Carbon tax (Australia)

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The carbon tax is the common name for the carbon pricing mechanism established under the Clean Energy Act 2011. Intended to reduce greenhouse emissions to combat climate change, it's been the single biggest and most controversial issue in Australian politics for many years. The Abbot Government scrapped the tax in 2014.

How it works[edit]

Technically the carbon tax is only a tax for three years. After that it will become an emissions trading scheme (ETS) which will link with the existing European Union's ETS. For its first three years, though, it functions as a fixed price per tonne of carbon emitted, applying to all businesses that release more than 25,000 tonnes a year. The tax commenced on 1 July 2012 at $23 a tonne and currently sits at $24.15 a tonne. It will rise again to $25.40 on 1 July 2014 and become an ETS, with the market determining the price, the following year.[1]


Climate change has been at the forefront of Australian politics since Kevin Rudd campaigned on the "great moral challenge of our time" to win the 2007 election. His first act as Prime Minister was to sign the Kyoto Protocol that John Howard had refused to sign, but he didn't do much else until 2009, when he proposed an ETS with a target of only 5% reduction in emissions by 2020. This attempted compromise between environmental groups (represented in Parliament by the Greens) and business groups (represented by the Opposition) ended up pleasing no one, and the scheme was defeated in the Senate. Unwilling to negotiate with the Greens (who wanted a much stronger scheme), Rudd worked out an even more watered down compromise with Opposition Leader Malcolm Turnbull. Just when the revised ETS was about to pass the Senate, however, Turnbull faced a revolt within his own party from climate sceptics opposed to any action on climate change whatsoever. This led to a leadership challenge from Tony Abbott who, vowing to oppose any ETS, defeated Turnbull for the Liberal Party leadership by a single vote. The ETS was defeated a second time.

The following year, instead of re-introducing the legislation, Kevin Rudd decided to shelve it for three years. Why is a mystery, but the decision was a factor in his downfall at the hands of Julia Gillard months later. Despite nominating the abandonment of the ETS as a major reason for challenging Rudd, Gillard went to the 2010 election promising no scheme whatsoever, and specifically ruling out a carbon tax. In an election in which Gillard and Abbott were almost indistinguishable, the Greens' vote skyrocketed, and they won their first lower house seat. Moreover, the result of the election was a hung parliament, forcing Gillard to make an agreement with the Greens to form government. Naturally, they demanded proper action on climate change in return, and the resulting negotiations led to what is now the carbon tax. The unpopularity of the tax, the breaking of an election promise by Gillard, and Abbott's relentless scare campaign against the "Great Big Tax On Everything" brought Gillard's approval rating to record low levels. Nonetheless, Labor and the Greens had the numbers to force the legislation through both Houses, and it took effect 1 July 2012.

Current status[edit]

Since winning the 2013 election, Prime Minister Tony Abbott has been trying to repeal the carbon tax, but he's been frustrated by a hostile Senate still controlled by Labor and the Greens until July 2014. The carbon tax repeal bill was formally defeated in March 2014, but the Abbott Government will re-introduce it when the new Senate takes effect. In this new Senate, the balance of power will be held by eccentric billionaire mining magnate Clive Palmer and his self-named Palmer United Party. Despite campaigning against the carbon tax (for obvious reasons), and even calling for its repeal to be retrospective, Palmer has recently threatened to block the repeal if the government goes ahead with its own token climate change policy, which he considers a waste of money.

In July 1 2014 the Abbot Government formally repealed the carbon tax. In its place, Abbot set up the Emission Reduction Fund in December 2014.