Australian parliament repeals carbon tax, emissions trading scheme

Australia on Thursday became the first country in the world to scrap a carbon tax as the upper house of the legislature also discarded plans for a trading scheme based on emissions

PUBLISHED : Thursday, 17 July, 2014, 11:18am
UPDATED : Thursday, 17 July, 2014, 11:18am

The Australian Senate voted on Thursday to scrap the country’s carbon tax and plans for emissions trading, a major victory for conservative Prime Minister Tony Abbott that leaves uncertainty about how the country will meet its carbon reduction goals.

Australia is one of the world’s biggest carbon emitters on a per capita basis and scrapping plans for the world’s second largest emissions trading scheme (ETS) after Europe, set to begin from next year, is a major setback for global CO2 trading.

Abolition of the carbon tax was a centrepiece policy of Abbott’s 2013 election campaign, but his Liberal-National coalition struggled to repeal the legislation without control of the upper house Senate.

“This is an appalling day for Australia.”
Senator Christine Milne

On Thursday, the Senate voted 39 to 32 to dump the carbon tax and planned ETS with the support of mining magnate Clive Palmer, whose Palmer United Party (PUP) holds the balance of power in the chamber.

The repeal was fiercely opposed by the opposition Greens and Labor Party, who portrayed the vote as a stain on the country’s international reputation.

“This is an appalling day for Australia when a government, rather than lead in the face of what the world is facing up to ... is determined to stick with the past,” Greens leader Senator Christine Milne said before the vote.

Abbott, once a climate-change sceptic, has long argued that the carbon tax is a burden on industry and consumers in a country reliant on coal-fired power and does little to cut emissions. The tax saw 348 of Australia’s biggest companies pay A$25.40 (HK$184.15) for each tonne of CO2 they emit.

But Abbott’s plan to replace the carbon tax with an A$2.55 billion Emissions Reduction Fund that would see big emitters paid to cut carbon levels is opposed by Palmer, leaving it unclear how Australia will meet its emissions reduction goals.

Australia’s Renewable Energy Target scheme, which Palmer insisted not be repealed, is designed to ensure that 20 per cent of Australia’s electricity comes from renewables by 2020.

Australia has committed unconditionally to reducing its overall emissions by 5 per cent compared with 2000 levels by 2020 and by 80 per cent compared with 2000 levels by 2050.

Investors are likely to welcome an end to years of uncertainty on the long-term outlook for carbon pricing and the fact that Abbott has retained the A$10 billion Clean Energy Finance Corporation, another of Palmer’s demands.

The government-backed loan agency invests in wind, solar, and bioenergy projects in Australia with a total loan portfolio of over A$700 million since it started in mid-last year.

Scrapping the carbon tax will be seized on by Abbott as a major political victory, at a time when support for his government has slumped following an unpopular budget in May, but the cost may be high.

To gain support from the PUP Senators, Abbott agreed to guarantee that savings from repealing the carbon tax would be passed onto consumers, adding to the government’s fiscal pressures as it tries to rein in growing deficits.