Arguments
Australia Legislates an Emissions Trading Scheme
Posted on 10 November 2011 by alan_marshall
A Moment to Savor!
On Tuesday, November 8, 2011, the Senate, or upper house, of the Australian Parliament voted by 36 to 32 to pass the Clean Energy Future legislation to put a price on carbon. This follows its passage through the lower house on October 12, 2011 by 74 votes to 72. The package of 18 bills is now law, with the bills that price carbon coming into effect on July 1, 2012, and the bill which compensates households taking effect in May 2012. The prime minister, Julia Gillard (photo at left), is right to describe this as historic legislation. At her press conference (click here for full transcript) she said:
Today Australia has a price on carbon as the law of our land. This comes after a quarter of a century of scientific warnings, 37 parliamentary inquiries and years of bitter debate and division.
Al Gore was equally exuberant:
With this vote, the world has turned a pivotal corner in the collective effort to solve the climate crisis.
Australia had been dragging its feet since 1997 on real action to combat climate change, so this law is long overdue. For John Cook and myself, who have been playing our part to try to ensure our politicians understand the science, it is a moment to savor!
The scheme requires around 500 of the nation’s largest emitters to purchase fixed-price permits for their CO2eq emissions at a starting price of $A23 per tonne (metric ton). Initially, some industries will receive a percentage of their permits free depending on their degree of trade exposure. Agriculture and private transport are excluded from the scheme. The latter was excluded in order to secure passage through the lower house. SkS believes that the scheme would be improved by its inclusion.
As stated in Appendix 1 of the Copenhagen Accord, Australia is committed unconditionally to reduce emissions by 5% below 2000 levels by 2020. This equates to 160 million tonnes of CO2eq in that year. Many would see this as inadequate, and indeed it is, though I should point out that with Australia’s growing population, it represents a reduction of 23% on a per-capita basis.
In 2015, this carbon pricing scheme becomes a fully fledged emissions trading scheme (ETS), with the price of permits set by the market, and an overall cap that will achieve the required 5% reduction. The scheme has the flexibility to tighten the cap in the context of significant global efforts to reduce emissions. Under the Copenhagen Accord, Australia has committed to "reduce its greenhouse gas emissions by 25% on 2000 levels by 2020 if the world agrees to an ambitious global deal capable of stabilising levels of greenhouse gases in the atmosphere at 450 ppm CO2eq or lower, and by up to 15% by 2020 if there is a global agreement which falls short of securing atmospheric stabilisation at 450 ppm CO2eq and under which major developing economies commit to substantially restrain emissions and advanced economies take on commitments comparable to Australia's". Commendably, this review of the cap will be conducted by an independent body, as it is the UK.
A Long Hard Battle for Science
In the aftermath of Al Gore’s influential film “An Inconvenient Truth”, and the report by UK economist Sir Nicholas Stern, a majority of the Australian public came to understand that climate change was real and potentially dangerous. In this political climate, both major political parties went to the November 2007 election with an ETS as part of their platform. That election was won by the Labor Party under Kevin Rudd. He succeeded in getting his Carbon Pollution Reduction Scheme, a forerunner of the Clean Energy Future bills, through the lower house, only to have it defeated in the Senate. In hindsight, he should have negotiated with the Greens, rather than the centre-right Liberals, who were by then split on the science.
As Gore’s film started to fade from public memory, a number of misinformers, for what seemed to be primarily ideological reasons, began to contest what is the overwhelming consensus of climate scientists. In the United States and Australia, but notably not in Europe or elsewhere, these misinformers received undue attention from conservative media and politicians.
In Australia, the Leader of the Opposition, Tony Abbott, has acknowledged how much he has been influenced by Ian Plimer, who is a notorious misinformer. At SkS, we have previously examined Abbott's climate myths. With the public becoming confused about the science, Abbott saw a political opportunity. In the lead up the August 2010 election, he ran an effective scare campaign over what he claimed would be an onerous tax. (Treasury modeling actually shows the impact on prices to be a once-off rise of 0.7%, for which 2 in 3 households would receive at least equal compensation through tax cuts and adjustments to welfare payments). So effective was Tony Abbott's campaign that the result of the election was a hung parliament, with his Liberal-national Coalition and the Labor Party under Julia Gillard each commanding 72 votes. For three nervous weeks, a mechanism to price carbon hung in the balance, as the nation waited to see who the 5 independents and one Green MP would support. To the credit of the majority of these men, they understood climate science well. They aligned themselves 4 to 2 for Gillard, and a government was formed. Gillard worked productively with independents and the Green MP in a multi-party committee to fashion the legislation that has now passed into law.
