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Australian Carbon Tax Repeal In The Balance

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

30 December 2013


While the Australian Senate ponders legislation intended to repeal the country's carbon tax law, the former chief executive of a greenhouse gas research centre has said that scrapping Australia's carbon tax is "the right thing to do at this time."

Peter J. Cook – who worked at the Cooperative Research Centre for Greenhouse Gas Technologies and on an Intergovernmental Panel on Climate Change – claimed in The Australian that the levy has "proved inefficient as a mechanism for decreasing emissions." Any reductions will have come from wind and solar and had "nothing whatsoever to do with a carbon tax and everything to do with the renewable energy target system."

Last week, the Senate was urged by the Australian Industry Group (Ai Group) to "spare business and households additional cost and uncertainty," and scrap the carbon tax. The Group warned of "great complications" should the Senate vote against the Government's proposals. It is thought that electricity pricing and contracting deals will bear the brunt of any extended delays.

Group Chief Executive Innes Willox recommended that both the Labor Opposition and Green parties no longer focus on less crucial elements of the Government's repeal package, such as the Clean Energy Finance Corporation and the Climate Change Authority. He stressed that resolving these issues was not urgent, because the two bodies do not impose any additional costs on energy. The Treasury should, therefore, "take the chance to repeal the core carbon pricing mechanism right away, giving energy users, generators and retailers the maximum chance to prepare."

Prime Minister Tony Abbott's Coalition does not have a majority in the Senate. Although the Senate's Environment and Communications Legislation Committee, which reviewed the repeal bills, is backing the Government on the issue, there does not yet appear to be a majority in favor of the repeal.. It found that the levy is "one of the highest and broadest carbon taxes in the world," and has "had a significant impact on costs for Australian businesses and families."

Willox says that Australians need "a sound policy basis for future investment." To provide this, the country must "clear away the carbon tax and to focus on the major task of designing the Direct Action approach to meet the emission reduction targets to which Australia has committed."

Cook suggests that for any price on carbon to have a positive impact, it would need be used "to directly support the research needed to develop and deploy emission-reducing technologies." However, the former Labor Government provided "no such linkage," with its carbon tax "targeted at broader budgetary issues and at social engineering rather than what its target should have been, namely clean energy engineering."

The recently elected Coalition Government came to power with pledges to scrap the carbon tax. The Labor party has refused to support Government legislation to this end when the alternative remains Prime Minister Tony Abbott's so-called "direct action plan." As part of the repeal package, an Emissions Reduction Fund will be created, based on a "market-based mechanism," and the Government will offer a series of positive incentives to reduce emissions.

The Government intends for the tax to be removed by July, 2014; but this is starting to seem unlikely. One theory is that Abbott wants the Senate to reject his bill twice, which would allow him to call another election for both houses of parliament.

TAGS: tax | energy | budget | Australia | legislation | tax rates | carbon tax | tax reform

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