Climate action: put a price on carbon?

September 25, 2010
Action against carbon trading, Melbourne, February 14. Photo:

The call to put "a price on carbon" has gained wide support in Australia. It has also gained new currency in the context of a minority Labor government formed with support from the Greens and three independents.

Support for a price on carbon has come from across the political spectrum — from the Liberal Party's Malcolm Turnbull through to grassroots climate activists.

Green Left Weekly’s Simon Butler asked five Australian climate activists if they thought a carbon price was good policy and should be supported by climate action movement.

Phillip Sutton is the convenor of Melbourne’s Climate Emergency Network and co-author of the 2008 book Climate Code Red.

Adam Lucas is coordinator of Beyond Zero Emissions Sydney and lectures in the Science and Technology Studies Program at the University of Wollongong.

Gemma Weedall is co-convener of the Adelaide branch of Socialist Alliance and attended the April World People’s Conference on Climate Change and the Rights of Mother Earth, held in Cochabamba, Bolivia.

Fiona Armstrong is a Melbourne-based climate policy analyst and climate action advocate.

John Rice, an Adelaide-based climate activist, was a founding member of the Climate Emergency Action Network South Australia (CLEAN).

* * *

Phillip Sutton: The “price on carbon” issue is not at all straightforward.

There are really three energy futures fighting to happen in Australia. The first is the continuation of the coal-based status quo (helped along by carbon capture and storage).

The second is a fossil gas transition where coal-fired electricity is replaced by fossil gas-fired electricity. This future is the lowest cost option in a “carbon” constrained world — so it encourages the continuation of energy-intensive industrial development.

In the end, when the fossil gas runs out, energy demand would be so high that some proponents of this future think that fast-breeder nuclear power is the logical replacement.

The third future is 100% renewable energy with a strong emphasis on energy efficiency.

Without a “carbon” price, it will be very difficult to move Australia beyond energy future number one. Getting a price on “carbon” is probably quite important psychologically to draw a line in the sand marking the end of energy future one.

However the realpolitik is that getting a very high price on “carbon”, sufficient to drive the economy to energy future three (100% renewables plus efficiency), is highly unlikely. So if all we achieve is a (moderate) price on “carbon”, then the energy future we will get is the fossil gas transition to nuclear fast-breeder reactors.

To get to the 100% renewables future fast, what is needed is really only two major policy decisions. One is to make sure that all new power investments are 100% renewable/zero emissions. The second is to establish a schedule for closing the existing fossil-fuel power stations.

To implement these two strategies it is not necessary to use a price on carbon. Regulation can do the job.

Once these policies are in place there is a role for regulatory taxation to gently nudge the economy continually in the direction of energy efficiency.

My preferred package would be to put a modest price on “carbon”, and complement this with the more powerful decisions to legislate to make all new energy 100% renewable and to phase out greenhouse gas-emitting power stations.

Once the energy system has reached the zero emissions point, the “carbon” tax would be converted to an energy tax, with the revenue spent on energy efficiency investments or redistributed to the public.

Adam Lucas: I’ve got mixed feelings about putting a price on carbon. You don’t to have to an emissions trading scheme to put a price on carbon — that’s point number one.

The more I learn about emissions trading schemes the more I don’t like them. I don’t see the strong benefit of implementing such a scheme unless it was restricted to the major polluting industries and getting them to cap and reduce their emissions.

But I don’t see the point of applying it to the whole economy. It allows far too much room for cheating and offsetting and also for trading in futures, which will not actually achieve any emissions reductions in the medium to longer term.

In terms of doing it through a carbon tax — again it’s a complicated issue. At least a carbon tax prevents businesses from weaselling out of paying. But establishing what level a carbon tax should be to actually drive real emissions cuts is quite difficult.

Most Scandinavian countries have had a carbon tax in place since the early ’90s. Even a price of $150 for a tonne of carbon dioxide hasn’t resulted in any substantial reductions in emissions.

Although it is probably not a bad thing to do in the short to medium term, it’s just one of several dozen policy changes that need to be made. And, in itself, it is certainly not sufficient to drive emissions down in any substantial way.

If it were to be introduced there are certainly equity issues for people on lower incomes. So there has to be some mechanism in place to repatriate funds back to low-income households and guarantee that a certain percentage of the income goes into renewable energy or to other carbon reduction measures.

The devil is in the details with a carbon tax or an emissions trading scheme. I don’t think we should give blanket support to a carbon price unless we know what all the details are beforehand.

Gemma Weedall: I think a carbon price can be a useful tool as long as it meets certain criteria — namely that it is a carbon tax set at a high enough price to have an effect, that it is socially equitable, and that the revenue raised goes directly towards funding renewable energy (not to lowering the corporate tax!).

However, a carbon price in itself is certainly not an adequate response to the climate crisis and should not be the main demand of the climate movement — this needs to be direct investment to achieve 100% renewables by 2020.

Fiona Armstrong: A carbon price is essential. That is well understood internationally, and has been since the Stern report in 2006. It is the most cost-efficient and effective way we can make clean renewable energy cheaper, and it should be quickly implemented in Australia.

I think the most appropriate mechanism would be for a carbon tax, with the revenue directed to a combination of clean renewable energy incentives and support for affected communities (that is, a transition for workers in fossil fuel industries and assistance for vulnerable and disadvantaged groups).

The evidence (e.g. a recent UTS study) suggests there is strong support in the community for a price on carbon provided vulnerable groups are protected.

However, a carbon price is by no means the only mechanism we need – it is just one of a suite of policy options necessary, especially given the urgency for emission reductions.

We need stronger regulation, tougher emissions standards, mandated energy efficiency, investment in transmission and transport infrastructure, removal of perverse incentives and so on.

John Rice: I think a price on carbon is a necessary, but not a sufficient, thing. It’s worthwhile campaigning on, but we shouldn’t take our eyes off the prize, which is a massive rollout of renewables similar to what is urged in the Zero Carbon Australia plan.

On its own, a carbon price could simply stimulate a transition to natural gas, and that’s a problem.

A price on carbon can take many forms, such as an emissions trading scheme. But emissions trading has proved ineffective in Europe and other places.

But a tax, combined with very active government intervention and the publicly owned rollout of renewable energy — along with an effective process of community consultation — is the kind of scenario we should aim for.

So a carbon tax is one plank in the platform, but it’s by no means the whole thing. It’s quite restricting for the movement to fetishise a carbon price. We need to think much more broadly about the solutions.

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