Australian PM Changes Carbon Tax Ahead Of Election

Jul 16, 2013

Australia’s Prime Minister Kevin Rudd said Tuesday a deeply unpopular carbon tax will be replaced by a less-severe emissions trading scheme a year ahead of schedule, in a bid to lower power bills for households as a tight national election looms.

The carbon tax on Australia’s worst industrial polluters, including its coal-reliant power producers, went into effect in July 2012 and was supposed to remain in place until 2015. At that point, it was set to be replaced by an emissions trading scheme, in which the cost of emitting a ton of carbon would be determined by buyers and sellers in a carbon market.

Rudd is advancing that timeline by a year, with the emissions trading scheme now beginning on July 1, 2014. The move will reduce the cost of carbon from a predicted 25.40 Australian dollars ($22.40) per metric ton in July next year to an estimated AU$6 per metric ton, Rudd said.

“This is the fiscally responsible thing to do,” Rudd told reporters in the northern city of Townsville. “The nation’s 370 biggest polluters will continue to pay for their carbon pollution, but the cost will be reduced, meaning less pressure on consumers.”

The move is expected to save Australian households an average of AU$380 a year, Rudd said. The savings would largely be in the form of lower energy bills.

The government will make up for a predicted $3.8 billion shortfall in the federal budget with spending cuts, including scaling back funding for some environmental programs.

The carbon tax was enacted under the previous prime minister, Julia Gillard, who was ousted by Rudd last month in an internal Labor Party coup. Rudd had been ousted as prime minister by Gillard in her own internal coup three years earlier.

Under Gillard, Labor looked set for an overwhelming defeat at this year’s elections. But recent polls suggest the race has tightened since Rudd took back the reins. Gillard had set elections for Sept. 14, though Rudd can hold them between August and November. He has refused to publicly announce a date, though said “there’s not going to be a huge variation” from Sept. 14.

Gillard pushed through the carbon tax in a bid to gain needed support from the minor Greens party, despite a campaign promise not to do so. The government defended the move as a necessary weapon against climate change. Australia is one of the world’s worst greenhouse gas emitters per capita because of its heavy reliance on massive coal reserves to generate electricity.

But the backlash from the public was intense, with some dubbing Gillard “Ju-liar.” Conservative opposition leader Tony Abbott has repeatedly hammered Labor over the tax, using it to paint the ruling party as untrustworthy.

On Tuesday, Abbott criticized Rudd for saying the government was terminating the tax.

“All he’s done is simply brought forward Julia Gillard’s carbon tax changes by 12 months. He’s not the terminator – he’s the exaggerator. He’s not the terminator, he’s the fabricator,” Abbott told reporters in the island state of Tasmania. “He’s changed its name, but he hasn’t abolished the tax. All he’s done is given Australians one year only of very modest relief.”


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I'm Jeremy Hobson. It's HERE AND NOW. Australia's government is getting rid of the country's carbon tax. The tax applied to hundreds Australia's biggest polluters, including mining and steel companies and Qantas Airways. It required them to pay a stiff fixed price on carbon emissions. Here's Australian Prime Minister Kevin Rudd.

PRIME MINISTER KEVIN RUDD: We expect to change that we are bringing in. We'll see the price on carbon fall from an expected $25.40 a ton by next July to around $6 a ton. This is a big change. Treasury modeling tells us that this will reduce pressures on consumers and on businesses.

HOBSON: Well, not everybody is happy about this. Joining us to talk about what it all means around the world and here in this country is Richard Caperton, managing director of energy at the Center for American Progress. Welcome.

RICHARD CAPERTON: Thanks for having me on.

HOBSON: Well, so how big a blow is this to efforts around the world to institute carbon taxes?

CAPERTON: The important thing is that it's not a big blow at all to efforts to reduce carbon pollution. That's the important thing to keep in mind, and that's where we need to stay focused. The exact mechanism or policy that different countries use to reduce pollution will change over time, just like we're seeing in Australia. And in some places, carbon taxes may be less popular than carbon trading.

HOBSON: But this was a big test for carbon taxes, and it didn't work. Do you think that that idea is now going away and people would move just more towards carbon trading?

CAPERTON: I think carbon trading is going to remain very popular and will probably grow in popularity going forward as we see good success stories coming out of the EU and other places with carbon trading systems. That said, there is a lot of enthusiasm for carbon taxes among certain communities. Here in the United States, for example, we see a lot of excitement about carbon taxes from the business community, who really like the certainty of a price that a tax provides.

HOBSON: Although it didn't make it through the Congress.

CAPERTON: Well, that's correct. We have congressional issues with passing climate change legislation here.

HOBSON: Just for people who don't follow this very closely, give us the difference between the carbon tax system and the carbon trading system.

CAPERTON: Sure. So a carbon tax is just like it sounds. If you emit a ton of carbon dioxide pollution, say, from your power plant, then you pay a price per ton. In Australia, $25 roughly. Carbon trading is a little bit different. That's a system that in the United States we call cap and trade, and it's where there's a cap on total pollution allowed throughout the economy. And then you can trade under that cap, and it theoretically leads to the most cost-effective solutions.

HOBSON: The main arguments against either of these schemes are economic. Businesses argued in the depths of the recession that it was not a good idea to add this burden, this environmental burden on them at a time when they weren't doing well in the first place. Now that the economy is getting better, is this your moment to strike if you're an environmentalist who wants these carbon schemes?

CAPERTON: It's important that when you say that dealing with climate change is hard in tough economic times that you keep in mind that climate change is first and foremost an economic issue. It is a threat to our economy. It is a cost to taxpayers when we have to recover from extreme weather. And it will be a much bigger problem going forward. So it always is good for the economy to deal with the threat of climate change. Now, in the short term, the immediate term, things are looking better as the economy improves, and it will become more palatable to reduce carbon pollution.

HOBSON: Richard Caperton, managing director of energy at the Center for American Progress. That's a liberal think tank in Washington, thank you so much.

CAPERTON: Thanks for having me on. Transcript provided by NPR, Copyright NPR.