The Times Australia
The Times World News

.

Australia and the US are passing major climate bills – without taxing carbon

  • Written by Ian A. MacKenzie, Associate Professor in Economics, The University of Queensland
Australia and the US are passing major climate bills – without taxing carbon

At last, there’s action on climate change. The United States recently passed[1] its largest climate bill ever. And Australia is set to usher[2] a 43% emissions target into law this week, although the Greens will try to amend[3] the bill so the climate impacts of new gas and coal projects are considered.

Good news, right? There’s one issue – these laws, packages and amendments conspicuously avoid the “T” word. Economists have long argued the best option to cut emissions is a tax or, failing that, a type of carbon market known as “cap-and-trade[4]”. But nowhere do the Australian or US bills mention taxing carbon dioxide to discourage dumping it into the atmosphere.

Why? The answer is basically politics. The Gillard Labor government introduced a carbon tax that, although it worked, turned out to be political kryptonite. So Labor’s climate policies now rely not on a tax, but on incentives for clean energy, carbon farming and electric transport.

This is not ideal. For decades, economists have pointed out carbon taxes and pollution allowance markets are the simplest and best way[5] to reduce emissions at the lowest possible cost. But it seems taxes are out and stimulus is in.

adam bandt
No taxes here: Greens leader Adam Bandt introducing his AAP

A long history of tax avoidance

This isn’t new, of course. For decades, politicians – particularly in Anglophone countries – have avoided carbon taxes or market-based ways of cutting planet-heating pollutants.

Every attempt to price carbon on a national level in the US has failed[6]. The first was in 1990. Presidential candidate turned climate campaigner Al Gore called for a carbon tax[7] in his influential 1992 book, Earth in the Balance. But it was politically unappealing[8].

Read more: The US has finally passed a huge climate bill. Australia needs to keep up[9]

Why? Concerns over “federal overreach”, increasing cost of power, and, of course, lobbying[10] from fossil fuel industries.

Australia has the sad title of the first country in the world to introduce and remove a price on carbon – a sign of how fraught the idea[11] has been. Labor’s Rudd-Gillard government lost the 2013 election with the “carbon tax” issue front-and-centre in the campaign[12].

electric car Subsidies for electric vehicles and green energy are set to grow strongly. Shutterstock

Policy and politics has evolved

Since Australia repealed its carbon tax, we’ve seen significant change in climate policies towards what is politically possible.

In the US, federal inaction on climate change spawned stronger environmental regulation by some states. Coalitions of American states now operate some of the world’s best pollution markets, such as that covering 12 eastern states[13] and California’s own market[14].

The EU avoided taxes in favour of a cannier approach. They created a pollution market[15] but allowed each state to determine how many allowances domestic firms could obtain. This made the policy more politically appetising and the EU carbon market has since expanded substantially[16].

The world’s largest emitter, China, last year followed suit and launched the world’s largest[17] carbon trading scheme.

But Australia didn’t follow the emissions trading model pursued by the EU and many US states. Instead, the Abbott Coalition government brought in an emissions reduction fund[18] to subsidise pollution reduction.

Companies can use pollution reduction to gain carbon credits, which can be sold to government or on the private market. The policy has proven thoroughly underwhelming[19].

What trends are we seeing?

So tax and markets seem to be off the table when it comes to climate bills.

Last month, the US passed a sweeping A$530 billion bill[20] aimed at boosting health care funding and tackling climate change.

It’s aimed at speeding up the shift to clean energy and electric transport, through rebates and tax credits for electric cars, efficient appliances and rooftop solar. Conspicuously absent was any mention of a carbon tax or pollution allowance market.

Australia’s climate bill requires us to reduce emissions by 43% by 2030 – but there’s very little information on the crucial question of how.

Labor’s bill envisages[21] a type of market, regulating large polluters by allowing them to trade credits created by emissions reduction.

But both Australia and the US have shied away from the principle of “polluter pays”.

This is disappointing. Yes, subsiding pollution reduction can create incentives for behaviour change. But subsidies are often wasteful[22] and inefficient. Taxes and markets are better options. We now know countries with a price on carbon have emissions growth rates around 2% lower[23] than those without. Longer term, this is often enough to see overall emissions begin to fall.

