What happened with the carbon tax in Australia?
Climate policy has long been a contentious issue in Australia. But in 2007 the election of the Rudd government opened a brief window of bipartisanship, due to the fact that the coalition had proposed an emissions trading scheme in its election campaign. This lasted until 2009 when Malcolm Turnbull was negotiating the details of the Rudd government’s carbon pricing legislation. Some coalition members resisted and Turnbull’s leadership was challenged; Tony Abbott became leader of the opposition and the legislation was defeated.
Two weeks later the COP 15 climate conference in Copenhagen failed to reach an agreement on emissions reduction. Carbon pricing was in trouble.
This was the start of the so-called climate wars. Climate and carbon pricing proved to be very effective political weapons for the Coalition and were major issues in the elections of 2010 and 2013.
The short life of the Clean Energy Act
The 2010 election resulted in a minority Labor government led by Julia Gillard. Cross bench support from independents and greens enabled the parliament to pass the Clean Energy Act in 2011. It applied a price to the 260 highest industrial emitters from 2012. It started at a fixed price of $20 for each carbon unit purchased and was intended to rise to $27/tonne before transitioning to a flexible-price Emissions Trading System in 2015.
Emissions fell during its short life and rose again after its repeal. Electricity generators were the biggest contributors, and some companies were given free units where industry assistance was considered necessary to protect exports to countries without a carbon price.
Complexity
It was complex legislation and was therefore hard to understand. Its revenue recycling mechanisms were also difficult to see, and ordinary voters had little or no awareness of if or how they were being compensated for rising costs. There was no clear dividend for citizens. This made it vulnerable to populist politicking and difficult to defend.
The Abbott opposition campaigned strongly to “axe the tax” and won the 2013 election in a landslide. The Clean Energy Act was repealed in 2014 with the support of industry and business. In 2015 it was replaced by the Emissions Reduction Fund, a taxpayer-funded scheme which purchased emission reductions, mostly from land use. Emissions from the non-land use sectors have been rising ever since, despite a so-called safeguard mechanism, except for a brief dip during the Covid recession.
Due to the effectiveness of Abbott’s devastating attacks on carbon pricing it is seldom considered a viable policy option. Labor has avoided it and the climate movement rarely mentions it. It is considered politically toxic.
Rehabilitate, restore, revive
It’s rehabilitation as a viable policy option is now necessary if we are to succeed in decarbonising our economy. Many piecemeal policies will be needed to match the power of an economy-wide carbon price. Some corporations and some business organisations now support a price. It is vital that we encourage these green shoots and build support for putting a price on carbon.
