Australia Poised to Repeal Carbon Tax

Published June 2, 2014

Australia’s tax on carbon dioxide emissions faces likely repeal after a coalition led by the Liberal Party seats a Senate majority on July 1. The Liberals swept to victory in late 2013 federal elections after making opposition to the carbon tax their central political message. Under Australian law, the new Senators must wait until July 1 to take their seats.

Broken Promise
Former Prime Minister Julia Gillard and the Australian legislature approved the carbon tax in 2011 and implemented it in July 2012. The carbon tax applies mainly to electricity providers and large-scale industrial activity.

During her 2010 election campaign, Gillard had explicitly ruled out implementing a carbon tax. She broke her campaign promise after the elections when a split legislature forced her to reach out to the Green Party to form a majority coalition. Gillard agreed to placate the Greens with a carbon tax, and her majority coalition voted the tax into law.

Political Price Paid
Political momentum quickly shifted against Gillard, and her problems worsened due to several factors. The carbon tax caused rapid increases in electricity prices, hitting voters in their pocketbooks. Moreover, consumers rather than industry and electricity providers, bore the burden of the tax, as industry and electricity suppliers passed the costs on to consumers even while accepting government subsidies designed to lighten the burden of the tax.

Even worse for Gillard, Australia’s carbon dioxide emissions increased after imposition of the tax, even though the nation’s emissions had been flat for several years prior to the carbon tax.

The Liberal Party and its leader, Tony Abbott, campaigned hard on the issue prior to the 2013 federal elections, framing the election as a referendum on the carbon tax. With the Liberal Party coalition gaining a legislative majority in the aftermath of the elections, global warming activists have been furiously attempting to pressure incoming legislators to renege on their campaign promises to eliminate the carbon tax.

Complicating Circumstances
The Liberal coalition, however, appears unwavering in its desire to repeal the carbon tax and has already disbanded much of the federal bureaucracy and programs targeting global warming. Nevertheless, some recent political maneuverings have complicated the repeal process.

Clive Palmer, whose Palmer United Party will control four key seats in the Liberal coalition, objects to Abbott’s plans to make carbon tax repeal part of a controversial budget proposal rather than a standalone bill. Palmer and others are also criticizing Abbott’s proposal for a “Direct Action” plan. The Direct Action plan will incentivize carbon dioxide restrictions through taxpayer subsidies and allow government bureaucrats to institute carbon dioxide reduction programs in place of the carbon tax.

In addition, Abbott is undergoing criticism for supporting an increase in the transportation fuel tax as an alternative means of reducing carbon dioxide emissions.

Leaders Pledge to Follow Through
In interviews with Environment & Climate News, coalition members pledged to follow through on their campaign promises to repeal the carbon tax.

“The government is absolutely committed to scrapping the carbon tax with effect from 1 July. Scrapping the carbon tax will deliver much-needed relief to Australian families,” Minister for the Environment Greg Hunt MP (Liberal-VIC) said.

“The Liberal Democrats do not support retention of the carbon tax and will vote to repeal it. Even if there was consensus on the need to mitigate carbon dioxide emissions, and that is not the case, it is pointless for Australia to damage its economy unless the major economies of the world do the same. When Brazil, Russia, India, China, and the USA all decide carbon dioxide emissions should be reduced, Australia would need to cooperate for trade reasons. Until then, it is quite pointless.” Senator-Elect David Leyonhjelm (LDP-NSW) told Environment & Climate News.

“From 1 July, the government will require the votes of six of the eight minor party senators to pass legislation through the Senate. I will be one of the eight,” said Leyonhjelm.

“We also support a completely free market in energy and would support abolition of the Renewable Energy Target and an end to energy subsidies of all kinds. That would mainly affect solar and wind projects, but there are subsidies for ethanol and some concessions for coal,” Leyonhjelm added.

“I believe it is grossly irresponsible to continue with these [carbon related] policies, which are having major impacts on the Australian economy, without having a proper, independent enquiry—e.g. a Royal Commission—which would be prepared to listen to the many distinguished scientists who disagree with the current global warming/climate change doctrine,” said Senator-Elect Bob Day (Family First-SA).

Scientists Support Repeal
Australian scientists told Environment & Climate News there is no scientific justification for a carbon tax.

Global warming alarm is based on “a theory that has no practical utility because it has not improved weather or climate forecasts, but a theory with tremendous political value for those keen on regulation,” said biologist and science writer Jennifer Marohasy.

“Abolition of the carbon tax will go only some way to reducing pressures on Australian business and households,” Marohasy added. “The so-called Clean Energy Act 2011 is part of a tsunami of regulation and legislation introduced over recent years that has seen the average electricity price in Australia increase by 70 percent in real terms. Next in line must be the mandatory renewable energy target, a government legislated requirement on electricity retailers to source a specific proportion of total electricity sales from renewable energy sources, including wind and solar, with the extraordinary costs paid by all electricity users.”

Meteorologist William Kininmonth said, “The Abbott Government is committed to repealing the so-called Carbon Tax because the tax is demonstrably making Australian industry uncompetitive and putting Australians out of work, and the tax will have no impact on future climate. At the recent election Australian voters demonstrated their agreement that the tax should be abolished and gave Abbott a mandate to repeal the tax.

“To Abbott’s advantage, the Australian people are rapidly losing interest in climate change as a political issue, and a double dissolution over repeal of the Carbon Tax, with the promise of cuts in cost of living and improved job prospects, should see Abbott returned to government with control over the Senate,” Kininmonth added.

Practical Concerns Expressed
Viv Forbes, chairman of the Carbon Sense Coalition, said lawmakers neglected to ask the right questions about carbon dioxide. “They should have asked practical nurserymen, farmers, and meteorologists” prior to imposing the tax, he said.

“Nurserymen would tell them that if you pump carbon dioxide into a greenhouse the plants grow faster, bigger, more drought-tolerant, and more heat-tolerant. Therefore, more carbon dioxide will produce more food,” Forbes explained.

“Farmers would tell them that plants grow faster in the warmth of spring and summer and slower in winter. Any warming by carbon dioxide would tend to warm the higher latitudes so the snow line will shift, thus creating more arable land. It would also tend to produce warmer nights, thus reducing frost damage to crops and opening more land to frost-sensitive crops,” Forbes added.

“Meteorologists would tell them that if global temperatures increase, evaporation from the vast oceans must also increase. What goes up with more evaporation must come down as more rain or snow. Although some areas may become drier, a warmer world is on average a wetter world, producing more food,” Forbes observed.

Rising Electricity Prices
Economist Alex Robson said the carbon tax is based on flawed economic logic.

“The main effect of Australia’s carbon tax has been to significantly increase electricity prices for households and businesses, with no reduction in CO2 emissions. The costs of the tax are expected to increase over time, so that the cumulative costs are expected to be large in relation to Australia’s current GDP,” explained Robson, a senior economics lecturer at Australia’s Griffith University.

“Although a number of Australian reports examined the expected economic costs of the carbon tax, there was never a full cost–benefit analysis of various options. In particular, there was never an assessment of the incremental net benefits to Australia of limiting emissions relative to those of other measures such as adaptation,” Robson noted. “The debate has been framed as a choice between limiting emissions on the one hand and doing nothing on the other.”

“Overall, the policy was poorly thought through, badly implemented, and lacked majority public support before it began. Australia’s carbon tax experience is an interesting case study in how not to go about implementing climate change policy,” Griffith observed.

D. Brady Nelson ([email protected]) is an economist, writer, and speaker who hails from Brisbane, Australia and Milwaukee, Wisconsin and currently resides in Washington DC. He is a regulation expert with The Heartland Institute.