While questioning the science, Tony Abbott did put forward an alternative policy for mitigating emissions. I have published a critical examination of that policy on this web site.
The passage of the legislation is a defeat not just for Tony Abbott and the climate change "skeptics", but also for Rupert Murdoch, owner of Fox News. His newspapers have worked tirelessly to oppose both the Labor government and its climate change policies.
SkS Continues to be Non-Partisan
Lest there be any accusations of political bias, we affirm that SkS' interest in politics is solely a desire that decision-makers and voters understand the consensus science. We are not in the business of promoting one philosophy or ideology over another. In fact, while taking the current conservative parties in Australia to task for their lack of commitment to tackling climate change, we commend the former Liberal leader, Malcolm Turnbull, for his respect for the science. We applaud the conservative Government of the UK under David Cameron for their commitment to halve 1990 emissions by 2025. We approve of the conservative government of New Zealand under John Key for introducing their ETS for energy and transport in 2010. We also commend Arnold Schwarzenegger, former Republican governor of California, for the coming introduction of an ETS (cap and trade scheme) in that state on January 1, 2013.
More Still Needs to be Done
While the Clean Energy Future legislation, and the actions by other nations listed above, are all commendable, international efforts will need to be ramped up if we are to have a chance of avoiding dangerous climate change. At Copenhagen, scientists were seeking a 25% to 40% reduction in emissions from the developed nations, and commitments to date fall well short of that target. In the upcoming COP 17 conference in Durban and beyond, the science needs to set the agenda.
Again congratulations on a job well done.
Now for round 2. The fight to stop the legislation being repealed. (Happily, that is likely to be a mammoth tricky task for any would-be repealer.)
Yes, Australian is fortunate in that both houses of parliament have the option to set time limits for debate. If we had to contend with the filibuster (as used in the US Senate in violation of the intentions of your founding fathers) our parliament would be in perpetual gridlock. At the moment the hope for the US is in actions taken by the states, and I congratulate the good people of California on their cap and trade scheme, which will commence 6 months ahead of the scheme in Australia. As California is the 8th largest economy in the world, hopefully other states will follow suit.
But who cares: the bills are passed. It's not even the end of the beginning of all that has to be done, but it's worth celebrating. And getting the date right :D
(for overseas readers - 'The Australian' is the only nation-wide daily newspaper in Australia, owned by Murdoch's News Corporation)
Thanks. Date fixed.
Repealing would be pretty easy for the Coalition if they win the next election, even with a hostile Senate. In Australia, if the Senate blocks a law it becomes a double-dissolution trigger. The lower house Govt can then use the trigger to call on the Governor-General to dissolve both houses of Parliament and force a full double-house federal election. Coalition could do this in the hope of gaining control of both houses, which would allow them to repeal the tax unopposed.
Also, the state of some of the current Independents could end with them withdrawing confidence in the current lower house. This would force a federal election (since the Labor party couldn't guarantee control of the lower house). This again could lead to a double-dissolution, but earlier than the above "normal" situation. The likelihood of this occurring is slim, but still a chance in Australia's current unstable political environment.
And speaking of ruination - Dale, if the Coalition forced a double dissolution in order to repeal the price on carbon, they would ultimately be consigning themselves to political history, although not before doing untold climatic and economic damage. There's a lot of ignorance in the Australian lay public, but even a cynic like me would be hard-pressed to believe that Australians are so ignorance that they'd tolerate the Coalition accelerating the country toward the New Dark Ages.
More likely, Malcolm Turnbull will slip the stiletto through Abbott's kidney at the next opportune chance, and quietly leave the Labor/Green initiatives in place so that he can eventually "own" the revolution in the eyes of the ignorant voting public, if not in the eyes of objective history.
In my family of 4 persons worked in coal mines. None of them lived to retirement ...
I have, however, one question: where the money will go to a new quasi-tax?
Is there a program to use them?
In Europe, a large part goes back to the fuel companies which develop and fund research into green energy, invest in it (so monopolize the energy market), but also investing in Carbon Capture Storage ...
