Labor should, and could, introduce a price on carbon

September 3, 2025

Thanks to Ross Gittins, economics editor of The Sydney Morning Herald, for so clearly outlining Rod Sims’ five reasons why a carbon price is both “necessary and urgent”.

Sims, now chair of Ross Garnaut’s Superpower Institute, argues that Australia needs a carbon price “so effective climate action can be taken, so our targets can be met, and so we can more than fully compensate households for the price effects” while also strengthening public budgets. These outcomes would be well received by Australians and should give the Albanese Government courage in its second term.

There is also international precedent. In its series on carbon pricing and energy taxation, “Pricing Greenhouse Gas Emissions: Turning climate targets into climate action”, the OECD found that countries could raise revenue equivalent to about 2.2% of GDP if carbon prices reached the midrange value of €120 per tonne of CO2 by 2030. It also concluded that progressively increasing carbon prices while phasing out fossil fuel subsidies would allow nations to deliver more ambitious, effective, and efficient climate policy.

The lesson is simple: the longer we delay putting a price on carbon, the higher the price we will all pay.