Australian Government Slams Opposition Carbon Scheme

by Mary Swire, Tax-News.com, Hong Kong

07 September 2011

In a critique of the opposition coalition's carbon reduction scheme, the Australian Treasury says that its proposed 'Direct Action' scheme will more than double the economic cost of reaching the bipartisan carbon pollution reduction target of 5% on 2000 levels by 2020.

The analysis states that the economic costs of Direct Action would be higher for two reasons: first, direct domestic action would forego opportunities for cheaper, internationally sourced abatement; second, direct action programs are generally less effective at driving take up of all potential abatement opportunities.

In a joint statement, Wayne Swan, Treasurer, and Greg Combett, Minister for Climate Change, said: “It is consistent with the advice we've seen from leading economic institutions like the International Monetary Fund, Organization for Economic Co-operation and Development, Productivity Commission and the overwhelming majority of respected economists across the nation.”

They added: “Direct Action is funded entirely on Budget, using taxpayer funds to pay polluters to lower their pollution. In contrast, a carbon price is paid by polluters. It raises revenue and this will be used to assist householders, support jobs and invest in climate change programs.”

They said that Opposition Leader Tony Abbott's 'Subsidies for Polluters' scheme will cost the Budget at least AUD48bn (USD51bn) to 2020. This is almost five times the stated cost of the Coalition policy, and would mean that the average Australian household would have to pay an extra AUD1,300 in taxes.

Under the Direct Action scheme, a coalition government would establish an Emissions Reduction Fund to support CO2 emissions reduction activity by business and industry. Through the Fund incentives would be made available for the oldest and most inefficient power stations to reduce their emissions in an orderly manner. Further incentives would be targetted at the forestry industry, and to encourage energy efficiency.

In addition, there would be initiatives to boost renewable energy use in Australian homes and communities under Direct Action, including investing AUD100m each year for an additional one million solar energy homes by 2020.

The government has chosen, however, to go down an emissions trading route, setting a carbon 'price' of AUD23 per tonne. This, Abbott argues, would cripple Australian industry with high extra costs and make the country less competitive internationally.

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