Australia’s Ill-Fated Emissions Trading System

In 2011 Australia’s federal government, led by Labor PM Julia Gillard, passed the Clean Energy Act. The Act sought to regulate carbon pollution by putting a fixed price on emissions, which would be overseen by a newly-created regulator. Entities that emitted above a certain threshold would need to purchase one “carbon unit” for each tonne of emissions. The price of these units was fixed for the first three years of operation, but from 2015 it would be tied to the EU’s carbon price. From 2015 the government also intended to cap emissions nationally, and would distribute carbon units on a per-entity basis via a mathematical formula.

In this scheme “credits” could only be obtained in two ways: via the Carbon Farming Initiative where Australian farmers were paid to maintain their land as carbon sinks, and by already possessing credit from participation in the Kyoto Protocols. The scheme was limited to Scope 1 emissions (combustion of fuels, fugitive, industrial & landfill emissions) and wouldn’t be applied to fuel, though small changes were made to fuel excise and tax credits in a bid to price pollution from transportation. And, most importantly, the scheme worked. In its three years of operation Australian carbon emissions fell significantly as high-emitting entities changed their behaviour.

Australian greenhouse emissions. Note the significant drop during the “Carbon price period”. Credit Greg Jericho (@GrogsGamut).

So why was the scheme “ill-fated”? The introduction of the Clean Energy Act into Australian parliament created a violent schism in the opposition Liberal-National Party, who had initially supported the legislation. Hardline elements of the Party captured the leadership and began a ruthless campaign against what they now dubbed the “Carbon Tax”. A year after winning the 2013 election the Liberal-Nationals repealed the scheme and replaced it with the Emissions Reduction Fund, a much less-effective mechanism that incentivised companies to embark on emissions reduction projects. The fund is considered an abject failure, as it has failed to sign up many noteworthy participants, given money to suspect projects and failed to deliver any significant emissions cuts. Without a price on carbon pollution emissions skyrocketed, and have been on a sharp upward trend ever since.

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The bitter fight over the emissions trading system ensured any future debate over carbon pricing would be sullied in Australia. Political operators from the time admit the whole fight was just “brutal politics” and their aim was to convince the public that carbon pricing was an attack on their cost of living. Since then a poisonous “economy vs. the environment” mentality has embedded itself into Australian discourse around carbon pollution. Recently in Western Australia, the state EPA attempted to put out draft guidelines for heavily-emitting projects which would require companies to pay offsets. It took just one week for fossil fuel lobbyists and executives to corral the WA government and shut the proposal down. At last year’s federal election Labor’s modest emission reductions target was described as “economy-wrecking”, and so on.

Every Australian state and territory has a net-zero 2050 emissions target, and new climate change legislation is finally making a comeback to Australian parliament. As it becomes clearer that a carbon price will bring policy certainty – and is inevitable given so many other global pricing schemes are popping up – Australian businesses and industry groups are beginning to call for one. But, any new attempt at carbon pricing will have to cut through this mess and will require coordinated pushback against disinformation campaigns.

Take Action

Message:

20% of global greenhouse emissions are covered by some sort of pricing scheme. The world’s biggest economies are mulling stronger carbon pricing initiatives. New trading frameworks are being constructed that take into account how strongly each trading partner is committed to climate action. And to top it off Australia had a solid, effective carbon pricing scheme until it was brought down in a sea of political rancour and misinformation. We risk being left behind in a world honing in on a zero-carbon future, and the least Australia can do is re-impose a simple, tried-and-tested carbon price like those that operate in so many other countries without controversy. You know something’s up when the biggest mining, oil & gas companies are calling for more certainty (and a fairer future) by reinstating a price on carbon pollution in Australia. So will you support their call and look to what comes next? Please lend your support to sensible, proactive, uncontroversial policies and join the push for a new carbon price.

Send your action alert message to:

Ai Group- innes.willox@aigroup.com.au

Australian Chamber of Commerce and Industry – james.pearson@australianchamber.com.au

Business Council of Australia – simon.pryor@bca.com.au

Minerals Council of Australia – tania.constable@minerals.org.au

National Farmers Federation – fsimson@nff.org.au

Resources

https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd1112a/12bd068

https://theconversation.com/explainer-australias-carbon-price-mechanism-in-six-dot-points-4230

https://www.abc.net.au/news/2016-09-02/direct-action-not-as-motivating-as-carbon-tax/7808098

https://www.theguardian.com/environment/2012/jul/16/carbon-price-tax-cap

https://www.theguardian.com/environment/2019/aug/02/coalitions-emissions-reduction-fund-labelled-a-joke-after-first-post-election-auction