What price the carbon price?

The grand goal of carbon pricing has decimated many a political career over the years. But now the public and business will see the cost of 'scrapping the tax'.

We all know that the act of 'putting a price on carbon' has contributed to the downfall of three Australian prime ministers and two opposition leaders.

What might not be as well known is that carbon pricing has gone relatively unnoticed in other countries, particularly in Europe, but also in our close neighbour New Zealand.

When I was working in the OECD on emissions trading from 2002-2004, the European Commission was designing and implementing an emissions trading scheme with little attention from anyone in the community. This followed schemes that had been implemented in the Netherlands, Denmark, Norway and the UK, with no outcry from the general populace.

So why all the fuss in Australia? Is carbon pricing just another political football?

And what are the implications of Australia moving away from an emissions trading scheme?

Australia had been leading the world in emissions trading design in the late 1990s. New South Wales had already introduced an emissions trading scheme. The International Energy Agency was drawing off much of the early work of Australia in developing some of the leading international thinking in emissions trading. When the Howard government established the Australian Greenhouse Office in late 1997, this was the world's first government agency dedicated to climate change.

Part of the work of the AGO was to produce four papers on emissions trading:

1) Principles and coverage;

2) Allocation;

3) Carbon crediting; and

4) Designing the market.

When I worked on emissions trading with the OECD in 2002, much of this work had informed the design of emissions trading in the UK, Denmark, the Netherlands, as well as in the international climate change negotiations – but not in Australia.

By the time I returned to Australia in 2004, emissions trading was a dirty word, it had been removed from the Howard government's agenda, and Howard had backed George W. Bush in not ratifying the Kyoto Protocol. Opposition leader Mark Latham proposed an emissions trading scheme as part of his election platform, but this never came to pass.

Then, once again, the 2007 election was fought on climate change. Australia was in its fifth year of drought, Al Gore had released the film An Inconvenient Truth and the movie The Day after Tomorrow had moved the climate debate in the community. Through drought response measures such as water restrictions in major capitals and hardship on the land, both rural and urban Australians were impacted in some way, even if that meant not being able to wash your car in the driveway.

Labor leader Kevin Rudd ran his campaign on climate change, emissions trading, and ratifying the Kyoto Protocol.

I had been asked to work on designing an emissions trading scheme in the Department of Prime Minister and Cabinet in the dwindling days of the Howard government. Interestingly, after Howard lost the election, much of this design work went into designing Rudd's Carbon Pollution Reduction Scheme. The broad design principles were the same – wide coverage of sectors, minimising free allocation of permits to sectors that were emissions intensive or trade exposed, and international linking.

Howard never actually committed to implementing an emissions trading scheme, however all the design work had been done to make Rudd's implementation a lot easier. The scheme under Rudd was comprehensive – it had been designed to address the issues that had been problems in other countries.

Emissions trading at this stage had enjoyed the support of the Liberals, until Malcolm Turnbull lost the leadership, but the CPRS failed to convince the full spectrum of the environment movement, or the Greens senators, and didn't pass parliament. Part of the reason for the lack of support was because the emissions reduction target was weak and unambitious, certainly not enough to seriously stabilise emissions to safe levels recommended by the IPCC.

Emissions trading was once more 'off the agenda' even though an emissions trading division continued to exist in the Department of Climate Change, now rebadged as the carbon markets division.

Gillard was then elected promising never to introduce a carbon tax, and despite the wide misconceptions on this, she never did. Part of the deal with the minority parties was to implement an emissions trading scheme, with a fixed price, until Labor and the Greens could agree on an emissions reduction target for 2020 – the scheme was, again, an emissions trading scheme with a short fixed price period until the target issue could be resolved.

We all know happened from there. Abbott got hold of the word tax and we heard nothing but "scrap the tax" for ever after. The media held the Abbott line with little question or analysis and swallowed the Abbott message hook, line and sinker. No one seriously challenged Abbott on the issue, there was no deeper debate. The Australian public also swallowed the pill and fed the frenzy. Such a simple message to swallow. For some reason, each of us paying approximately $10 per week under an emissions trading scheme is too high a price to pay to protect the climate and our future.

But what does 'scrapping the tax' actually mean? Firstly, it means that there will be no cap on emissions. The emissions trading scheme is a cap and trade scheme – in other words it 'caps' or limits emissions with a defined and legislated target. Scrapping the tax means that there is no longer a legislated target, the weak 5 per cent reduction 'promised' by the Coalition becomes an even weaker notional or aspirational target, restricted by the quantum of funds allocated by the government to 'buy' abatement, a quantum which is steadily being eroded the government. An emissions trading scheme guarantees that an emissions reduction target is achieved. Direct action does not. While the merits or otherwise of a carbon price are often confused with the emissions reduction target that is set, soft emissions targets become even softer with no legislated carbon price.

Secondly, scrapping the tax means that the legislated institutions established to support and implement the carbon price and emissions reductions will no longer exist. We have already seen the demise of the Climate Commission. The Climate Change Authority, the body established to provide independent advice to government on emissions reduction targets, will no longer exist. Other institutions, such as the Clean Energy Finance Corporation, and the Clean Energy Regulator are under threat.

Thirdly, the policy and investment certainty that industry called for for years before the trading scheme will disappear. In 2012 I spoke to many companies implementing the carbon price who were getting on with the job of applying the carbon price into their activities. The carbon price meant that a price on emissions was factored into short-, medium- and long-term investment decisions by these major corporations, with emissions reductions to flow well into the future. This investment and policy certainty will now go.

Fourthly, under an emissions trading scheme, the polluters pay for abatement, whereas under direct action the government, and the Australian people, pay for it. This completely flips the incentives for climate action. What incentives are there for polluters to reduce emissions when a price is not factored into their activities?

Lastly, Abbott's campaign against the carbon price promised that 'scrapping the tax' would reduce the cost of living and the price of energy. When all is said and done, and when electricity prices and gas prices don't fall after the' tax is scrapped', Australians will realise that they were well and truly duped by these hollow promises.

Dr Stephen Bygrave is chief executive of Beyond Zero Emissions. He has worked nationally and internationally on climate change for 20 years.

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