Also, there is a trend appearing in all the polls-Labor & Gillard are slowly but surely creeping back towards a winning position, whilst the public appear to be growing tired of Abbott's Dr. No routine. When the Carbon Price doesn't bring about the predicted apocalypse, I predict that the polls will go even more against the Coalition.
Even if the Coalition *does* win the next election, they won't be able to force a double dissolution until around late 2014 to early 2015-& even then its believed that such an election will favor minor parties in the Senate-which could leave a Coalition Government with an even *more* hostile senate.
http://www.nytimes.com/2009/12/07/opinion/07hansen.html
We often forget, not matter what the science says, a political coalition will have to carry through the necessary measures. Forming such a coalition is not easy - in the richest country in the world, it seems impossible.
Gillard seems to be able to keenly judge "the art of the possible". I wish Barack Obama had the same skills, but (as someone pointed out) he has to deal with a broken political system.
"Carbon pricing scheme"
Sheesh...they got it done in the end, but they've done a horrible job of selling it. They haven't managed to convince anyone to call it anything other than something that sounds purely negative - the big bad government taxing them more, although this is certainly on the media too. I mean, they could just as well call it the "Clean Energy Promotion and Income Tax Relief" bill, and it would be just as accurate. Instead, Australians come away with the false impression that it's simply a tax on them with nothing positive. Maybe someone can find a poll on this, but how many Australians know that there are income tax offsets that will put many of them ahead?
As the economy continues to fail to fall apart post CT what has 'Dr. No' got left? Turnbull then becomes the obvious leader of the Her Majesty's Loyal Opposition. Then neither major Australian party in denial - of AGW, anyway - woohoo!
Although I agree with Bernard that some will attempt to sheet home the global impact of Berlusconi's egregious incompetence to the Great Big New Tax, I seriously doubt that people are that stupid.
“Capitalism vs. the Climate”, The Nation (USA), Nov 28, 2011 print edition.
Click here to access this in-depth and thought-provoking, cover story by Naomi Klein.
The revenue raised by pricing carbon will be used for legitimate purposes. All taxpayers with incomes below $80,000 will get tax cuts - most about $300 a year. Combined with adjustments to welfare payments, this means that 55% of revenue will be returned to households, with 2 in 3 receiving compensation at least equal to the impact on their cost of living. The balance of the revenue will be used for industry assistance and a renewable energy investment fund.
Tony Abbot describes this as a “money churn”, but he missed the point. The price differential between products and services that are emissions intensive, and those that are not, will still provide the same incentive to alter spending behaviour, regardless of how much compensation is paid.
When Tony Abbott seized the Liberal Party leadership from Malcolm Turnbull in December 2009, he won by just 42 votes to 41. As the impacts of climate change become ever clearer, Abbott’s support is unlikely to increase. And when we consider that not just Turnbull, but 3 other former leaders of the Liberal Party have supported pricing carbon, Abbott is beginning to look a bit lonely.
With David Cameron, John Key, Arnold Schwarzenegger and Gordon Campbell, we have conservative leaders from 4 similar English speaking economies taking firm action to reduce CO2 emissions. These men ought to serve as good role models for whoever leads the Liberal Party in Australia.
However, in other respects, is it worth boasting about? There are no performance targets associated with the legislation and the purely nominal target of reducing carbon emissions by 5% below 2000 level is just that – nominal and giving a poor example to major emitting countries. Worse, government is very unclear about the actual level of reduction it aims to achieve and, when clarity is sought on this point, it refuses to provide any response.
One might, at the very least, have hoped for orderly reduction in dependence on and use of fossil fuels. Instead we get repeated, categorical assurances from the Minister for Climate Change that coal has a long and lucrative future and investment in it is encouraged.
The legislation provides a good structure for reduction of carbon emissions and the orderly, rapid abandonment of fossil fuels and development of the innovative technology required to achieve this. Indications are that there is far too little political will to actually achieve these outcomes. Actions speak louder than words – particularly ambivalent ones.
So - for those of us concerned about real climate action - the carbon tax achieves nothing.
"Some of the money raised in the first 3 years will be going to an Independent Authority that will invest the money in Clean Energy Projects. Luckily, thanks to the efforts of The Greens & Independents-in both Houses-neither Coal Seam Gas nor Carbon Capture & Storage will be included for funding by said Authority."
Govt doesn't have a great track record of investing in anything!!! Insulation....schools.... etc. Why not give tax breaks or investment incentives to private companies to come up with the technology? And what do you mean 'luckily'? What you are saying is "luckily" the govt decided not to invest in the only two currently viable technologies that could replace some of our peak power load. How is that lucky?
