Jul 02, 2014 - 11:34am
This article first appeared in ABC's The Drum on 2 July 2014.
CEO, The Climate Institute
As the carbon laws turn two, just weeks ahead of the repeal vote that may terminate them, it's appropriate to reflect on their performance before we become the first nation in the world to dismantle a working carbon market.
With new senators just arriving in Canberra they should not be rushed into repeal, rather they should take stock of the latest facts in a political landscape littered with broken promises and now empty scare campaigns.
Australia's pollution is down, the nation's energy mix is cleaner, and the economy is growing.
The carbon laws that price and limit pollution have worked with the Renewable Energy Target and economic changes to achieve these results. As the fixed price moves into an emissions trading scheme from next year, default emission limits alone would see emissions fall by 15 per cent of 2000 levels by 2020.
Emissions from all sectors combined, excluding land use and forestry, fell 0.8 per cent, or 4.3 million tonnes in the year to December 2013. By the Government's own assessments, the carbon laws will decrease national pollution by 40 million tonnes from business as usual.
Australia's total emissions from electricity consumption in the National Electricity Market are down by 5.3 million tonnes in the 12 months to May 2014. This means emissions from electricity generation have fallen by 17.2 million tonnes or 10.3 per cent since carbon pricing was introduced.
Our energy mix is getting cleaner, too. Electricity from wind, solar and hydro has increased significantly in the last two years, while power from fossil fuels has declined. In April this year, coal's share of electricity fell below 74 per cent, the lowest ever, while wind matched its highest ever peak at 4.6 per cent of power in the National Electricity Market.
Contrary to the scare campaigns, the carbon laws have not clobbered the economy. In fact, growth was higher than expected (1.1 per cent) in the March quarter, with an annual growth rate of 3.5 per cent. Unemployment remains below 6 per cent and thousands of jobs have been created in the renewable energy sector alone.
The cost of living has been the biggest fear factor but again the Government's own figures bell the cat. Buried in the last budget papers was the minimal inflationary impact of carbon pricing by predicting its removal would "reduce the headline Consumer Price Index (CPI) by ¾ of a percentage point and the underlying CPI by ¼ of a percentage point over the year to the June quarter of 2015 compared to what it would have been".
These are almost exactly the numbers predicted by Treasury and which taxation and other changes supported by revenue from the carbon price had the average householder better off for the carbon reforms.
Independent modelling separately by NATSEM and AECOM backed these results. Epic bad luck or poor timing meant the reforms coincided with the far costlier and unsupported spend on poles and wires.
The other argument often used as reasoning for delaying action, or amending our policies, is inaction by major trading partners. But in fact, China, the US, Europe, South Korea and Japan all have carbon markets in some shape or form, regionally or nationally.
China's seven regional pilot emissions trading schemes already cover a larger amount of emissions than Australia's own policy. And the Californian scheme is about to be expanded to 85 per cent of the economy when ours covers just 60 per cent.
One option may be for the independent Climate Change Authority now backed by the Palmer United Party to lead such stocktaking. Among the issues to consider is also that energy generators are suggesting returns to households of only $80 to $200 a year, well short of the $550 being promised by the Government. These realities and broken promises change the post-election landscape.
A lower carbon price could be adopted for 2014/15, such as the European price of about $8 per tonne or even, less desirably, the New Zealand price of about $4. That's right we are about to sink behind even the Kiwis!
Such a measure would enable a calm review of the facts, protect the current scheme framework and potentially prevent a repeat of disruptive and painful public debates as Australia inevitably returns to pricing carbon as one of the most cost effective solutions where polluters not taxpayers take responsibility for reducing emissions.
If instead we indefinitely lose laws that price and limit pollution, we lose laws that not only encourage the most cost effective cleaning up of existing industries, but also provide ongoing revenue to support workers and families in switching Australia to a cleaner more sustainably prosperous nation.
The new Senate should not rush into a vote on repeal. Let the laws age beyond two. They have already accomplished so much in so little time.
John Connor was CEO of The Climate Institute from 2007 to March 2017. Whilst qualified as a lawyer, John has spent over twenty years working in a variety of policy and advocacy roles with organisations including World Vision, Make Poverty History, the Australian Conservation Foundation and the NSW Nature Conservation Council. Since joining The Climate Institute in 2007 John has been a leading analyst and commentator on the rollercoaster that has been Australia’s domestic and international carbon policy and overseen the Institute’s additional focus on institutional investors and climate risk. John has also worked on numerous government and business advisory panels.