in Australia

Australia to replace carbon tax with emissions trading scheme

Australia’s carbon tax started in July 2012. The carbon price was supposed to be fixed until July 2015, at which point it would be replaced by an emissions trading scheme. This week, prime minister Kevin Rudd announced that emissions trading will start a year earlier than planned.

Australia’s emissions trading scheme is to be linked to the EU ETS and as a result, Australia’s carbon price is expected to drop from A$25.40 a ton to around A$6 a ton.

The announcement of the change has caused a political storm in Australia and the issue is likely to play a key role in the forthcoming election. Rudd argues that this is the “fiscally responsible thing to do”, and that,

“The nation’s 370 biggest polluters will continue to pay for their carbon pollution, but the cost will be reduced, meaning less pressure on consumers.”

Tony Abbott, leader of the opposition Liberal Party, attacked Rudd’s decision. “This is not a true market,” he told reporters in Sydney.

“Just ask yourself what an emissions trading scheme is all about. It’s a market, a so-called market, in the non-delivery of an invisible substance to no one.”

But when a journalist asked whether this made carbon markets like financial markets (some commodities are invisible, derivatives don’t involve the delivery of any product), Abbott just repeated his definition.

Christine Milne, leader of the Greens, said the Greens oppose Rudd’s ETS proposal because it will reduce the carbon price:

“The Greens do not support making it cheaper for the big polluters to pollute. And we certainly do not support slashing climate programs that are playing a vital role in helping Australia reduce emissions, address global warming and protect the environment.”

As a result of the fall in the price of carbon, the Australian government will have to cut spending to cover about A$3.8 billion shortfall in the federal budget. One of the programmes that might be in the firing line is the Biodiversity Fund, which is funded from the carbon tax. This could have a serious impact on endangered species in Australia.

A political discussion about climate change is important, especially in Australia, which is one of the highest emitters of greenhouse gases per capita because of its massive coal industry. Over the last decade, black coal exports from Australia have increased by 50%. But the debate in Australia is focussed on carbon trading versus a carbon tax, not on addressing climate change. Reducing emissions by leaving Australia’s fossil fuels in the ground is not part of the debate.

Combined with the collapse of Australia’s REDD programme in Indonesia, it seems that Australia’s climate change policy is unravelling.

Earlier this week, the BBC World Service’s World Business Report interviewed Tamra Gilbertson of Carbon Trade Watch, asking for her views about Rudd’s decision. She is dismissive of both a carbon tax and carbon trading.

A transcription of the interview follows and you can listen to the interview by clicking here (runs from 6 mins to 10:30 mins).

Mark Whitaker (BBC World Service): Julia Gillard wasn’t popular with everyone in Australia and one of the bits of legislation her government brought in while she was prime minister hasn’t been popular with everyone in Australia either. Well now both are gone: Julia Gillard and Australia’s carbon tax, designed to curb greenhouse gas emissions. Canberra is scrapping the carbon tax a year ahead of schedule and replacing it with the kind of ETS, or emissions trading scheme, favoured by European governments.

The man who replaced Julia Gillard, Kevin Rudd, announced the replacement carbon scheme:

“We expect the change that we are bringing in will see the price on carbon fall from an expected $25.40 a ton by next July to around $6 a ton. This is a big change. Treasury modelling tells us that this will reduce pressures on consumers and on businesses. Every Australian should be clear about the government’s new ETS and that it will leave average families $380 per year better off.”

That’s the Australian prime minister, Kevin Rudd. Well, Tamra Gilbertson who’s based in Barcelona, represents the pressure group Carbon Trade Watch. I asked her what she made of the Australian decision.

Tamra Gilbertson (Carbon Trade Watch): Ultimately, carbon taxes and carbon trading have the same end point. From an environmental justice perspective, curbing emissions should not shift an economic burden onto vulnerable communities. And that’s just what carbon taxes and carbon trading do, because the companies can pass on the extra cost to the consumers. So, regardless if it’s taxing or trading, you have the same outcome, you have companies still benefiting from the systems.

Mark Whitaker: Does it actually work? Regardless of whether it’s fair or not, does it actually work? Is there less carbon put into the atmosphere as a result of either of these schemes?

Tamra Gilbertson: No, it doesn’t work. Neither of these schemes actually end up solving a problem that we call climate change. Climate change is a very complex issue and putting a price on carbon, whether it’s taxes or trading, fails to adjust the impacts of the energy [sector] more widely from a more holistic perspective, including impacts from air pollution, biodiversity loss, from extractive industries, from where they’re extracted in the first place. So, taxes and trading do not deal with the issue of putting carbon into the air. In fact it completely ignores it.

Mark Whitaker: So you’re not particularly saddened by the fact that Australia’s found this too tough a route to go down? Because most people would think that this is, if you have a tax rather than a trading scheme then that’s tougher. In your way of thinking there’s no difference between them.

Tamra Gilbertson: In my way of thinking, I think it’s really too simple to say one is better or worse than the other. For example, in the Australia scheme, the taxes were only implemented in electricity and industrial sectors, to 185 companies only. And those electricity companies can very easily pass on the cost to the consumers.

Now that Australia is going to change into an emissions trading system, a year early, the sad part about that is that the emissions trading schemes, whether it’s Australia, China, or the California cap and trade system, are being constructed based on the European Union ETS, which has been an obvious failure.

Mark Whitaker: So, if customers are having to pay for systems of curbing carbon that simply don’t work, and companies are getting away with it, what is the answer?

Tamra Gilbertson: There’s not one answer. I don’t think there’s one techno-fix. I think quote-unquote fixing the climate change problem requires progressively radically reducing emissions. And that means keeping oil and coal and gas underground. That means phasing out fossil fuels. That means radically changing how we think about consumption and changing agricultural schemes so that we’re not taking away more forests and polluting streams with more pesticides. There are so many solutions out there.

Ultimately, carbon trading is a means to pre-empt and delay the structural changes necessary to address climate change. Instead of examining the fundamentals of an economic and political system, carbon trading adjusts the problem of climate change to fit and to benefit the polluters.

So, the answer to what do we need, how do we change this, what’s the way forward, is really about looking at some of the solutions that exist already.

Leave a Reply


  2. The fact that Australia may be sitting on as much as 233 billion barrels of oil (Saudi Arabia’s reserves are estimated at 263 billion barrels) could explain why Australia doesn’t want to start discussing leaving fossil fuels in the ground.

    Six months ago Brisbane company Linc Energy Ltd.Energy released two reports, based on drilling and seismic exploration, estimating the amount of shale oil in the as yet untapped 30,000 square mile Arckaringa Basin surrounding Coober Pedy ranging from 3.5 billion to a mind boggling 233 billion barrels of oil.

  3. I do think a properly designed carbon tax would be a necessary supplement to other policies provides it included an equal rebate of all or most revenues directly to residents of the area taxed, which would keep it from being regressive. The point would not be so much that it would reduce emissions (though it would to some extent), as that if you had other policies that did reduce emissions such a progressive carbon tax would avoid a rebound effect. If you reduced consumption in general and fossil fuel consumption in particular, there would be a rebound effect where fossil fuel grew cheap and thus was repurposed. A carbon tax would be part of keeping the coal in the hole, the oil in the soil, the gas in the ground.