carrett

 

When Australia introduced a carbon price of AU$23 (€14.77) per tonne on July 1st, 2012, the plan was it would transition to a cap-and-trade emissions trading scheme three years later, linking Australia to international carbon markets.

But it never got that far. After one of the most divisive elections in Australian history, in which the opposition Liberal-National coalition campaigned to “axe the tax”, they did just that when elected and the carbon price was repealed on July 17th, 2014.

The experience has been cited since as a textbook example of how not to introduce a carbon tax, with Taoiseach Leo Varadkar telling the Dáil in November the Government was conscious of what happened in Australia which he said had set that country back 20 years.

Australia’s Labor government under prime minister Julia Gillard had brought in the tax in the first place because the country has one of the highest per capita carbon emissions in the world.

To offset the impact of the tax, Labor reduced income tax and increased welfare payments to cover expected price increases. It also introduced compensation for some affected industries. When the carbon price was repealed, the Australian National University estimated the scheme had cut carbon emissions by about 17 million tonnes in 2013, the biggest annual reduction in 24 years of records.

Scaremongering

But scaremongering on the carbon price was a major contributor to the coalition winning government in a landslide in 2013. Then prime minister Tony Abbott said getting rid of the tax would save people $550 (€485) a year. This figure was widely disputed, but electricity and gas prices did fall by an estimated 7 and 5 per cent respectively. But Australia’s emissions went up again. With 0.3 per cent of the world’s population, it produces 1.8 per cent of the world’s greenhouse gases. The latest per capita figure for C02 emissions in Australia was 17.22 tonnes, more than three times the Irish figure.

According to Dr Ian McGregor of the University of Technology, Sydney, who was part of the Afghan government delegation at the Paris climate talks, Ireland and other countries will have a smoother path with carbon taxes if they have something Australia does not – bipartisan political support. “In most of western Europe there is no real opposition to having a carbon tax,” he said.

With a federal election due in Australia by May, Labor recently launched its plan to make renewables 50 per cent of the electricity mix by 2030, including a $15 billion investment for new clean energy generation and electricity grid upgrades, and $200 million for battery storage to back up household rooftop solar.

The government, which has been trailing in polls for the past two years and is desperate for anything that might give it an edge, immediately accused Labor of planning “carbon tax 2.0”. The News Corporation press largely agreed, but the Sydney Morning Herald newspaper was lukewarm, saying in an editorial that “the vicious politics of energy and climate change have forced Labor to adopt a suite of policies that are very far away from the first-best, market-friendly options to reduce carbon emissions that were being contemplated a decade ago”.

When even the Greens party is not using the phrase “carbon tax” anywhere in its climate change and energy policy, there is no mainstream political party seeking its return in Australia.

However, prime minister Scott Morrison regularly says Australia will meet its Paris Agreement target of a 28 per cent reduction in emissions on 2005 levels by 2030, “in a canter”, largely based on investment in renewable energy technologies. Having disposed of the proposed National Energy Guarantee (Neg) along with former prime minister Malcolm Turnbull in August, this looks more like wishful thinking than reality.

Obligations

The Neg would have imposed two obligations on energy retailers: to supply sufficient quantities of “reliable” power to the market, and to reduce emissions over the decade between 2020 and 2030. But after becoming prime minister, under pressure from climate sceptic Liberal MPs, Mr Morrison announced “The Neg is dead.”

This policy carries its own political risk. Recent massive swings against the coalition in federal byelections and the state election in Victoria have been attributed in part to its lack of action on climate change. If the response of resources minister Matt Canavan to thousands of children skipping school in late November to demand federal government action on climate change is anything to go by, the coalition has not yet learned its lesson.

“The best thing you’ll learn about going to a protest is how to join the dole queue,” Mr Canavan said.

The Climate Council, which was founded in 2013 after the coalition government abolished the Australian Climate Commission, says bushfires and drought are a warning to Australia.

Climate change is driving the intensity of the extreme weather events we are witnessing right now – from extensive drought to record-breaking heatwaves to catastrophic bushfires in Queensland. Despite Australia being on the frontline of climate change, the federal government has failed to roll out any credible policy to bring down pollution,” says Climate Council chief executive, Amanda McKenzie.

“It’s been the same story year after year under the Abbott, Turnbull and Morrison governments. Our greenhouse gas pollution levels have continued to rise in the absence of leadership on climate change.”