Gillard announces interim carbon tax to tackle carbon pollution and climate change

Australia is to get a carbon tax from 1 July 2012 as one cornerstone policy for tackling the challenges of climate change, announced Prime Minister Julia Gillard, Greens leader Senator Bob Brown, and Independents Rob Oakeshott and Tony Windsor in Canberra yesterday. The interim carbon tax is proposed to run for 3-5 years, rising by a set amount each year, to be followed by a full cap and trade emissions trading scheme linked to international markets. There would be no international offsets allowed for the interim mechanism and agricultural emissions would initially be excluded from the tax.

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While the date for the introduction of the carbon tax has been announced, many of the details are still to come including setting the introductory carbon price rate, the level of compensation for households and businesses, and the emissions reduction target for 2020. The agreement is a compromise worked out by the Multi-Party Climate Change Committee set up after the last election composed of the Labor Party, the Greens and Independent MPs.

"If you put a price on something, then people will use less of it. At the moment it is free to emit carbon pollution. If we price carbon pollution, then people will find ways of emitting less of it because they won't want to pay the price." said Julia Gillard who is determined to bring in a carbon pricing mechanism as the issue has been pivotal in four party leaders losing power (Howard, Nelson, Turnbull, Rudd). "I'm determined to do it, because climate change is real. We have never before lived with so many people on the planet emitting so much carbon pollution."

The carbon pricing mechanism will be budget neutral with money raised returned to compensate households and some businesses. There will be a great deal of debate on the extent of this compensation, especially to business and industry.

A Grattan Institute report released on April 22, 2010 - Restructuring the Australian Economy to Emit Less Carbon - was the final nail in the coffin of Kevin Rudd's CPRS scheme in part due to the large extent of the business compensation package. "The assistance package under the Government's proposed carbon trading legislation for emissions intensive industries is a $20 billion waste of taxpayers' money", said the CEO of Grattan Institute Professor John Daley on the release of the report. "Concerns that a carbon price will devastate industry and households are misplaced and exaggerated. They are no basis for delaying adapting the Australian economy to its carbon constrained future." (The Rudd retreat on climate policy: scientists and conservationists react)

The Greens proposed in January 2010 an interim carbon tax as a compromise to break the senate deadlock in the previous parliament.

The Labor Government is still intent on just a 5 per cent reduction in carbon emissions below 2000 levels by 2020, while the Greens urge a 25 per cent reduction by 2020. The International Panel on Climate Change recommended rich countries should cut emissions by 25-40 per cent below 1990 levels by 2020 which was adopted by the 2007 Climate meeting for the Kyoto Protocol meeting in Bali.

A report released in October 2010 found that Australia is falling behind in indirect carbon pricing in the electricity sector.

Reaction

Conservationists cautiously welcomed the announcement, "The decision to introduce a price on pollution from July next year is an important start to the job of tackling Australia's greenhouse emissions," said ACF Executive Director Don Henry in a media release. "At present Australia is on track to increase our pollution levels 24% by 2020. If we are going to turn that around, we need to get cracking. A fixed price on pollution, while an important step that will help business adapt, does not on its own ensure greenhouse pollution levels will fall. We need to move from a fixed price to a cap on pollution sooner rather than later."

"Today's announcement is extremely welcome and shows good progress but we're not through the minefield yet," said The Climate Institute CEO John Connor in a statement. "By making it clear that businesses will be responsible for their pollution with an initial permit price is an important foundation as is the focus on actual pollution reduction."

The Climate Institute urges an initial pollution price of more than $25 per tonne. "Without a credible initial pollution price of greater than $25/tonne we will not unlock billions of dollars new investments and thousands of new jobs in new clean energy and low pollution industries. " said John Connor.

Environment Victoria Campaigns Director Mark Wakeham called for a starting price of $50 per tonne. "The starting price will be critical in determining whether emissions rise or fall in the next 5 years. Environment Victoria supports a starting price of at least $50 per tonne, which is what Treasury estimated would be needed to reduce emissions by 25 percent by 2020. Unless we start the scheme at this sort of price, and have the ability to increase it over time, we will have no hope of achieving the sort of emission reductions that Australia and other nations will need to meet to stabilise our climate."

