The repeal of the carbon tax is a political victory for Tony Abbott but it is hard to imagine a worse combination of poor reasoning and bad policy making. It shows little appreciation of economics. It will increase the budget deficit. It shows a mistrust of the market. Tony Abbott’s political legacy will be defined by the repeal of the carbon tax. It is one of the worst examples of policy vandalism in our history.
As the world’s greatest carbon polluter per capita, we are now probably the only country in the world going backwards on carbon reduction. We will be left with a nonsense called ‘Direct Action’ which Malcolm Turnbull rightly described as a fig leaf when you don’t have a real policy to reduce carbon.
All the expert advice around the world from the climate scientists and economists is that we have a real problem which is best addressed through a market mechanism – either a carbon tax or an emissions trading scheme. Our own Treasury, Ken Henry, Bernie Fraser and Ross Garnaut, all tell us that the best and cheapest way to reduce carbon pollution is through a market mechanism rather than direct action. Tony Abbott prefers to take the advice on climate change – not of the experts but of Rupert Murdoch and other foolish people.
Our political system and our political leaders have failed us badly. John Howard reluctantly said in 2007 that he would introduce an emissions trading scheme, but told us later that he really didn’t believe in it but he had to do it because of political pressure. Kevin Rudd’s emissions trading scheme was pursued more in the end to skewer Malcolm Turnbull. It was at the cost of a good policy outcome. When the Liberal Party dumped Malcolm Turnbull for Tony Abbott, Rudd refused to call a double dissolution on the ‘great moral challenge of climate change’. Julia Gillard told us that she would never introduce a carbon tax, and then did just that under pressure from the Greens. Then Tony Abbott, despite having favoured a carbon tax in his Daily Telegraph blog of 2009, played the carbon tax issue like a dog with a bone. No untruth was out of the question. No scare was too great. He played to the climate sceptics and the extreme right wing of his own party and in the community. As the chair of the G20 in Brisbane later this year, he will do his best to keep climate change off the agenda.
And then there were the Greens who must bear a huge responsibility for their policy purity that denied us a sensible outcome in 2009. The Greens joined with the Coalition in the Senate to vote down Kevin Rudd’s proposals because they ‘locked in an inadequate 5% target’. Five years later we still have a 5% target with no clear or efficient way to get there. The Greens should hang their heads in shame. They took no risks but kept parading their policy purity. Their hypocrisy continues on one issue after another. Just think asylum seekers when they sided with Tony Abbott and Scott Morrison on critical issues. In parading their self-righteousness the Greens invariably ask for more than is on the table and finish up with nothing. It is often better to hold your nose and make some real progress.
But in it all, Tony Abbott stands out as the greatest vandal. He warned us about dramatic increases in power prices that the carbon tax would incur. Those scare tactics are turning out to be largely nonsense. The price rises due to carbon tax have been so small that the Australia Bureau of Statistics has had trouble measuring them. There certainly have been increases in electricity prices but they have little to do with the carbon tax. Only 7% of power prices are due to the carbon tax and another 7% is due to various other means to encourage energy saving and use of renewables. The big increase in electricity prices has been the gouging by the state-owned networks in NSW and Qld. On top of this gold plating by the networks which has forced up prices, we are likely to see a doubling of gas prices in the next two years as the domestic price of gas rises to the world price.
The price increases from the carbon tax have been minimal, the economy has continued to grow and Whyalla has not been wiped off the map.
And the carbon tax has been doing what it was designed to do in reducing carbon emissions. Only yesterday Frank Jotzo, Director, Centre for Climate Economics and Policy at ANU said in The Conversation
‘Carbon emissions in Australia’s national electricity market would have been 11 to 17 million tonnes higher if Australia had not introduced a carbon price. New research using the latest data indicates that the policy was working despite its imminent Senate repeal. Over the first two years of operation of the carbon price (July 2012 to July 2014) carbon emissions were down by 29 million tonnes or 8.2% across the national electricity market compared to the two years prior. The conclusion from our research is that the carbon price has been performing well in its main job; delivering emission cuts in the power sector, which is the largest source of emissions and the sector with the biggest opportunity for cuts.’
Frank Jotzo adds that the reduction in carbon emissions would have been higher if companies had been confident that the carbon tax was here to stay. With Tony Abbott raising doubts some companies deferred decisions to reduce pollution.
We are out of step with all other major countries. A month ago China and the UK signed an agreement to work together towards a global framework for combatting climate change. China has emission reduction schemes in six major provinces which will lead to a national scheme. China is the largest investor in renewable energy and coal use is being scaled down. President Obama is pushing ahead with ambitious carbon reduction policies. Ten US states are well ahead in carbon reduction. The Europeans have had an emissions trading scheme since 2005. Commenting on the Abbott government’s decision to abolish the carbon tax, the European Union’s Climate Commissioner said today ‘The EU regrets the repeal of Australia’s carbon pricing mechanism just as new carbon pricing initiatives are emerging all around the world. The EU is convinced that pricing carbon is not only the most cost-effective way to reduce emissions but also the tool to make the economic paradigm shift the world needs.’
The repeal of the carbon tax will have some short term benefits for business. The chief beneficiaries will be the heavy polluting electricity generators in the La Trobe Valley who burn brown coal. But there will be significant down-sides in the long term. A carbon tax or an emissions trading scheme is essential in both reducing carbon emissions and helping organisations switch to low emissions technology. Companies will not be able to avoid making this transition. The sooner they do it the better. But there will now be fewer incentives for Australian businesses to develop low emissions technology. We will continue to depend on fossil fuels both as a major domestic energy source and an export product. Tony Abbott prides himself in becoming an ambassador to the world for highly polluting thermal coal.
Direct Action is not a serious policy. The cost will be higher than a market mechanism. The carbon tax penalised polluters, but Direct Action will be paid by taxpayers as an incentive for polluters to reduce pollution. What an absurd idea! Perhaps Tony Abbott has in mind paying people to give up smoking!
If the world and Australia are to grow and prosper our polluting industries must decline and industries based on renewable sources of energy must expand. To delay that process is foolhardy…
Tony Abbott and all Australians will come to rue the decision to abandon the carbon tax and an emissions trading scheme. Politics has won in the short term but at great cost to our future.
Can Bill Shorten lead us out of this mess? He bears a heavy responsibility