Australia's bitter carbon tax pill
Australian Prime Minister Kevin Rudd’s decision to scrap the carbon tax weeks before their upcoming major general election on Saturday is obviously a political move that hopefully will save the Labor Party at the polls. But the unpopularity of the previous Gillard administration imposed measure was already obvious even a few months back, with cash bonuses of A$100 per child and A$250 per pensioner being handed out to ease the impact of the tax. Rudd said the move would cut average household electricity costs by A$4 weekly and would slash A$3.8 billion from the federal budget over a four year period.
As reported, the new plan is to shift to an Emissions Trading Scheme (ETS) linked to the European ETS a day after the carbon tax expires on June 30, 2014. Based on current prices, the move would shift the price of emission permits from A$25.4 per ton from July 2014 to around A$6 per ton, saving business and industry billions in carbon costs. The price is currently at A$24.15 a ton. Rudd is relying on his center-left Labor party, with support from the Greens. The Conservative opposition, if they win the elections, have promised to scuttle all carbon efforts altogether.
Prices for carbon, such as that from carbon taxes and indirectly from measures to spur renewable energy, like the Feed-in-Tariff, are never popular. In the Philippines, while a Renewable Energy law was passed in 2008, the FiT was delayed by significant opposition from industry and free market economist groups. In California, industry groups such as the California Manufacturers & Technology Association and the Western States Petroleum Association argued an announced cap-and-trade measure was another reason for businesses to relocate out of state. Japan and China have announced their own measures to curtail carbon, but so far no significant failure of their mechanisms have been reported.
In hindsight, reductions to the price per ton of carbon might have saved the Australian carbon tax, but in light of the elections, Labor is taking no chances but not totally ditching carbon either. Undoubtedly, this failure in Australia will (and is already) be used by opponents of carbon measures everywhere.
Unfortunately, the timing is not good. Noticeable to long-time observers of carbon financing is the shift from the single unifying Kyoto Protocol treaty to one that has fragmented into many measures like carbon tax (such as the Australian one), cap and trade, and other schemes. While another attempt at a global treaty will again be done in 2015 using the Durban framework, to take effect after Kyoto expires in 2020, at present all efforts are fragmented and previous failed COP attempts to reach a global treaty do not make reaching a new one look promising.
What needs to happen is a rejuvenated effort to really educate the public worldwide that whatever measures are implemented, there will be birthing pains. They may initially hit the pocket hard and entail sacrifice, but not sticking to carbon emission schemes will cost us more in the long run. Cutting carbon is not about once a year feel good parties to switch off lights for an hour symbolically. It is, like many good medicines and cures, going to hurt a bit and require work, but the results will be well worth it.