Australia backs away from carbon taxes

Australians have long fretted about the best way to reduce their carbon emissions. Bitter rows over carbon pricing have cost two Prime Ministers their jobs and brought the Liberal-National coalition to power ten months ago on the back of a “axe the tax” ticket. Moves by Tony Abbott to follow through on this election pledge and overturn the previous Labour government’s tax on the largest carbon emitters were successful this week. It is with dark irony that a country so rich in renewable resources should be so dependent upon coal; so skewed is this bias that, despite having one of the lowest population densities, Australia is one of the highest emitters of carbon per head in the developed world. Data from the United States Department of Energy revealed that the average output of carbon emissions was 20 tonnes for each Australian.

Fueling fear – Inept politics, not bad policy

Riding a wave of populism, Tony Abbott’s campaign relied upon claiming the carbon tax was a “wrecking ball across the economy” in that it was destroying jobs and raising the cost of business across the board. Hyperbolic predictions that whole parts of the country would be “wiped off the map” failed to come to pass but played well to a populist base. Once a toxic background of internal Labour fighting between Gillard and Rudd was factored in, the policy had little chance of survival. Sadly, at the exact time of his pronouncements, it appeared that the Carbon Tax was starting to pay dividends as the percentage of electricity sourced from dirtier coal sources was falling and renewable generating – primarily from Wind and Solar – had increased by a third. Introduced in July 2012, the tax charged the 348 highest polluters A$23 (£13) for every tonne of greenhouse gases the produced and had brought the federal government revenue of more that A$7 billion (£4.1 billion) in 2013-4. The original plan had been for this tax to rise to A$24.15 and then to transition to an emissions trading scheme in 2014-15, where the available permits – initially unlimited – would be capped and then reduced inline with emission targets. As a replacement, Mr Abbott has proposed a “direct action” plan whilst details are sketchy, the main thrust is public fund to pay producers to cut emissions. It has been suggested that it is through this mechanism that the commitment to cut carbon emissions by 5% from 2000 levels by 2020 will be met. Shifting the burden from business to tax payers has met with understandable approval from the principle emitters but has faced challenge from with Mr Abbott’s own party. Indeed, his coalition does not hold a majority in the Senate and relied upon the support of senators from the mining tycoon Clive Palmer’s Palmer United Party.

Uncertain future

Abbott’s government claims that the repeal of the carbon tax will save Australian companies and consumers £4.5 billion annually, but in the opinion of blog, the costs of this repeal will likely outweigh the benefits. Australia is one of the world’s largest coal exporting nations and herself relies upon coal for 80% of its daily power needs despite being on of the sunniest places on earth. Formerly, government feed in tariffs helped to jump start a lucrative solar panel market and led to 1 in 10 of Australian homes having solar power installed. A migration from coal to gas could leave Australia too highly leveraged on coal as global markets for its fuel tighten and European/Asian nations look to more diversified generation portfolios Polls have found that a significant proportion of Australian voters want the Government to take action on global warming – even if they are not in favour of the carbon tax. Some commentators have speculated whether a patchwork of regulations (methane on cars, power plants, appliances etc) might be more palatable than a central carbon tax.

Carbon Taxes around the world
Map showing carbon taxes around the world

A future for carbon pricing?

Australia was one of the major test-beds for carbon pricing and the death of carbon tax is certainly significant. However, she wasn’t the only country with carbon pricing. The World Bank and Ecofys recently reported that 40 countries, states and provinces have already placed some sort of price on carbon, either through a carbon tax or some sort of emissions trading scheme. South Korea is expected to begin emissions trading next year, while China is proceeding with pilot schemes in seven locations. Europe’s emissions market covers 31 countries and 40% of total greenhouse gas output inside the bloc. Britain in 2008 also committed to slashing emissions by at least 80% by 2050 when measured against 1990 levels, while the U.S. Environmental Protection Agency has finalized regulations that aim to deliver carbon pollution cuts of 30% from power plants by 2030 when compared with 2005 levels, giving teeth to U.S. President Barack Obama‘s promise to tackle climate shift through mechanisms putting a price on carbon. But there have been backward moves as well. Japan last year retreated on pledges to cut greenhouse emissions, blaming the shutdown of its nuclear plants in the wake of the 2011 Fukushima nuclear disaster for a decision to release 3% more greenhouse emissions by 2020 instead of a 25% cut on 1990 levels previously promised. Closing down nuclear power forced the world’s fifth-biggest emitter to rely on fossil fuels for electricity generation. Canada withdrew from the Kyoto protocol in 2011, with the conservative government saying the agreement would unfairly penalize its fossil fuel-reliant economy for failing to meet a promised 6% cut. Mr. Abbott, who shares the Canadian government’s conservative ideology, said during a recent visit to Ottawa and the U.S. that climate change was “not the only or even the most important problem that the world faces“.  Furthermore,  John Connor, chief executive of Australia’s Climate Institute think tank said:

“There is no question there is fragile trust and ambition around the world, at international climate talks last year in Warsaw Japan, Canada and Australia were standouts in going backward, and so steps like this do matter”

Long term reversal of climate change, much like the roll out of other major energy policies, is best tackled through a combination of Government and Private initiatives but – as Australia demonstrates – you also have to involve the people and the transition to a carbon free economy will have doubtless have one step back for every two steps forward.

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