Tony Abbott has declared his opposition to the introduction of the carbon tax, with scaremongering over it's impact on living expenses. "Today she has broken her promise - and all Australians will now pay for that broken promise with higher electricity and petrol prices. Let us be clear, what the Prime Minister announced today is a carbon tax. From the middle of next year, Australian families will pay $300 more for power each year." he said in a media release. Gillard has replied that the biggest portion of the revenue raised would go to compensating households.

As long as Julia Gillard keeps the Greens and some of the Independents onside in the negotiations, the legislation should pass through both houses of parliament. From July 1st, 2011, the Greens will have 9 Senators with the balance of power in the Senate.

Professor John Quiggin from the School of Economics at the University of Queensland commented "This is a sensible way of tackling the problem. A carbon tax can be introduced rapidly, and the public will quickly realise that all the scaremongering about its effects has been overblown. With a price in place, the government can take time to design a workable system of tradeable emissions permits, compatible with developments in other countries."

Christine Milne, Deputy leader of the Australian Greens, called the agreement "a major step towards real climate action in Australia...." but urged a community campaign to push for a high enough carbon price to achieve a carbon target that climate scientists suggest we need to aim for to mitigate climate change. Milne also emphasised the importance of complimentary measures such as the renewable energy target, national gross feed-in tariff, and energy efficiency targets"

"The carbon price would cover the energy sector, transport, industrial emissions and waste. There is agreement to support change in the land-use and forestry sectors but details are still under consideration." said Christine Milne in a media release. "The agreement sets out points for compensation, including helping the community meet rising costs of living, but the details are still to be determined.

"This is a big step forward for climate action in Australia. For the first time, everybody in Australia will have a clear signal that the old, polluting ways will have to change and a new, exciting era is set to begin." Senator Milne concluded.

Not all environmental groups have endorsed the proposed carbon pricing mechanism. Activist group Friends of the Earth said that the interim carbon tax leading into an emissions trading scheme takes Australia in the wrong direction, and away from real solutions to the climate crisis.

Climate justice spokesperson Holly Creenaune said, "We're concerned this is a resurrection of the Carbon Pollution Reduction Scheme (CPRS), which was rejected in the Senate and failed to win public support because it was worse than doing nothing."

Holly Crenaune highlighted the problems in carbon trading, "Carbon trading does not work - across the world cap-and-trade has failed to reduce emissions, harmed local communities and delayed real action; whilst delivering huge profits to polluters and financial speculators."

Friends of the Earth UK released a report in November 2009 - A Dangerous Obsession which highlighted the dangers of carbon trading.

"The MPCCC framework repeats the mistakes of the CPRS by handing over revenue to big polluters, on top of other loopholes like cheap offsets." said Crenaune. "We welcome the exclusion of international offsets from the interim carbon price. However, by allowing domestic offsets in the initial phase, expanding to a carbon market riddled with international offsets, polluters will avoid reducing emissions at the expense of communities displaced and affected by damaging offset projects."

"Today's agreement foreshadows a low price on carbon - and no political parties are currently committed to a substantial price. With a low price on carbon, Australia's emissions will continue to rise." Crenaune warned.

"Competitiveness and energy security for polluters are clearly the main considerations in setting the price - ignoring the serious impacts of climate change and regulatory action needed to transition away from fossil fuels."

"We want to see effective and just solutions on the table - solutions that phase out coal-fired power, that stop the expansion of coal mining; that protect our rivers, farmlands, and health from fossil fuels extraction; and drive the rapid growth of renewable energy in Australia. These solutions include direct investment in renewable energy and an end to fossil fuel subsidies." concluded Holly Crenaune.

Sources:

• Australian Conservation Foundation media release, Feb 24, 2011 - Cap on pollution needed sooner rather than later
• Climate Institute Media Release, Feb 24, 2011 - Good progress but not through the minefield yet
• Environment Victoria media release, Feb 24, 2011 - Environment Victoria welcomes carbon price framework, calls for strong starting price
• Friends of the Earth media release, Feb 24, 2011 - 'Hard-wired' path to carbon trading goes the wrong direction
• Greens media release, Feb 24, 2011 - Carbon price agreement: The transformation to clean energy can start now