Axe the Tax: Why the left should not support the carbon price

Monday, 24 March, 2014

Illustrations by Kitty Chrystal
Infographic by Kevin Hawkins

What has become of the Clean Energy Act (CEA)? This once great milestone in the war on climate change has reduced the political conversation on carbon emissions to an endless squabble about electricity prices and loopholes. Meanwhile, CO2 concentrations in the atmosphere march inexorably past 400 parts per million, and we’re marching inexorably toward the sportiest, road-trippiest Senate ever. Perhaps it’s time we review our climate policy.

First, let’s not pretend that the so-called carbon tax has zero impact on people’s finances. What else is a pricing mechanism supposed to do, anyway? It makes the regulated stuff more expensive. Economists generally agree that the cost boils down to $10 per week on households, which—depending on who you are—might mean the difference between morning coffees and morning lattes, or the difference between breakfast and no breakfast. Liberals have never been particularly nice to poor folks, but it doesn’t change the fact that their line about the carbon tax being an electricity tax, if not misleading, sounds true to working class people.

The numbers tell us that the CEA is working, but only just. Since its introduction, the Department of the Environment estimates a drop in CO2 emissions of 0.3 per cent, while the National Electricity Market’s data shows electricity sector emissions have decreased by 3.4 per cent yearly since 2008. How much of this is the result of carbon pricing? We will never know for sure, but between the demands of the Mandatory Renewable Energy Target (MRET) and investments in clean energy by the Clean Energy Finance Corporation (CEFC), probably not much. When the price per tonne drops from $25.40 to a floating price in 2015, it will be even less effective.

Paradoxically, the polluters themselves may not be as upset about carbon pricing as they would have us believe. The government earned $4.13 billion last year from selling permits to polluters, but it also gave away $2.4 billion in free permits to the same polluters (most of which were massive power companies and resource refineries). The rest of the cost can be passed onto the consumer as a ‘production cost’. Since carbon footprint doesn’t vary consistently with income, the final cost constitutes a regressive tax—it affects the poor more than the rich. Unsurprisingly, most of this is because the polluters made sure to have their lobbyists poke as many holes in the CEA as possible before it passed.

So, let’s recap. Carbon pricing is scary to working people, doesn’t cut emissions much, is full of loopholes, and doesn’t force polluters to pay up. We’re going to need a Plan B.

Fortunately, there are bits of the CEA that work. Let’s start with those. We know that the CEFC has been making good investments in renewable energy projects. It’s limited in that it can only invest in projects from other developers, rather than coming up with its own. However, it’s still been able to add 500 megawatts of generation capacity, abating 3.88 million tonnes of CO2 each year. Let’s incorporate publicly owned clean energy infrastructure investment into the national budget, along with public transport and high-speed rail to cut transport emissions.

We also have a MRET which demands that by 2020, 20 per cent of electricity generated here must come from renewables. Since the energy sector is responsible for 77 per cent of emissions here, a well-enforced MRET can cut emissions without using convoluted price signals that can eventually be passed to the wider population. Let’s push for stricter emissions targets while monitoring energy prices to make sure they stay within reasonable levels. Consumers will get affordable clean energy quicker, and power companies can breathe easy on the day that oil and coal run out.

Finally, instead of a carbon pricing system, let’s switch the funding for this progressive policy to the traditional progressive funding source: filthy rich people and the corporations they run. They’re the people most responsible for high emissions, and we were going to raise the mining and corporate tax rates anyway. Bump those up from 30 per cent to 40 per cent, throw in a 75 per cent tax rate on the top one per cent and we’ll have double the $37 billion per year that Beyond Zero Emissions says we’ll need to go carbon neutral in the next decade. Plus, we won’t scare off low-income earners.

Carbon Neutral is our generation’s Apollo moment, so we need bold policies to get us there. The proposals here mesh beautifully with the social-democratic platform of wealth redistribution, public services, and social justice. In the face of criticism from climate skeptics and their allies in Parliament, it’s important that Labor, the Greens and progressive groups in Australia keep their options open and their eyes on the finish line. Up until now, we’ve had to choose between a carbon tax and the farce that is Direct Action. If we can offer a better third option with popular support, then Abbott can axe away while everybody moves on.