Greens put carbon tax on the agenda

January 31, 2010

The Australian Greens announced an "interim carbon price proposal" on January 21, whereby carbon would be taxed essentially within the framework of the federal Labor government's proposed Carbon Pollution Reduction Scheme (CPRS).

Instead of releasing pollution permits at a given rate (the government has proposed a starting price of $10 a tonne), the Greens proposal would tax emissions, at a rate of $23 per tonne in the first year, starting July 2010, and $24 in the second year.

Greens Senator Christine Milne said that, once the interim scheme was implemented:
"We can then discuss the longer term solutions Australia will need over the coming two years, secure in the knowledge that a carbon price is already in place, helping to unleash innovative and job creating climate solutions", said the January 22


Further rises in the tax rate could then be implemented when the two-year period expires.

The proposal echoes calls by government economic advisor Ross Garnaut to implement the tax as in interim measure.

The fact that the Greens are proposing a tax, rather than a trading scheme, is significant.

A tax gives governments much more control over emissions reduction than a trading scheme; it is inherently harder to rort, and provides the (at least nominally) accountable government with the responsibility and revenue to implement genuine emissions reduction programs.

However, since the Greens proposal is based on the CPRS, it retains key elements of the government's inadequate scheme. Gone is compensation to coal-fired power stations, but compensation to "emissions intensive trade exposed industries" (such as coal, steel and aluminium exports) remains, albeit at a slightly lower rate than under the original CPRS.

The scheme returns a large amount of the revenue collected (almost half) to "low and middle income households" but in doing so creates a catch-22.

Money that could have been invested in providing at-cost renewable energy for those working people is instead spent compensating them for private generators who pass the cost to the consumer.

Notably, the policy also provides "financing for tackling climate change in poor countries" of $1.27 billion per annum.

However, the overall "surplus" revenue collected out of the proposed scheme, after paying out "compensation", is only $2.97 billion in total over the two years the scheme would run.

This, coupled with the government's already-established Climate Change Action Fund, means the federal government would be equipping itself with $4 billion over two years to directly invest in renewables — roughly enough to build wind farms to replace one or two small coal-fired power plants.

Two roles of a carbon tax

A tax on carbon must to fulfill two roles. First, the burden of paying it needs to be a great enough disincentive that polluters are actually prepared to cut their emissions. This may be through efficiency measures, by purchasing "100% green power", or by investing in renewable energy generation or renewable heat production.

Secondly, in the absence of such action by the polluters, the revenue stream generated by the carbon tax needs to be great enough that the government itself can directly invest in these measures.

Arguably, in Australia, the most urgent of these measures is the construction of renewable generators to replace filthy coal-fired plants.

A soon-to-be-released report by Melbourne-based campaign group Beyond Zero Emissions attempts to quantify this. The Zero Carbon Australia 2020 Stationary energy plan puts the price tag on a 100% renewable energy grid (including grid upgrades) for Australia at around $350 billion.

Add to this the cost of a roll-out of massively improved and expanded free public transport networks, and further efficiency programs, and you can put a price on the massive task of severely cutting emissions.

How soon does this have to happen?

That depends who you ask.

A 2009 study by the German Potsdam Institute concluded that to have any chance of stopping runaway climate change, and factoring some growth in the historically small per capita emissions of China and India, the big polluters like Australia and the US would have to virtually eradicate their emissions by 2020.

This is in contrast to the federal government's stated aim of cutting emissions by 5% by 2020.

How much would a carbon tax have to be, per tonne, to raise sufficient revenue, and send the right "price signal" to start a 10-year crash conversion to renewables? A damn sight higher than the "interim" carbon price proposed by the Greens, that's for sure.

Based on research done by the CSIRO and modelling included in the Stern report, climate author David Spratt estimates: "For a carbon tax to have a significant impact on emissions, it would need to be multiples higher than the figures being talked about in Australia today for emissions trading: around $300-$400 per tonne of carbon."

Only at such high rates of carbon tax would the polluters be under sufficient impetus to make deep cuts to their emissions — and indeed source all of their energy and industrial heat from renewable sources.

Passing the buck

Whether a carbon tax is $24 per tonne or $300, business has indicated it will try to pass the full cost of any new carbon tax on to consumers.

Apart from setting a suitable price for carbon, governments must find a way to ensure that it is corporate profits that foot the bill, rather than wildly rising bills for ordinary workers.

Exactly how to stop businesses from trying to pass the cost of a carbon tax on to consumers is a whole separate issue to the rate of tax itself and how it is spent, and is equally important.

One possibility for how this might be confronted is the Venezuelan example, where the steel company Sidor was nationalised after refusing to negotiate a collective agreement with workers.

Elephant in the room

The Greens' interim carbon tax policy, in mirroring so much of the CPRS, shies away from confronting the elephant in the room: a crash conversion to renewables is inherently incompatible with ongoing windfall profits for Australian corporations.

You just can't have both.

At a certain point, we must put human need before the abstract corporate "need" for massive profits. As the climate crisis looms, that point is now.

For counterposing the idea of a carbon tax to a trading scheme that leaves emissions reduction entirely in the hands of "the market", the Greens should be congratulated.
But, at some point, the Greens need to decide whether they want to lean on Labor with tweaked versions of the CPRS or instead rally the climate movement around a crash conversion to a low or zero emissions economy.

You need Green Left, and we need you!

Green Left is funded by contributions from readers and supporters. Help us reach our funding target.

Make a One-off Donation or choose from one of our Monthly Donation options.

Become a supporter to get the digital edition for $5 per month or the print edition for $10 per month. One-time payment options are available.

You can also call 1800 634 206 to make a donation or to become a supporter. Thank you.