Australia and the US pass major climate bills without taxing carbon
The Gillard Labor Government introduced a tax on carbon that worked but was political poison. Labor’s new climate policies do not rely on a carbon tax but instead on incentives to encourage clean energy, carbon farming, and electric transportation.
This is not ideal. For decades, economists claim that carbon taxes and pollution-allowance markets are the easiest and best way of reducing emissions at the lowest cost. It seems that taxes are no longer in fashion and instead, stimulus is the new thing.
Tax avoidance has a long history
It’s not a new thing. Since decades, politicians in Anglophone nations have avoided carbon taxation or market-based methods of reducing planet-heating pollution.
All attempts to set a carbon price at a national scale in the US have failed. The first attempt was made in 1990. Al Gore , former presidential candidate and climate activist, called for a Carbon Tax in 1992’s influential book Earth in the Balance. It was a politically unappealing.
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Why? Concerns over “federal overreach”, increasing cost of power, and, of course, lobbying from fossil fuel industries.
Australia holds the unfortunate title of being the first country to have introduced and removed a carbon price – a testament to just how controversial the idea was. The Rudd-Gillard Labor government lost the 2013 elections with the “carbon-tax” issue at the forefront of the campaign.
Subsidies to green energy and electric vehicles are expected to increase.
Politics and policy has evolved
We’ve seen a significant shift in climate policy since Australia repealed the carbon tax.
In the US federal inaction has led to stronger environmental regulations by some states. Some of the best pollution markets in the world are operated by coalitions of American state governments, including twelve eastern states as well as California’s market.
The EU avoided taxes to favor a more clever approach. The EU created a market for pollution, but each state was allowed to decide how many allowances their domestic firms would be able to obtain. The policy became more appealing from a political perspective, and since then the EU carbon markets have grown substantially .
Last year, China, the world’s biggest emitter of carbon dioxide, launched the largest Carbon Trading Scheme.
Australia did not follow the EU or many US states’ emissions trading model. The Abbott Coalition government introduced an emission reduction fund instead to subsidise the reduction of pollution.
Companies can obtain carbon credits through pollution reduction. These can then be sold on the market or to the government. The policy is a sham.
What are the trends we’re seeing?
Tax and markets are off the table in terms of climate bills.
The US passed a A$530 bill last month to boost health care funding.
The plan aims to accelerate the transition to clean energy, electric vehicles, and rooftop solar. It does this through tax credits and rebates for electric cars, efficient home appliances, and rooftop solar. There was no mention of carbon taxes or a pollution allowances market.
The climate bill in Australia requires that we reduce our emissions by 43 percent by 2030. However, there is very little information about how to do this.
The bill by the Labor Party envisages as a market that regulates large polluters, by allowing them trade credits created through emission reduction.
Both Australia and the US have resisted the “polluter-pays” principle.
It’s disappointing. Subsidizing pollution reduction is a good way to encourage behaviour change. Subsidies are inefficient and often wasteful. Markets and taxes are the better alternatives. Now we know that countries that have a carbon price see their emissions grow at about 2% less in comparison to those who do not. This is usually enough to reduce emissions over the long term.
