Carbon Myths and Realities

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WORDS | Guillermo Umaña

How much is Australia really benefiting from the repeal of the carbon tax? According to Australia’s Prime Minister Tony Abbott, the removal of the scheme on 17 July 2014 would have reduced the cost of living by an average of AU$550 per household per year.

In reality this claim has proven to be overstated. Energy Australia revealed that Australian households will not save more than $200 per year. In NSW, households will only save $158, equal to $0.43 in savings per day.

This truly modest saving will be outweighed by the combination of some of the heavy measures on households that the government is putting forward as part of the budget, such as the AU$7 co-payment on GP appointments, a rise in university fees due to deregulation and an increase in fuel taxes.

The repeal of the carbon tax was advertised as a measure that would bring great savings to Australian households, but the truth is that it won’t.

According to the Climate Change Authority, in its first year, the carbon tax raised AU$7.6 billion and contributed to a 10% decrease in the proportion of electricity sourced from brown and black coal, while that from renewable sources rose by more than a third.

Getting rid of the tax has left a huge hole in the government’s budget.

So why is Tony Abbott so keen to get rid of a scheme that generated revenue while he tells Australia that there is a budget emergency? The answer has to do with short-term consumer preferences and a lack of visionary politics.

Australia could have become a world leader in climate change law implementation, ahead of the Conference of the Parties Meeting next year in Paris. Instead, politicians sold us the idea that the carbon tax was damaging to the Australian economy, while other countries continue to move forward (for example, Norway has announced that it plans to become carbon-neutral by 2030).

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Instead of the carbon pricing mechanism, the current government proposes a ‘Direct Action’ plan, in which an ‘Emissions Reduction Fund’ will be created to pay big polluters to cut emissions through carbon reduction projects. It is then up to the good will of big polluters to apply for funding in order to reduce emissions.

This fund will cost the government AU$2.55 billion over four years and will not raise any money.

The cost-effectiveness of this new scheme is highly questionable: How will emission reductions be measured? How will the government make sure that funded projects will continue to exist in the future? What criteria will be used to provide funding for companies and to avoid greenwashing?

Moreover, why are taxpayers subsidising big polluters to lower their emissions, instead of big polluters paying for their excess emissions?

It seems like this ‘Direct Action’ plan is a piecemeal, unsystematic and costly measure. Putting a price on carbon has proven to be more cost-effective because it establishes a value property right to emissions and incentivises reductions systematically.

Misinformation played a big role in the carbon tax debate. Contrary to popular belief, the tax did not heavily affect exports as these were not liable under the tax and therefore, the prices of Australian commodities abroad were not affected. In addition, the Jobs and Competitiveness Program was designed to give free carbon units to companies that were likely to become uncompetitive in the international markets due to the carbon pricing mechanism.

The Australian Climate Change Authority has clearly stated that it is possible for Australia to reduce emissions by 19 per cent below 2000 levels by 2020 at very little economic cost. The current government’s target is 5 per cent below 2000 levels.

Comparatively, the European Union Emissions Trading Scheme is predicted to reduce emissions in Europe by 40 per cent below 1990 levels by 2030. This scheme covers more than 11,000 companies; the Australian scheme covered only 350 companies, which made it relatively easy to manage and monitor.

Australia should look at the successes and failures of the European model to develop an effective carbon pricing mechanism nationally.

If there is so much evidence about the benefits of putting a price on carbon, why is Australia going in the opposite direction?

Australia is highly vulnerable to climate change and it also is one of the single largest per capita polluters in the world due to its reliance on coal for electricity production. Action is urgently needed.

In the meantime, Tony Abbott will tell us that the budget needs fixing and that we will save the economy and our pockets by avoiding the reintroduction of the carbon tax.

 

Guillermo Umaña is studying a Masters of International Environmental Law at Macquarie University. He completed a Bachelor of Planning degree at Macquarie University in 2013.