Australia’s brand new second-hand Prime Minister, Kevin Rudd, has just taken bold action to prevent the nation’s fixed carbon price from being scrapped by the opposition. He has done this by scrapping it himself. No longer will Australians be haunted by the spectre of a carbon price potentially high enough to sensibly transition the nation to a low carbon economy. And no longer do they have to fear that their country is taking reasonable steps to protect its citizens from bushfires, droughts, floods, heat waves, and other environmental disasters associated with climate change.
When questioned, Prime Minister Kevin Rudd was definitely not quoted as saying, “I saw that village creeping up on me and destroyed it just in the nick of time to save it from being destroyed by the Coalition.”
Australia’s carbon price was introduced on the first of July last year and was fixed at a $23 per tonne with a set increase of 5% per year for three years. It was scheduled to change to a floating price determined by an Emissions Trading Scheme in the middle of 2015. The price was fixed for the first three years in order to give the market stability and allow businesses to plan ahead. It was designed to result in a 5% decrease in Australia’s CO2 emissions by 2020 and a 50% decrease by 2050. Fortunately for the world the low cost of cutting CO2 emissions through improved efficiency and wind and solar power meant that Australia was well on track to meeting its 2020 target. For example, in the last year emissions from burning coal were 11% below what they were 4 years ago. Because of this there seemed a fair chance that in 2015, rather than let the carbon price fall and reduce government revenue, the target for CO2 cuts would instead be increased. But Kevin Rudd’s premature switch to an Emissions Trading Scheme has pretty much blown that hope out of the water.
Because the cost of cutting emissions is low and the world economy is still depressed, the carbon price that will result from the Emissions Trading Scheme will be low and similar to what it currently is in Europe. It could be as little as $6 per tonne of CO2 as that’s all that may be required to result in a 5% decrease in emissions by 2020. The income tax cuts and benefit increases that the carbon price funded will be kept in their entirety, so the carbon price cut will result in billions of dollars a year in lost revenue for the federal government. Kevin Rudd was quoted as saying the elimination of the fixed carbon price would, “Take the cost of living pressures off Australian families and still act on climate change.” This is of course nonsense, as the Magic Pudding is not currently Australia’s Treasurer. When the Magic Pudding is eaten there is always more than what you started with, but without pudding based magic there is no way ordinary Australians will not end up paying for the lack of revenue in the future, either through increased taxes or decreased services. Economics can be a very dismal science indeed. An influential American once said, “To spend is to tax.” I’m not sure which American said that. I’m thinking Flavor Flav, but I’m not sure if that’s right.
Because some people are kind of dumb, I feel the need to point out that the revenue loss of cutting the carbon price is less than the revenue loss from eliminating it, which is what Australia’s opposition party, the Coalition, intends to do. I will also point out that compared to almost every other developed country Australia’s government debt is quite minimal, so being an extra few billion a year in the red is a cause for concern rather than panic.
So what should Australians do? Well to me it’s clear and it involves Australia’s system of preference voting, which is something I heartily recommend to any country that doesn’t have it. When election time comes vote for the Greens as your first preference and hope they somehow end up holding the balance of power in Parliament again so we can continue to have strong action on cutting carbon emissions. Even if your local Green candidate doesn’t have a snowball’s chance in Darwin of winning, put them down as your first preference anyway, both to send a message to the major political parties and so the Greens will get public funding which depends on first preference votes. But be sure to put the Labor Party before the Coalition in your preferences. While Labor has just cut the carbon price, the Coalition intends to destroy it and also appears likely to weaken or eliminate Australia’s 20% Renewable Energy Target. So no matter how annoyed you may be about the cut in the carbon price, don’t flip out when it comes to your preferences. With regard to protecting the environment and the creatures that depend on it such as humanity, Labor is still much better than the Coalition even though they fall short of where they should be given the danger that climate change poses, both to the world and particularly Australia.