Australia’s repeal of its carbon tax

A lot of (bad) environmental law news has been coming out of Australia recently. The new Liberal government has attempted to dump dredging spoils on the Great Barrier Reef and open up protected Tasmanian forests to logging. But most importantly, the government has repealed the carbon tax enacted by the prior Labor government.

The Australian carbon tax repeal is a cautionary tale for climate policy and politics. For climate policy, it makes clear the political risks of going straight for a carbon tax – no matter how economically efficient it might appear to be in theory. The tax was a simple and clear price signal – it also was a simple and clear political signal. It was easy for opponents to connect the carbon tax to rising energy costs. The elimination of the carbon tax isn’t just a political disaster. It also undermines the investments that various actors might have made in reliance on the tax (e.g., in energy efficiency or renewable energy). Those actors are probably going to be much less likely to rely upon future climate change policies in making investment decisions, since they can’t be sure those won’t be repealed as well. That can only undermine the efforts of any future Australian climate policies to reduce carbon emissions.

The repeal is also a cautionary tale for climate politics. I’ve written about how the best way to ensure lasting climate change policy is to use that policy to build a strong network of interest groups that support climate change policy. That path is what led California voters to resist repealing California’s own climate change regulatory efforts in 2010. So what went wrong in Australia? A lot more research is needed, but perhaps the government just went too far too fast. Australia’s economy is dominated by primary extraction interests, especially coal. The major media sources are also ideologically aligned in favor of those extraction interests. Thus, it is essential for the long term sustainability of climate policy in Australia that countervailing interest groups be nurtured and sustained. That might mean building up solar power (which has lots of potential in Australia), hydropower, and even nuclear (lots of potential in a country with substantial uranium resources). Tools that are not directly threatening to the existing interest groups should be used – not a carbon tax that is a direct assault on those interest groups, and that is easily used as a weapon in a populist campaign. One can only hope that this setback in Australia is temporary.

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Reader Comments

7 Replies to “Australia’s repeal of its carbon tax”

  1. Eric said;
    “….. the best way to ensure lasting climate change policy is to use that policy to build a strong network of interest groups that support climate change policy….”

    Dear Eric,
    The best way to ensure lasting climate change policy it to produce hard, conclusive, scientific proof that carbon dioxide is the driving force in global warming. In the absence of such proof what we are left with is a bunch of uninformed community organizers propounding non-sense. That is why Australia repealed its carbon tax, and the reason why a carbon tax will never be accepted in America.

    We know it’s not easy and we know it hurts, but life is short so it’s time to get over it and move on.
    Cheers

    1. BQRQ, check the IPCC reports and the science cited therein–you will see that there is undisputed scientific proof that man made CO2 emissions are driving global warming. Australia repealed their CPM for other reasons [see below].

  2. Sounds like the Schwarzenegger election and slashing the car tax.
    Immediate pain for long-term gain is a hard sell and an easy target.
    And immediate tax relief is political gold!

    But voters don’t always mind if you kick costs down the road with things like bonds.
    Or by allocating (for free!) pieces of a market that you’ll devalue later (cap and trade).

    Somehow we have to get the message through to voters that their “gimme and take” behavior is wrong.
    We may have to resort to shaming.

  3. Eric,

    I don’t disagree with lots of what you are saying but want to make one comment about your use of terminology.

    Why do you think people persist in referring to the Australian Carbon Pricing Mechanism as a carbon tax? My understanding of the legislation – and this is from speaking with representatives of the Australian Government when they were visiting California in 2012 – was that it was a tax for just two years before a transition, to have occurred in 2015 – to a cap-and-trade. Australia was actively involved in discussions to link with both California and the EU for this second phase prior to the fall of the Gillard government.

    My own view is that the CPM had some serious flaws – mostly the way that it structured giveaways to industry, especially brown coal fired power plants, and its heavy reliance on offsets, especially from Australia’s agricultural sector. I’m personally glad that California never did get to the point of serious linkage discussions for these reasons (esp the offsets). But it is just not correct to call it a carbon tax, except in its introductory period.

    The first person who called it a carbon tax was Tony Abbott – in advertising related to his election campaigns (I saw some of these while teaching at Sydney Law School). I think supporters of carbon pricing (and climate policy generally) should be careful not to adopt the language of those who oppose it.

    Warm regards,
    Michael

    1. Excellent question Michael. I don’t know why the carbon tax language caught on. You’re right that the government switched it over to cap-and-trade. Part of it might just be inertia in how short-hand language is used in the political debate — once that short-hand language gets traction it’s very hard to change. (E.g., even President Obama eventually had to embrace the term Obamacare for the ACA.) Part of it might be that, while there can be significant differences in how cap-and-trade and taxes work, from a consumer’s perspective they might be very similar (depending on the extent to which costs are passed through by the regulated/taxed parties). I don’t know enough about the Australian system to know if that’s the case or not, but it is a risk to be considered when you’re designing these systems.

      The lesson I would take from this is that it’s all the more important to take the political landscape into account when you design these systems. There might not have been all that much to do about it in the context of Australia — they started with a carbon tax, realized that had problems, and switched over, but by then it was too late in terms of how people thought about the policy instruments. There might be ways to tweak a cap-and-trade system (e.g., doing some rebates to consumers) that reduce the ability of other parties to conflate the differences between cap-and-trade and a carbon tax. After all, if you’re getting some money on a regular basis, it’s harder to call it a tax. (But that means you should make the payments very high visibility — kind of like the rebate checks that the US government sent out in 2008 to try and spur spending by consumers.)

    2. Mr. Michael Wara said:
      “…… I think supporters of carbon pricing (and climate policy generally) should be careful not to adopt the language of those who oppose it…”

      Dear Mr. Wara,
      Supporters of carbon pricing (and climate policy generally) should be careful not to adopt erroneous “scientific” language
      and other such gimmicks. Intelligent people have learned to separate fact from fiction in the climate debate. Seek the truth. Truth always wins in the end. Those who persist in denying truth eventually unmask their falsehood and that is why Australia repealed its so-called “Carbon Pricing Mechanism” tax.

  4. “So what went wrong in Australia?”

    The influence of the US right on Australian politics and the funding support given by groups like the Koch Bros to ‘think tanks’ that have taken control of the political debate.

    What’s going wrong here in Aus is the increasing influence of the US on policies.

    http://www.crikey.com.au/2012/02/15/leaked-docs-from-climate-denying-think-tank-reveal-strategy/

    There is plenty of evidence to what has been going on. The cards are being stacked by people who have no interest is environmental values and make cash from whatever without any bother for anyone or anything.

    It isn’t limited to climate policy, it is any policy that gets in the road of profit.

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Eric Biber

Eric Biber is a specialist in conservation biology, land-use planning and public lands law. Biber brings technical and legal scholarship to the field of environmental law…

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