Carbon pricing - inevitable, or a quaint relic?

Many have given up on pricing carbon - actually its inevitable so let’s make sure we get a good one!

Adam Morton, the Guardian’s Climate and Environment Editor wrote a very useful article in praise of Victoria’s rapid shift from coal to renewables this week.  He described the effort and costs that Victoria has to expend to make it happen. He wrote ….

“The long-held idea that investment in the new clean grid would be driven by an overarching national policy, such as a carbon price, with governments otherwise mostly taking a hands-off approach seems increasingly quaint. It was killed off as the federal Coalition spent years blocking climate action, and isn’t coming back.”

At Citizens’ Climate Lobby we beg to differ. Carbon pricing is critical if we are to decarbonise quickly enough in the face of the enormous forces that are pushing to extend the burning of fossil fuels as far into the future as possible. We recognise that a price on carbon is the most effective way to reverse fossil fuel subsidies and redirect financial flows towards zero carbon.

Morton points out what we are left with:

”Instead we have a messy, bottom-up approach in which governments working in the same general direction make their own commitments.”

Correct! But not only is it mess; it is inefficient, very expensive and perpetuates the current situation in which we have a “negative carbon price”; one that requires citizens to pay the price of decarbonisation while subsidies still flow to fossil fuels.

This messy approach is much more complex than it needs to be. A predictably rising fee on the carbon content of fossil fuels at source would decarbonise the economy rapidly and much more smoothly with a lot less wasted effort and less leakage through all the gaps between policies.

It also ends up being piecemeal, lots of different initiatives across many levels and organisations, instead of one comprehensive policy underpinning the transition and supporting other policies needed for hard-to-abate emissions and to draw down historical emissions.

An efficient carbon price like climate dividends is essential and well beyond “quaint”. Its rehabilitation in Australia is vital, not just for emissions reduction and environmental protection, but also for budget repair – it will help plug the black hole created by fossil fuel subsidies and get finances flowing in the right direction.