I admire your idealistic view of the world - but idealism won't get us anywhere....
As a former member of an Australian political party who drafted some policies relating to environmental matters, I'm just pleased to see that the legislation has put it's foot through the door.
The first year of operation will allow the public to see that carbon pricing will not cause the sky to fall - and thus leave those who would repeal the tax with so much less wind in their sails.
Subsequent years will most likely see changes and adjustments made to the existing legislation.
The biggest hurdle has been crossed, now it just a matter of keeping the bill in law and ammending and improving it to suit needs.
All of us who post here at SkS know to be very careful when posting on politically related topics.
The Clean Energy Authority is to be an independant body, not a government department.
I'll not make any comment about either the Labor party, the Greens, nor the independants. This site is not the forum for such discussions.
This site is concerned with climate science. Right now it appears that the Australian Federal Parliament has heeded the word from climate scientists. Any comments we make regarding the efficacy of political policies should be viewed through the lens of peer reviewed science. There are several topic threads at this site where discussions of how to meet base load power generation can be found.
Such matters are best discussed on the appropriate threads.
This entire world is living a Las Vegas type of life based on artificially cheap energy and countless other "externalized costs."
Heck when you see how Wall Street, big banks and the whole she-bang work, you could say it's living off of money that doesn't even exist.
But the ship, the physical support of all this madness, has a bow and a stern, it is finite. The boundaries are slowly catching up with us and our outrageously careless lifestyle. Australian are blessed to have a chance to learn about the boundaries while there is still room and the country is rich enbough to manage a low-pain transition. Consider yourself lucky indeed.
There is indeed more than one way to price GHG emissions, and the Fee and Dividend approach advocated by James Hansen and The Climate Lobby has, in my opinion, a lot to recommend it. As noted by Tom51@ 15, it was successfully implemented by British Columbia in 2008. Its present price of $25 per ton of CO2, and annual increment of $5 per ton, happens to be nearly identical to a proposal I independently put to both the Austalian Labor and Liberal parties last year as part of my personal campaign to get a price on carbon.
Nevertheless, I fully support the scheme introduced by the Gillard government. It is effectively a hybrid scheme, acting as an incrementing carbon tax until 2015, when it transforms into a cap and trade scheme through floating the price of permits.
There are two features of Cap and Trade schemes that are not presently part of the Fee and Dividend approach, but could be incorporated if so desired. The first is the price on GHGs other than CO2. For example, the Australian scheme charges dirty coal mines for their fugitive methane emissions at $23 per tonne of CO2eq. As a result, the biggest such miner, Gujarat, has already made plans to reduce its emissions by a whopping 83% by simple measures to control ventilation and drain gases for flaring. That’s how a carbon price works!
The second feature is carbon credits, the ability for businesses to purchase offsets to reduce their liability. James Hansen thinks these are dodgy, and indeed some are, but properly audited offsets need to be part of the mechanism so that we can begin to sequester, through both biological and industrial means, the excess CO2 already in the atmosphere. We are now at 393 ppm, and the consensus is that we need to get back below 350 ppm.
I think we need to avoid a fight between supporters of Cap and Trade, Fee and Dividend, Cap and Dividend (which caps production) and any of the other proposed mechanisms. Our struggle is rather with those who deny the science of climate change and would do nothing to reduce emissions.
The above schemes, properly implemented, can all radically curb emissions, so I dissent with Karamanski @ 13 on that point. Both Cap and Trade and Fee and Dividend are capable of implementation on a provincial, national or global level. There is also no reason in principle why a Cap and Trade system cannot return a 100% dividend to citizens. My present position is that we need a principled formula, such as some version of Contraction and Convergence, for setting emission reduction targets for each nation. Then each country can decide for itself what mechanism to use to achieve its target.
How about nuclear power ? Who did all the investing in that ?
Huh?!
Have you not heard of the Snowy Project?
Have you not heard of Tasmania - you know, one of the states of the Commonwealth of Australia?
Do you really need to have the truth spelled out for you?
Really? Seriously?
China will have about 25 times Australia's coal fired capacity by 2020, so if Australia's Carbon Tax reduces its carbon emissions by 5 or 10%, we are talking about saving about 36 hours of China's coal fired emissions per year. The effect on the planet will be slight if not unmeasurable. Australia is a major coal exporter to China, and the Gillard Govt approves such exports.
