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Australia scraps carbon tax

18 July 2014

Australia’s carbon tax has been repealed, leaving the country with no official policy to achieve the minimum 5% greenhouse emissions reduction target it has signed up to in international agreements. The Liberal-led  government said households will be better off by an average $550 following the move.

Stock image
Stock image

The tax was $25.40 a tonne and the repeal will cost the budget around $7bn over the next four years as around 350 businesses, mainly electricity generators and big manufacturers, no longer have to pay the tax. 

The government argued the carbon pricing scheme had been ineffective, although national emissions fell by 0.8% in the first calendar year of its operation, the largest fall in 24 years of records.

Since the tax began, emissions from the east coast electricity market have fallen 11%, but emissions from other sources – especially coal and gas -have increased.

The Australian Competition and Consumer Commission’s special powers are to monitor and enforce only electricity and gas price reductions. Electricity bills will rise, but by an estimated 9% less than they otherwise would. Gas bills will rise by an estimated 7% less than they would have with the tax still in place.

The government says it will now achieve the target of a 5% reduction in Australian emissions (compared with 2000 levels by 2020) through its Direct Action policy, which will offer $2.5bn in competitive grants over the next four years to companies and organisations voluntarily reducing emissions. The policy is voluntary and puts no overall cap on emissions.

The Business Council of Australia, the Minerals Council of Australia and the Australian Industry Group called on the government to “develop and implement a cost-effective emissions reduction fund” as “part of a toolkit of measures to reduce emissions”.

But the Climate Institute thinktank said that “by repealing laws that price and limit carbon pollution, Australia today became the world’s first country to dismantle a functioning and effective carbon market, taking a monumentally reckless backward leap even as other major countries are stepping up climate action”.

Opposition leader Bill Shorten, said Labor’s climate policy for the next election would include an emissions trading scheme and accused Abbott of “sleepwalking Australia towards an environmental and economic disaster”.

The move comes after eight years of bitter political debate, during which climate policy dominated three election campaigns and contributed to the fall of two prime ministers. Current prime minister Tony Abbott’s gave a “pledge in blood” to “axe the tax”, but initially had difficulty getting the measure past Australia’s upper house, the Senate. The government position was finally backed by a Senate majority in a vote on July 17.

Australia is the first major country to scrap its carbon tax, although the Canadian government was re-elected on a platform hostile to emissions trading.

Emissions trading schemes are currently operational in the EU, New Zealand, Japan and South Korea, as well as in some US states and Canadian provinces such as California and Quebec. China has a network of seven pilot schemes in the design and planning stages and has said it will introduce a country-wide system in the future.


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