Is Australia's Proposed Carbon Tax Strong Enough to Do Any Good?

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Tim Wimborne / Reuters

Vapor pours from a steel mill chimney in the industrial town of Port Kembla, about 80 km (50 miles) south of Sydney, on July 7, 2011

In August 2010, when Julia Gillard was campaigning in the national election, she made a promise: "There will be no carbon tax under the government I lead," she said to an Australian television channel.

It's a statement that Australia's first female Prime Minister has undoubtedly lived to regret as she's heard it quoted back to her repeatedly since February — when she announced a bill that would put a price on carbon — as she tries now to persuade the Australian public to embrace a law they never voted for. "Most Australians now agree our climate is changing. This is caused by carbon pollution. This has harmful effects on our environment and on the economy, and the government should act," Gillard said in a televised address on July 10 after the government divulged the long-awaited details of the Clean Energy Future package.

The policy lays down the foundation for the biggest emissions-trading scheme outside of Europe. If passed, from July next year, 500 of Australia's top polluters will pay around $25 for every ton of carbon they release into the atmosphere. That fee will rise by 2.5% annually until 2015, when the carbon price will be replaced with an emissions-trading scheme. The goal of the bill is to reduce Australia's total emissions by 5% below 2000 levels by 2020, and ultimately reduce carbon pollution by 80% below 2000 levels by 2050. The government has also said it will invest approximately $13 billion into clean technology, with the focus on renewable energy such as solar, wind and geothermal power.

Today, 80% of Australia's electricity is derived from coal. Australia is also the world's leading coal exporter, and the nation's $50 billion coal industry could be hit the hardest by the proposed reforms. Ralph Hillman, executive director of the Australian Coal Association, an industry body, predicts the carbon-tax bill on the coal industry could run as high as $19.17 billion, forcing some 4,700 coal miners out of their jobs.

To placate coal and other industries that feel they will be disproportionately targeted by the tax, the government has designed a $9.8 billion package of rebates to heavy polluters — including steel, zinc, concrete and aluminum manufacturers — that will be reduced gradually each year. A $1.38 billion package has also been offered to protect jobs in the coal industry. But even with these measures, many worry that Australia will be priced out of the global market. "The tax will push our coal prices up, but the world's demand for coal is not going to decrease," says Michael Roche, CEO of the Queensland Resources Council, a not-for-profit industry association. "It just means that Australia will be less competitive."

Consumers have had mixed reactions to the tax. Half of the levy's revenue will be used to cushion individuals from bearing the brunt of the tax; 9 out of 10 households will receive tax cuts and payment increases. Car owners and small businesses will not be charged for their fuel use, which is not included in the tax, nor will those who use fuel for agriculture, fisheries or forestry. (Diesel used for heavy vehicles weighing more than 4.5 tons will be affected, however, as will aviation fuel. Qantas has already announced that the price of local fares will go up by $3.72 per ticket.)

In the end, the program is estimated to cost families an average of $10 a week. The Consumer and Taxpayers Association in Canberra has planned an Aug. 16 rally against increased prices. But others are not concerned. Jean-Miguel Leone, a marketing manager, believes that any rise in costs will be minimal. "I think the people who complain are just crying poor," he says.

Predictably, opposition leader Tony Abbott has slammed Gillard's proposal. "This go-it-alone carbon tax will also impose a heavy cost on Australian industries that their overseas competitors will not face. Australian jobs will be sent offshore for no environmental gain," he said in a statement on July 10. Abbott also faulted the impact the tax would have on households and consumers.

But for all the controversy it has generated from interest groups and the political opposition, will Gillard's carbon-tax plan make a difference to the environment? Scientists say it is a step forward — albeit a small one. "I am happy it has been introduced. We need a mechanism to trigger change," says Barry Brook, director of Climate Science at the University of Adelaide, though he and others agree that $25 per ton, even given its incremental rise, is not a hefty enough price tag to instigate any real change in the industry. Peter Cook, CEO of the Cooperative Research Centre for Greenhouse Gas Technology in Canberra, believes the price should be as high as $106 for renewable energy to become a proper alternative.

Environmentalists also worry the plan's goal of a 5% emissions reduction won't have a significant impact. Australia emits 577 million tons of carbon dioxide a year — just 1.5% of global emissions. Bill Hare the director of Climate Analytics, a nonprofit organization that specializes in climate change, believes that Australia should aim to reduce its emissions by 25% of 2000 levels by 2020. "It would be a major strategic contribution globally as it would spur others to match this and assist in getting a strong global agreement."

But before any international collaboration can take place, Gillard's package has to pass. The legislation is scheduled to go before parliament for a vote at the end of the year. The latest Newspoll, conducted for the Australian over the weekend, shows that her Labor Party's approval is at a record low of 27%, while the opposition's approval has risen to 49%. With an election due to take place in the next few years, Abbott has already said that if he is elected, he would eliminate the tax.

It wouldn't be the first time carbon has spelled the end for an Australian leader. Former Prime Minister Kevin Rudd's proposed emissions-trading scheme — and his decision to shelve it because of its lack of support — is widely considered to have been the catalyst for his demise both popularly and within his own party. Gillard, who again faces the onerous task of persuading the public to embrace putting a price on pollution, looks like she is wedged in an equally complicated position.

"The first Australian government to announce a plan for a carbon price was John Howard's back in 2007," she said in her address to the nation. "The debate has been difficult and divisive, and no government — no political party or leader — can claim to have got everything right during this time ... Now is the time to move from words to deeds."