Australia is the only nation that has implemented and repealed a carbon emission trading scheme. This reversal was a direct result of what has been termed Australia’s ‘climate wars’ – a saga of political strife and partisanship surrounding the Carbon Pollution Reduction Scheme (CPRS).
The rise and fall of Australia’s Carbon Pollution Reduction Scheme
Then, Prime Minister Kevin Rudd first proposed the CPRS in a White Paper published on 15 December 2008. It was a cornerstone of broader progressive climate change policies to reduce Australia’s greenhouse gas emissions. The CPRS was to take effect in July 2010. However, it failed to gain enough votes in the Senate. It was twice rejected, including by The Greens party, who argued that it was a bad policy that would not lead to any emissions reduction. Groups such as Greenpeace and the Wilderness Society also criticized the policy design due to its low 5 to 15% reduction target. Meanwhile, industry groups such as the Australian Chamber of Commerce and Industry and the Australian Industry Group expressed ‘fear, dismay and reluctance’ about the proposal.
Although support for climate action was widespread, political machinations spread concern and doubt around CPRS goals and mechanisms during this period. Powerful groups sought to undermine political support for action on climate, resulting in the overthrow of the Opposition party pro-climate action leader Malcolm Turnbull on the 1st December 2009 and the election of anti-CPRS Tony Abbott in his place. Tony Abbott had long sought to sow fear and anger amongst the general public by labeling the CPRS a ‘carbon tax’ and stoking anger that it may increase costs to customers and businesses. Pledging to ‘axe the tax,’ this mischaracterization aimed to sway public opinion against the CPRS by equating an emissions trading scheme with increased taxation.
The Labor (centre-left) party won the 2010 federal election despite these undercurrents. The new Prime Minister Julia Gillard passed the new form of emissions trading scheme into law as part of the Clean Energy Futures Package in 2011, which became effective on 1 July 2012. However, the Coalition continued to undermine the scheme. This included an outlandish claim by Queensland Senator Barnaby Joyce that the carbon price would result in a $100 Sunday leg of lamb roast.
This dissent fostered by the opposition was further leveraged when the European carbon price collapsed to as low as AU$3.34/ton in early 2013, leading to the Treasury projecting a carbon price revenue reduction of $6 billion. Tony Abbott opposed any form of carbon pricing and campaigned on a platform to repeal any legislation imposing a price on carbon if the Coalition won the government in the 2013 federal election. In 2013, this came to pass when the Coalition duly won the federal election and repealed the carbon pricing mechanism on the 17th of July, 2014.
Characteristics of the short-lived CRPS
The initial proposed CPRS was a cap and trade system, where the government would set a cap on emissions consistent with a 5-15% reduction from 2000 levels by 2020. This CPRS was superseded by the legislated Climate Energy Act 2011, which established an emissions trading scheme to be preceded by three years of fixed carbon pricing.
The Act came into force on the 1st of July 2012 and implemented a carbon pollution cap, with carbon units issued under the Act for a fixed charge. Around 500 entities were required to buy permits, which only covered emissions from a facility (scope one emission) and not any indirect emissions (scope 2 or 3). A fixed carbon price of AU$23/ton was applied to entities that emitted more than 25,000 tons of CO2-e/year, excluding the agricultural and transport fuel sectors. A new statutory agency called the Climate Change Authority was established to advise the government on caps, undertake periodic reviews, and report on progress. This information was required to inform the plans to transition to a cap-and-trade structure by 2015. Repealing the legislation in 2014 meant that this transition did not occur.
Efficacy and Legacy
As the scheme did not apply to all fossil fuel usage, there were limited opportunities to use the scheme to enforce emission reductions. However, a range of commentators have argued that it successfully reduced emissions. For example, the Guardian reported that companies paying the carbon fee reduced emissions by 7%. Official data from the Clean Energy Regulator found that the 350 largest corporate emitters reduced emissions from 342m tons in 2011-12 to 321m tons in 2012-13. More recent analysis suggests emissions fell 2% while having no negative impact on the economy. Researchers demonstrated that the carbon price significantly increased wholesale electricity prices, which would have decreased the economic feasibility of coal upon which Australia’s energy mix was heavily reliant. This largely positive view of the short-lived scheme continues to influence views today. For example, in March 2024, the Australian Energy Market Commission stated that a price of AU$70/ton was needed to cut emissions, and this price should rise steadily to $420/ton by 2050, in line with Australia’s net zero by 2050 target.
Furthermore, economists widely support the introduction of carbon pricing. Some commentators state that Australia would be better placed on climate policy if the CPRS or trading scheme had been maintained. In contrast, others note that the country’s necessary clean energy transition would have been smoother.
However, while many organizations agree that an economy-wide carbon price ‘polluter pays’ model is the most efficient model for emissions reduction, there is no political appetite for proposing such a system. Indeed, since the legislation was repealed in 2014, no political party has introduced legislation to implement a new emission trading nor explicitly campaigned on a policy of introducing a new emissions trading scheme. Australia’s emissions trading scheme saga illustrates the perils of allowing climate policy to become a partisan battleground. The critical takeaway for nations considering similar schemes is fostering a stable, bipartisan approach to climate policy and ensuring such mechanisms can withstand political shifts. Only when the policy is legislated and supported by politicians of all stripes will it then be able to contribute to global emissions reduction efforts.
This Post was submitted by Climate Scorecard Australia Country Manager Robyn Gulliver.