And It Passed! Australia Sets A Price On Pollution


This momentous change to Australia’s economic architecture has been a long time coming. Say what you like about Julia Gillard’s decision to change course, and break a promise on introducing a carbon tax in the wake of gaining minority government in a hung Parliament, but this decision is hardly without precedent in the Australian polity.

As former Hawke government science minister Barry Jones reminded us in a typically succinct article earlier this year, the idea of pricing pollution as a so-called ‘negative externality’ originally goes back to 19th century economist William Stanley Jevons, while the scientific understanding of the greenhouse effect was first outlined by Svante Arrhenius in 1896. Jones himself was a prominent early proponent of taking action to combat climate change in the 1980s, as Julia Gillard noted in a July address to the National Press Club.

Indeed, the idea of a carbon tax was first mooted by the Hawke-Keating government, although it was never formalised as legislation. During the Hawke-Keating years, Australia signed up to the UN Framework process on climate change, and although the Howard government notoriously refused to ratify the Kyoto protocol, Australia stayed involved at a diplomatic level throughout the tenure of the Howard government. It’s easy to forget nowadays, but John Howard’s government even set an emissions target for Australia in line with our Kyoto responsibilities, and the Howard government took an emissions trading scheme to the people as an election promise in the 2007 election.

The course of climate policy since Labor took government is better known. Kevin Rudd’s government spent much of its first two years in office developing the Carbon Pollution Reduction Scheme. It invested huge political capital in passing it as a bipartisan package, rightly judging that a significant economic reform such as this would soon become deeply unpopular as soon as it become politicised. But Labor played plenty of politics itself, using climate policy as a wedge to drive between a Liberal Party divided on the merits of anthropogenic global warming and the policy response to it.

Kevin Rudd reaped the whirlwind in late 2009, when his strategy of using climate policy to destabilise the Liberal Party backfired spectacularly. Instead of splitting the Liberals, Rudd ended up unifying them behind the ruthless leadership of Tony Abbott. The CPRS bills were voted down twice in the Senate. Labor’s poll figures started to bleed. Factional leaders started to become uncomfortable.

Climate policy was also the cause of the key event that set in train the downfall of Rudd as Prime Minister. This was Kevin Rudd’s April 2010 decision to postpone all further attempts to pass the CPRS. As we noted at the time, it was a backflip that could only damage Rudd’s reputation and standing in the electorate. As it turned out, his leadership never recovered. Julia Gillard was Prime Minister in a few short weeks.

I made a further prediction in my article about the CPRS back-down in 2010: that the death of the CPRS might even be good news in the long term for the likelihood of Australia embracing a sensible climate policy. "The Greens will almost certainly control the Senate in the next Parliament," I argued, "so if Labor does move an ETS bill after the election, the resulting policy will have to be stronger [and]featuring tougher targets."

And so it has come to pass. The eventual shape of the climate policy Australia is adopting today is in many respects stronger than that proposed under the CPRS. The so-called "gateway targets" are more stringent, the industry compensation slightly less generous, the mechanisms to adjust targets and compensation better. Most importantly, there is a mandated floor price on carbon for the first three years of the scheme. This particular measure is looking prescient, given the recent collapse in international carbon markets owing to the struggling European economy.

As a result, Australia now enjoys one of the highest carbon prices in the world, with one of the strongest policy architectures to ensure the decarbonisation of our economy. I say "enjoys", but of course many will lament Australia’s decision. They will trot out all the usual arguments that Australia is "going it alone", that the carbon price will harm the economy, and that nothing Australia does will make any difference to global emissions. But they will be proven wrong on all counts. This is an historic day for Australian economic and environmental policy. It is the beginning of a long and necessary path towards carbon neutrality.

It would be preferable, as a political commentator, to be able to write columns such as this without ever mentioning opinion polls. But the truth is that opinion polls exert a powerful influence on public affairs through their psychological impact on journalists and politicians, and even on ordinary voters. And so it does matter that Labor today enjoys a long-dreamed for bounce in the polls. Labor’s primary vote has climbed out of the 20s and into the low 30s, narrowing the Coalition’s lead from all-conquering to merely convincing. The only poll that matters is not for another two years. But with recent polls heading in the right direction, Labor’s internal rumblings will quieten, and the media may even start to take more notice of the government’s achievements.

What, then, of the Opposition? Under Tony Abbott, the Coalition has reaped maximum political gain from playing irresponsibly to public opposition to the carbon tax. But that tactic is now reaching its use-by date. More generally, recent events suggest that Tony Abbott’s days in the sun may already be behind him. A strategy based on complete and total negativity has many advantages, including clarity. But it inevitably suffers in terms of relevance as decisions are taken and the public debate moves on.

One big problem for the Coalition’s policy of opposing everything is that sometimes this is a lot more complex than it seems. The Coalition’s recent contortions over superannuation policy are a good example. The government is committed to raising compulsory employer-paid superannuation to 12 per cent in small increments out to 2018. It’s going to pay for this with money raised by the Minerals Resource Rent Tax, which the Coalition opposes. So most people thought the Opposition would also oppose the increases to superannuation.

But over the weekend, in a decision apparently taken without full approval by the shadow cabinet, the Opposition decided to support the increase in superannuation. As a result, the Opposition will have to find billions of dollars in extra "savings" (let’s leave aside the fictitious nature of most of their previously-announced savings for the moment) in order to meet their various budget commitments. The whole thing has looked messy and improvised.

The point is not whether the Opposition is divided on the merits of raising Australians’ retirement incomes, although it is certainly confused. The broader point is the increasing difficulties Tony Abbott and the Opposition face in trying to explain how to unscramble Labor’s policy omelettes, once in government. The Coalition has committed itself to rolling back so many of the government’s policies that it now faces a huge policy development challenge simply in working out how to sensibly roll them all back. The task becomes explaining exactly how an Abbott government will repeal swathes of complex legislation and policy in areas such as the mining tax, the carbon tax, the NBN, poker machine regulation … the list goes on.

Unfortunately, policy development has never been the Opposition’s strong suit. How will these roll-backs work? How will they transition? Who will be compensated? How much will it all cost? There will be many more backflips and confusions in coming months as the Coalition attempts to pin all this down. In the meantime, the rest of the country will move on, even as the Coalition continues to thrash around on the details.

And let’s not forget another important point about today’s vote: the government has had a big win. Conversely, despite all the drama and controversy of the past year, the Opposition must actually confront the reality that it has lost the carbon debate. A price on carbon has been implemented. It will be exceedingly difficult to unwind, except in the unlikely scenario in which the Coalition controls both houses of Parliament sometime in the future. Long before that happens, the Coalition may be forced — by the business lobby, or simply by political expediency — to the tacit acknowledgment that the climate debate in this country has effectively been settled.

In the article earlier mentioned, Barry Jones observes that "the failure of the opposition … to play a meaningful role in discussions on mitigating climate change is a profound historic misjudgment". I agree. Under Tony Abbott, the Liberal Party has, quite unnecessarily, put itself on the wrong side of the most important political and economic issue of the century. The decision to vote against meaningful policy to address climate change will haunt the Liberal Party in years to come, as the planet warms, Australia dries, and the world wakes up to the catastrophe that awaits us.

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Ben Eltham is New Matilda's National Affairs Correspondent.