Begone, carbon tax (Image: Gary Ramage/Newspix/REX)

Australia’s carbon tax, one of the world’s landmark attempts to stop climate change, is officially no more. The country’s government says the move will save money, but in reality the costs will be high.

Instead of decreasing its greenhouse gas emissions, Australia is likely to grow them by up to 18 per cent by 2020. The government has outlined plans to cut emissions in a different way, but analysts say this is likely to cost more and achieve less than the original carbon tax. The repeal may also have an impact on other emissions-cutting schemes around the world.

The tax finally fell under the axe of the Senate on Wednesday after a 39 to 32 vote against it. Prime Minister Tony Abbott, who has said he does not believe in human-induced climate change, swore a “blood oath” to scrap it in 2012 during his election campaign. The decision makes Australia the first country to repeal a comprehensive carbon pricing plan.


“The repeal reveals less commitment to climate change mitigation, and more commitment to business,” says Alyssa Gilbert of the Ecofys think tank in London.

Not a good plan

Australia has the highest per capita emissions rates in the world, largely due to its coal and mining industries. But the carbon tax, which launched in 2012 and charged A$23 for each tonne of carbon dioxide released by large greenhouse gas emitters, cut Australia’s emissions by 1.5 per cent last year. That went a long way towards its target of cutting emissions by 5 per cent below 2000 levels by 2020.

It now looks as if Australia will miss that target. A report by Ecofys and the World Bank, published in May, says scrapping the tax will probably increase emissions by 8 to 18 per cent by 2020.

In a white paper published in April, the government proposed a Direct Action Plan to replace the carbon tax. The details have not yet been approved, but the idea is that the government will pay businesses A$2.55 billion to help fund projects to reduce emissions.

Unlike a carbon tax, which provides businesses with sharp incentives to cut emissions, the impact of taxpayer-funded subsidies is unclear. “Economists the world over have pointed out for a long time that putting a price on emissions – through a carbon tax or emissions trading scheme – is the best instrument to cut emissions,” says Frank Jotzo of the Australian National University in Canberra. “Other policy options will be more costly and less effective.”

“There’s no evidence that what [the tax is] being replaced by is going to be better for the environment, or for the taxpayers,” says Gilbert. Jotzo and Gilbert say most analyses project an increase in emissions under the Direct Action Plan.

The big picture

Australia’s decision will also have global effects. For one thing, the Australian programme was going to link up with the European Union’s emissions trading scheme, bringing many rich countries under one roof. That cannot happen now.

What’s more, China largely modelled its seven new carbon trading programmes on Australia’s system. “Internationally, it may look like something was wrong with the policy,” Jotzo says. “In reality, the only thing that went wrong in Australia was the politics.”

The rest of the world is moving forwards on climate change, says Gilbert. “Ultimately, this is more Australia moving a step backwards.”