Australia repeals its carbon tax and triggers an international debate

Australia's government has voted to repeal a carbon tax on that country's biggest greenhouse gas polluters, ending one bitter domestic battle but opening up new fronts in the climate war both at home and internationally.

Diplomats negotiating a new global treaty denounced the repeal, saying Australia's move slows down their momentum. In the United States, Senate Democrats insisted Australia's actions will have no implications for President Obama's climate change regulations, while Republicans cheered its demise, saying the tax's repeal highlights the global unpopularity of carbon-curbing policies.

In a 39-32 vote, Australia's Senate made good on Prime Minister Tony Abbott's central campaign promise to "ax the tax," which was implemented in 2012. Abbott's Liberal Party claimed the policy put an annual 9-billion-Australian-dollar ($8.4 billion) burden on the economy.

"Today, the tax that you voted to get rid of is finally gone: a useless, destructive tax which damaged jobs, which hurt families' cost of living and which didn't actually help the environment," Abbott said at a press conference in the capital, Canberra.

The repeal comes at a sensitive time both internationally and in the United States. U.N. Secretary-General Ban Ki-moon is hosting a climate change summit for heads of state on Sept. 23 aimed at putting fresh pressure on leaders to deliver a strong deal in Paris, where the final agreement is expected to be signed in December of 2015.


Ambassador Marlene Moses of the tiny South Pacific island nation Nauru, who is also head of the Alliance of Small Island States, said it was "disheartening to see Australia deprioritize climate change" while action in other countries is building ahead of the September summit.

"Australia, unfortunately, seems content to let the world move forward without it," she said.

Abbott applauded by U.S. Republicans

Abbott has already declared through a spokesperson that he would not attend the summit. Meanwhile, in the wake of recent Obama administration proposals to curb greenhouse gas emissions from power plants, Abbott also sought out an alliance with conservative, "like-minded" countries like Canada to counter international pressure for a binding climate deal.

Congressional Republicans yesterday said Australia's carbon tax repeal should serve as a lesson to Obama that any mitigation policies that add to the cost of electricity will ultimately be unsuccessful.

"I applaud them, that they have the courage to do that," said Sen. James Inhofe (R-Okla.). "It should serve as a stark warning to the Obama administration, global warming alarmists and billionaires like Tom Steyer that their efforts to implement extreme climate initiatives will cause American taxpayers to suffer, as Australians had to learn the hard way."

Sen. John Barrasso (R-Wyo.) also heaped praise on the Australian Senate, saying, "I think they've done the right thing by repealing that tax; it shows how unpopular it is when a government decides to raise the cost of energy."

He added that such a measure continues to be unpopular in the United States after cap-and-trade legislation failed to pass the Senate in 2009. "And if the president wants to try and bring it on again, it will continue to be unpopular and it will be defeated," he said.

Democrats, meanwhile, downplayed the events in the land Down Under.

"This only shows that misguided conservative policies and fossil fuel influence are not unique to the United States," said Sen. Sheldon Whitehouse (D-R.I.), who last year released a discussion draft on carbon tax legislation. "What is unique to the United States is our own and the world's expectation of American leadership, and we must lead on the issue of climate change."

"I agree, and remain convinced we can implement a fair carbon fee program that will reduce carbon pollution and return its revenue to the American people," he said.

Sen. Barbara Boxer (D-Calf.) said the repeal is unlikely to incite further backlash against proposed U.S. EPA regulations on carbon emissions.

"When I was there right before the election, we knew if this party won, that they were going to do this and they were still going to pursue climate action in other ways," she said. "They'll have to. They're really, literally burning up there."

Last year, Australia experienced its hottest year on record. In several parts of the country, extreme dry conditions sparked severe and deadly bush fires.

'Extreme viewpoint' for the planet

Dirk Forrister, chief executive of the International Emissions Trading Association (IETA), noted that it's still unclear with what Australia will replace its carbon tax.

One option heralded by the Labor and Green parties is to get rid of a fixed price on carbon and move toward a market-based trading program. The United Party, led by coal baron Clive Palmer, has advocated an emissions trading scheme, but that would only go into effect if Australia's trading partners did the same. Abbott, meanwhile, has proposed creating a AU$2.55 billion ($2.4 billion) fund to incentivize industry to buy clean energy.

"Frankly, I think business just wants clarity on where things are going to end up," Forrister said. "This leaves a whole lot of question marks in place."

In the meantime, he said, Australia's current carbon market -- which primarily exists for agriculture and forestry -- will likely freeze up, though some projects might shift to the voluntary market.

E.U. Climate Action Commissioner Connie Hedegaard issued a statement saying the European Union "regrets the repeal of Australia's carbon pricing mechanism just as new carbon pricing initiatives are emerging all around the world." She noted that discussions to link the Australia and European systems "will evidently be discontinued."

Forrister argued that while Australia's repeal holds lessons for other countries, it does not necessarily upend attempts to create carbon markets in places like China, South Africa and Korea.

"I think this is a pretty unique situation, because it's sort of a shift to a pretty extreme political view held by Tony Abbott. You don't see many other places on the planet right now that have that extreme viewpoint," Forrister said.

Will the U.S. and China 'take up the slack'?

Some analysts said they're not overly concerned about the impact of Australia's repeal on the Paris negotiations. All countries, including Australia, have already agreed to put forward by March 2015 targets for emissions cuts that would go into effect after 2020. Those targets, called "nationally determined contributions," would essentially be voluntary with some still-undetermined mechanism for ensuring that countries make good on their promises.

In its most recent submission to the U.N. Framework Convention on Climate Change, the Australian government declared itself "firmly committed to meeting its 2020 target of cutting carbon 5 percent below 2000 levels" and said that it would review its position in 2015.

David Waskow, director of the World Resources Institute's International Climate Initiative, said Australia's carbon tax repeal doesn't automatically spell doom.

"It certainly doesn't send helpful signals," Waskow said. But, he added, "I don't think a decision like this necessarily means they'll go in the wrong direction in the international context. It certainly doesn't point in the right direction, but they still have an opportunity to get things right."

Elliot Diringer, vice president of international strategies at the Center for Climate and Energy Solutions (C2ES), said he does believe the repeal will make it difficult for Australia to meet the March deadline. But he argued that other governments -- particularly the United States, China and the European Union -- are taking up the slack.

"It's a setback. It may sap momentum at a moment when we need to be building it, but it's not going to deter an agreement in Paris by any means," he said. "One thing this underscores is that countries' efforts are fundamentally a function of their domestic dynamics. So in the case of Australia, that amounts to a setback at this stage. In the case of others, that means stronger action, thankfully, at this stage," he said.

Twitter: @LFFriedman | Email:

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