For the Australian Carbon Tax to have any global effect - the major global emitters need be on board.
Perhaps contributors to this debate could assess the liklihood of the USA, Europe, China, India enacting similar carbon taxes which will have the effect of reducing global carbon emissions.
Yes, but if China uses Australia's excuse (the USA isn't cutting emissions) and the USA uses the same excuse (China and Australia aren't cutting emissions) and if Europe abandons its investment (we can't compete because China, Australia, and the USA aren't cutting emissions) then the world goes to hell and we all lose.
Australia needs to do this, and to step forward and put pressure on other nations to follow suit, who in turn must also put pressure on other nations to follow suit.
The USA should be considered a laughing stock and the black sheep of the world on emissions and climate change. Getting there means that the rest of the world needs to lead where the USA is failing to do so.
The argument that Australia should stay in the herd and remain one of the sheep because other flocks are bigger and eating the same grass just doesn't cut it.
This is a very, very dangerous game of chicken to be playing, waiting to see who will cut emissions first.
I'd forgotten about that!
I actually wrote a long series of posts last year specifically applying game theory to climate change policy decisions, culminating in the application of the Tragedy of the Commons:
The Game of Climate Change -- Part 1
The Game of Climate Change -- Part 2
The Game of Climate Change -- Part 3
While USA emissions are reported to be falling, China’s are rising at an alarming rate and show absolutely no sign of peaking let alone declining. India is destined to increase its emissions and, despite declarations of good intent, so are those of Russia, Japan and Korea.
Major emitters refusing to make verified emission reductions, must be persuaded to do so by adopting renewable technologies able to produce base load energy, even though it costs more than using coal. Australian legislation gives it the edge in developing and demonstrating this technology. It already leads the way in heat mining and could now become a leader in more efficient production and storage of electricity generated from solar energy.
Another wee piece of good news - the Fossil Fuel Levy, which has been in place in Scotland since 1996, has finally yielded significant funds (£103m) for the burgeoning renewables industry in Scotland, despite some political wrangling. Another £103m is going to the Green Bank which is further supporting renewables investment. The Fossil Fuel Levy has now been replaced by the Climate Change Levy, which taxes non-domestic FF power in the UK - not quite the same as the Australian price on carbon, but a step in the right direction. Still more political will required to move carbon reductions forward still further, but it shows that if you get the building blocks in place, reductions can happen.
China is importing Aussie coal like mad and burning it. They are also years away from a carbon emission policy.
Austrailia is 15 in the world as far as GDP. Will be interesting to watch the shock value to their GDP from the passing of the carbon plan.
Meanwhile, the billions of dollars investment in renewables supported by the carbon price will have no impact at all on Australia's GDP?
Why do you think the shock value will be negative?
Some say what is happening in Australia is even better [scheme design] than in Europe, so in that sense Australia is leading.
It is worth remembering that China’s per-capita emissions are still 60% below that of the USA, which bears historical responsibility for more than 3 times China’s total emissions.
Unlike the USA, China is not burdened by a major political party in denial.
We shall see how the Chinese pilot schemes pan out. Remember it is a few cities and provinces.
We should expect to see significant growth in Australia's GDP as a result of passage of this.
China passed the US in total carbon emissions in 2006, despite the fact that the US GDP is more than 2x that of China. US leads in per capita emissions.
The amazing thing about this common-as-dirt received wisdom is that much of the energy-related status quo it's defending exists because of government investment.
Surely, some folks in the "government can't do anything right" crowd have affordable electricity because of the TVA. Or Hoover Dam. Or the National Reactor Testing Station. Or the UK's Central Electricity Board. Or government coal and oil subsidies.
And don't even get me started on the fact that they're issuing these complaints on the Internet.
The cognitive dissonance is just astounding.
It's a little like wondering 'what have the Romans ever done for us?'
Really? How about the Snowy Mountains Scheme, the largest engineering project ever undertaken in Australia and frequently cited as an example of civil engineering excellence. Still operated by a wholly state owned corporation and by the far the most important renewable electricity generator in Australia.
On the related issue of "picking winners" think about such things as the Pharmaceutical Benefits Scheme whose purpose is to "pick winners" ie effective medical treatments and ensure they are delivered at affordable cost.
Stupendous response. Still chuckling at that one.
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