The Carbon Tax – Policy and Politics. John Menadue

Oct 24, 2013

There are good policy and political reasons why the ALP should oppose the repeal of the carbon tax.

The carbon tax is designed to reduce carbon pollution. That fact is continually ignored by those who talk wildly about the tax rather than what it is designed to do. In any event, the tax is working and is not producing the ‘almost unimaginable’ destruction that Tony Abbott predicted. Gladstone has not been closed down and Whyalla has not been wiped off the map. The tax had a relatively small impact on prices when it was introduced but it is now accepted as very much part of our everyday life.

The September CPI figures released yesterday show an overall increase in prices of 1.2% for the September quarter and 2.2% for the year. It was all relatively benign. Water and sewerage costs rose by 9.9% in the quarter, fuel by 7.5%, council rates and charges by 7.9%, international holidays by 6.1% and gas prices by 4.8%. Electricity costs trailed near the back of the field for increases at 4.4%. That doesn’t sound like ‘almost unimaginable” destruction and chaos. Furthermore, even the relatively small increases in electricity charges have been due, not to the carbon tax, but much more to the ‘gold plating’ of poles and wires by the electricity utilities.

As Peter Martin in the SMH has pointed out, the Coalition has maintained that repeal of the carbon tax would save households $550 a year. This Coalition estimate is based on the scaling up of Treasury estimates for increases in prices due to the tax. Insofar as the increase in prices will be much less than expected, the savings to households will also be less.

It is also clear that the carbon tax is achieving what it set out to do – curbing electricity and gas consumption. Household spending on electricity and gas is now down 3%.

The carbon tax is designed to change the pattern of investments. A move to renewable energy and  less polluting power generation  depends on the carbon tax to discourage polluting industries..It is highly unlikely that the Government will be able to achieve the Renewable Energy Target of 41,000GwH by 2020 without the carbon tax.

So leaving the tax in place would be good policy. It is causing minimal problems despite Tony Abbott’s extravagance. Furthermore the unravelling of the carbon tax would be onerous for business which has written the tax into its energy supply contracts. It is also possible that in the repeal of the tax, the Government might have to pay $4 billion in assistance to industry with the wind back of the free permits.

On the political front there is a clear lesson that chopping and changing on carbon reduction schemes can be fatal for political leaders. Malcolm Turnbull attempted to hold the Coalition to putting a price on carbon. He failed. And Tony Abbott became the leader because Joe Hockey, the Liberal Party’s first choice to replace Malcolm Turnbull, refused to abandon his support for a carbon price.

Then the Greens sided with the Coalition to defeat the Rudd Government’s Carbon Pollution Reduction Scheme in the Senate. If the Greens had supported this legislation, Australia would be well on the way to sensible carbon reduction policies and programs. It would have been “all over red rover.” Instead, the sanctimonious Greens helped provoke a divisive and destructive debate on carbon which has been at the expense of good policy. The Greens have a lot to answer for on this issue as well as for their “policy purity” on asylum seekers.

With the failure of Rudd’s CPRS, and the failure of the Copenhagen Climate Change Conference, Kevin Rudd lost his way and his confidence. He was dumped.

Then in February 2011, and in order to lock in the Greens to her minority government, Julia Gillard announced that she would put a price on carbon. She never politically  recovered, not that the policy was wrong but she had clearly gone back on a promise and did not effectively explain why.

My sense is that Labor supporters would be appalled if Bill Shorten retreated now on the ALP policy to retain the carbon tax and then move to an emissions trading scheme. There has been too much chopping and changing. Surely he sees the price that both Kevin Rudd and Julia Gillard paid for walking away from well established and well considered policies.

Global warming is real and a market-based mechanism is superior to the inept ‘direct action’ policy which will be introduced by the Coalition. To achieve a 5% reduction in carbon pollution, it will cost far more than the carbon tax or an emissions trading scheme. Direct action is a confected and inefficient program designed to pretend that the Coalition is serious about global warming. It is very hard to understand how the Liberal Party which says it believes in markets could propose such a non-market scheme. It has much more to do with politics than good policy. The Coalition would serve Australia better if it spent a proportion of the ‘direct action’ funds to buy carbon credits from developing countries. Carbon pollution is a global problem. It has no respect for national boundaries.

With an early summer in parts of eastern Australia, we are seeing the extreme weather and the bushfires which we have been warned about as a direct consequence of global warming. The need for us to seriously address global warming is with us every day. Scientific reports, one after another, warn us of the consequences of global warming unless we all take action to reduce carbon pollution.

But what about the ‘mandate’ which Tony Abbott claims for the abolition of the carbon tax? What the election confirmed was the right of the Coalition to form a government. It was not a referendum on a whole clutch of policies.  On September 7, we had a general election. We did not have a referendum on the carbon tax or a double dissolution election on the carbon tax.

Let’s try and hold to the carbon tax and then move to an emissions trading scheme. That would be the best policy.  I suggest it would also be good politics for the ALP, that despite all of its political mistakes, does take more seriously than the Coalition, the threat of global warming .Its supporters would feel let down if Bill Shorten turned tail on climate change.


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