The so-called 'carbon tax' which came into effect in Australia on July 1st has been one of the most divisive policies in recent political history. The apparent widespread opposition to it suggests that many Australian's are either unconcerned about future sustainability or they have been hoodwinked by some clever political campaigning. There are certainly serious shortcomings in this legislation but these do not appear to be why so many people oppose the 'tax'. What's more, the carbon pricing mechanism is to all intents and purposes the same as what the Rudd government proposed back in 2008 (known as the Carbon Pollution Reduction Scheme - CPRS) when it was wholeheartedly embraced by the Australian populace, even being suggested as a reason for Rudd's drop in popularity when he backed away from it. So what's going one here?
First, the so-called 'carbon tax' is not a tax at all, but is in fact an emissions trading scheme (ETS). It has a 'fixed' price for the first 3 years after which it moves to a floating price determined by trading in limited permits. This fixed price period was effectively the same in the CPRS proposed by the Rudd government (sure, there are some subtle differences). It seems that the widespread opposition to the scheme is more related to the fact that Gillard, prior to the 2010 election, stated that there would be no 'carbon tax', but subsequently when asked if an ETS with an initial fixed price was like a tax, she foolishly answered 'yes', giving the opposition the free kick of being able to call it a carbon tax. So the political handling of this carbon pricing scheme by the government has been inept, to say the least. Meanwhile the Abbott opposition has ruthlessly pursued their political agenda, despite the fact that (a) they actually took a very similar scheme to the 2007 election, (b) the Liberal-National caucus almost agreed to support the scheme under then leader Malcolm Turnbull, and (c) they have no credible alternative policy.
There is little doubt that most people do not understand the details of this carbon pricing scheme, which is indeed fairly complex. But the basics are pretty simple - the large emitters of greenhouse gases must effectively obtain or purchase permits for those emissions, and the revenue raised by the government from those permits is passed back into the economy via tax cuts, welfare increases and grants to emerging renewable energy producers. Post 2015, businesses will be able to trade actual and future permits so encouraging the greatest economic benefit from each permit. Over time the number of permits will decrease in line with the government's chosen emissions reduction trajectory. Importantly, businesses can avoid purchasing permits (avoid the 'tax' if you like) by moving to renewable energy. Over several decades the number of permits will reduce to close to zero and the associated compensation will similarly decline as the nation moves away from carbon emissions altogether. Or at least that's the theory!
So what is different about this scheme from the 2008 CPRS which essentially failed to get implemented because the Greens opposed it? One might have expected them to agree to it! As is often said, 'the devil is in the detail', and the details of the CPRS included some very generous free permits going to various existing large emitters and it included a commitment to only a 5% reduction on 2000 emissions levels by 2020. The Greens rightly saw this as 'locking in failure' and held out for more aggressive targets and less generous assistance to existing emitters. To some extent they have negotiated those outcomes in the current scheme but it must be said that the emissions reduction trajectory beyond 2015 is yet to be agreed. This is crucial because once the future trajectory is set it cannot be hardened because future emissions trading will have been undertaken based on that commitment. Interestingly, the other big difference from the CPRS is that the current scheme excludes petroleum fuels. It might seem bizarre that this should be excluded and that the Greens would support it but anyone who understands peak oil will immediately see that limited future supplies of oil will 'do the job' of reducing emissions from petroleum. But not so for coal, of which Australia still has more than enough to cook the planet.
Reasons given to oppose the scheme are many and varied and those most fervent about their opposition will latch onto almost any argument, however fallacious. In any debate about the merits of the carbon pricing scheme it is first necessary to determine if those arguing against it actually believe that humans are causing climate change and whether they think climate change is a problem. There are a surprisingly large number of people who are happy to jump into the denialists' boat. Then there are those who argue that it will ruin the economy or that it is the wrong time because of the GFC. It is important to realise that the carbon pricing scheme is meant to be revenue-cost neutral in that all the money collected for permits goes back into the economy in compensation. Certainly there will be winners and losers - there always are when there is such a dramatic change in a key part of the economy, but such losers need to move on from their profligate ways if we are to cut carbon emissions. Then there are those that say that Australia's share of global emissions (1.4%) is so small that this will make no difference. This is perhaps true if we were the only country doing this, but we are not alone and indeed our actions add further support to those already pricing carbon (mostly Europe) in driving others (such as the USA) to join global action. Furthermore, Australia's per capita emissions are higher than almost any otehr country's. It must also be emphasised that so-called Emissions Intensive Trade Exposed Industries (EITEIs) are provided with very generous compensation so that they are not significantly disadvantaged against their global competitors who may be operating without a price on carbon emissions.
However, there is a large hole in this story that is rarely talked about. More than half the so-called emission reductions in Australia will actually be sourced from overseas. A graph adapted by the ABC from a Treasury document quaintly called Strong Growth, Low Pollution, shows this quite clearly. I call this the Catholic approach to emissions - keep sinning but just pay for it! First, this approach undermines the argument that pricing carbon won't cost Australia's economy, because it will - these overseas abatement sources are actual money flowing to other countries where they might be used to plant trees or to compensate loggers who agree not to clear fell vast swathes of forest. While it is desirable that forests are not clear felled in Indonesia or Malaysia, sadly these 'clean development mechanisms' which were created under Kyoto have often been largely fallacious, in the same way that the opposition's plan to plant trees in Australia as a form of abatement is prone to failure and abuse. Even more importantly, allowing electricity generators to keep emitting and to buy permits from overseas is not doing enough to encourage them to embrace renewable energy.
The final gaping hole in Australia's greenhouse policy is all too obvious - Australia is and proposes to remain the world's largest exporter of coal, mostly to places like Japan, Korea and China. The coal that leaves Australia is not subject to our emissions trading scheme (although the emissions associated with its mining are to some extent, even though coal mining is an EITEI). To be exporting coal to the world while claiming to be concerned about climate change is the height of ethical hypocrisy. Indeed Minister Combe has stated that coal mining will continue to be strong in Australia. Implicit in this view is the belief that Carbon Capture and Storage (CCS) technology will somehow allow coal to continue to be a viable fuel in the face of climate change mitigation, yet all the evidence suggests that this is extremely unlikely. In fact the reality is that as Australia's largest export earner, coal mining is simply to big to stop despite the fact that this is completely inconsistent with any real concern for climate change.
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