A carbon price is a clear pathway out of the government’s climate hole.
The government's climate policies have run into serious difficulties, largely due to the fact that it is trying to please competing interests which can only result in contradictory policies that cancel each other out. This fudge approach can work in some policy areas but with climate, the consequences will be deadly.
Approving new coal and gas production while reforming the Safeguard to reduce emissions of fossil fuel and other high emitting industries is a perfect example of contradictory policies. It is the result of many factors that Labor is trying to juggle all at once; trying not alienate an all-powerful industry that supported axing Labor's 2012 carbon price, keeping major donors onside, maintaining its integrity by sticking to its election promises, giving as little fuel as possible to the Coalition and media for another climate war, and of course, pleasing the majority of Australian voters who want action to address climate change.
The government is putting itself in an impossible situation and there is a real chance it will end up pleasing no one and losing the goodwill and political capital it has enjoyed since the election. It has boxed itself into a corner from which it will be difficult to escape.
However, there is a clear pathway out of the corner that they could choose. It requires a shift in political strategy and then a change in policy. And it takes courage.
First the political strategy.
It would make sense for the government to recognise that the electorate gave the Parliament a mandate to take strong action on climate – seven new climate-aware independents and three new Greens on top of Labor's majority in the House adds a lot of additional mandate to their election platform. The rejection of the Coalition by the electorate, especially in blue ribbon seats is further expression of elector intent. Further support comes from the fact that the majority of younger voters expect a lot more action and there will be more of them voting in the next election. Labor is being understandably cautious and is still hurting from past defeats in its efforts to land sound climate policy. They are almost certainly being overly cautious.
Also, the government needs to be less partisan in its dealings with potential allies. Greens and Independents represent a significant proportion of the vote and add significantly to Labor's low 32% primary vote. Again, their caution is understandable, but the climate crisis necessitates boldness and courage. The progressive majority in parliament has the power to do significantly more than was envisaged by Labor in opposition. Old wounds need to be put aside for the greater good of the nation and the planet.
And now to policy.
There is one relatively easy policy solution that would make all or most new fossil fuel projects simply unviable. A steadily rising price on the carbon content of fossil fuels, starting around $80/tonne and rising by $10-15/tonne each year will put the true cost of carbon pollution into the price of fuel and enable an orderly phase down, primarily on economic grounds. Finance will inevitably flow away from new gas and oil towards zero carbon alternatives. It will save the government many difficult decisions, shift subsidies away from fossil fuels and save the taxpayer from having to fund much of the cost of decarbonising the economy.
Such a carbon price would be greatly strengthened by returning the revenue to households as a 'climate dividend'. This would further shift the burden of paying for the transition from taxpayers, who have been paying the costs of carbon pollution for decades. By spending dividends on increasingly cheaper low-carbon living, citizens will actively participate in boosting and decarbonising the economy.
A Carbon Border Adjustment Mechanism (CBAM) would strengthen it further by protecting our industries from unfair competition from countries without a carbon price and build incentive for the global carbon price that will be essential if we are to reverse global heating.
Bold decisions and comprehensive solutions are needed to decarbonise our economy and will save the government from a great deal of political difficulty. A simple, well-designed carbon price, with dividend and CBAM, will enable the market to do most of the hard work for them, save a lot of money and give them space to address the hard-to-abate emissions that will challenge us all as we get closer to zero emissions.
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