Learn by doing. That appears to be one conclusion from Australia’s recent repeal of their carbon tax. The carbon price began on July 1, 2012 at AU$23/tonne. It was levied on Australia’s top emitters and rose to AU$25/tonne, yet on July 17, 2014 it was repealed just two years after taking effect. The Aussies deserve a pat on the back. They tried on a carbon pricing policy which didn’t fit well. The lessons learned can benefit U.S. states including Washington as we work to develop the right framework for a thriving low-carbon economy.
Everyone should know what they are signing up for and where costs are coming from. The costs of a carbon price were not clearly defined before the policy was enacted, and its effects were not clearly differentiated from other market forces. “The government estimated the tax would cost the average person less than AU$10 per week,” said the AP, “but three months after it took effect, most Australians surveyed by policy think-tank Per Capita said it was costing them more than twice that much. But they also expressed confusion, with most blaming the tax for higher gas prices even though it is not levied on motor fuel purchases.” It didn’t help that the largest electricity rate hikes, associated with necessary infrastructure upgrades, occurred at the same time as the carbon tax. Communication is key.
Everyone should have an idea of what the benefits are. The formula of applying carbon tax revenues in Australia was complex, with some going to a government agency for project funding and other monies going to a mix of socio-economic efforts. It was not a model of transparency, and this undermined trust in the policy.
- Anti-carbon tax protesters marching in Sydney
The carbon tax in Australia appeared to reduce carbon emissions. In May 2013, one of Australia’s major papers, the Age, reported that electricity generation with lignite coal had fallen 14% in the carbon tax’s inaugural nine months. During the same period, renewable electric generation “soared” by 28%. The Australian National University reported that total emissions decreased by 8.2% in 2012-2014 compared to the two previous years. As observed in British Columbia, a carbon price does lower emissions.
A targeted approach which focuses on one sector alone can be risky. The carbon tax in Australia primarily targeted electricity, not transport fuels. Coal makes up an overwhelming percentage of Australia’s electricity mix and CO2 emissions. Consumers noticed their power bill go up and voiced their concerns. In a shifting political climate, Clive Palmer’s Palmer United Party took advantage of consumers’ ill will. Politicians were sacked. An AP story in Australia asserted that “voters have never stopped hating the tax and its effect on their electric bills”.
Policymakers must recognize natural resource competitive advantages already present. Australia has an abundance of coal and natural gas, and the price shock of switching proved too costly. Washington state has an abundance of water, wind, sun, and innovation. Our electricity sector has some of the best rates and is one of the least carbon-intensive in the country. World-renowned innovators such as BMW have sited operations here because of our competitive advantage. Yes, we’re different. That means we shouldn’t take a copy and paste policy approach to lowering carbon.
Focusing on a practical, targeted, data-driven approach to lowering carbon in Washington state makes sense. The Washington Business Alliance is modeling numerous scenarios, including a market scenario with no explicit price on carbon. Finally, we are focused on engaging the business community and communicating our results to members. Please join us. Email Membership Manager Erin Williams erin@wabusinessalliance.org to learn how you can support our effort.
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