While the direct costs of subsidies are not immediately seen by citizens and companies, these subsidies have to be paid for through increases in general taxation. Carbon taxes, by contrast, are more explicit. A polluter will clearly notice having to pay the tax and be motivated to avoid it.

biden climate US President Joe Biden signing the climate bill, titled the Inflation Reduction Act, on August 16. Jim Lo Scalzo/EPA

We’ll still need taxes and market approaches, even with the subsidies

Instead of splashing out on subsidies, governments could still introduce a carbon tax[24] to raise much-needed revenue while offering assistance to low-income households, cutting taxes elsewhere, or even reduce the deficit.

In Australia, there’s surprising support for a return of the carbon tax[25]. But Labor may well be wary, given how their last carbon tax was easily defeated with a political scare campaign. One alternative could be to follow the EU and China and begin auctioning[26] off pollution permits.

We could also borrow from America’s approach. Deep in the bill is a fee on methane emissions[27]. This, some environmentalists believe, could be the crucial first step towards wider pricing of pollution.

Even though subsidies and rebates are politically popular, by themselves they cannot end greenhouse gas emissions. While carrots are popular, we will still need a stick – taxes or markets – to actually encourage polluters to cut emissions.

Read more: Carbon pricing works: the largest-ever study puts it beyond doubt[28]

References

  1. ^ recently passed (theconversation.com)
  2. ^ set to usher (theconversation.com)
  3. ^ amend (www.skynews.com.au)
  4. ^ cap-and-trade (www.lse.ac.uk)
  5. ^ simplest and best way (theconversation.com)
  6. ^ has failed (www.cnbc.com)
  7. ^ called for a carbon tax (www.belfercenter.org)
  8. ^ politically unappealing (www.politico.com)
  9. ^ The US has finally passed a huge climate bill. Australia needs to keep up (theconversation.com)
  10. ^ lobbying (doi.org)
  11. ^ how fraught the idea (www.abc.net.au)
  12. ^ in the campaign (theconversation.com)
  13. ^ 12 eastern states (doi.org)
  14. ^ own market (www.c2es.org)
  15. ^ pollution market (doi.org)
  16. ^ expanded substantially (www.reuters.com)
  17. ^ world’s largest (chinadialogue.net)
  18. ^ emissions reduction fund (theconversation.com)
  19. ^ underwhelming (theconversation.com)
  20. ^ A$530 billion bill (theconversation.com)
  21. ^ envisages (theconversation.com)
  22. ^ often wasteful (www.theage.com.au)
  23. ^ around 2% lower (theconversation.com)
  24. ^ introduce a carbon tax (theconversation.com)
  25. ^ return of the carbon tax (www.theaustralian.com.au)
  26. ^ auctioning (doi.org)
  27. ^ fee on methane emissions (subscriber.politicopro.com)
  28. ^ Carbon pricing works: the largest-ever study puts it beyond doubt (theconversation.com)

Read more https://theconversation.com/taxes-out-subsidies-in-australia-and-the-us-are-passing-major-climate-bills-without-taxing-carbon-189555

Times Magazine

Building a Strong Online Presence with Katoomba Web Design

Katoomba web design is more than just creating a website that looks good—it’s about building an online presence that reflects your brand, engages your audience, and drives results. For local businesses in the Blue Mountains, a well-designed website a...

September Sunset Polo

International Polo Tour To Bridge Historic Sport, Life-Changing Philanthropy, and Breath-Taking Beauty On Saturday, September 6th, history will be made as the International Polo Tour (IPT), a sports leader headquartered here in South Florida...

5 Ways Microsoft Fabric Simplifies Your Data Analytics Workflow

In today's data-driven world, businesses are constantly seeking ways to streamline their data analytics processes. The sheer volume and complexity of data can be overwhelming, often leading to bottlenecks and inefficiencies. Enter the innovative da...

7 Questions to Ask Before You Sign IT Support Companies in Sydney

Choosing an IT partner can feel like buying an insurance policy you hope you never need. The right choice keeps your team productive, your data safe, and your budget predictable. The wrong choice shows up as slow tickets, surprise bills, and risky sh...

Choosing the Right Legal Aid Lawyer in Sutherland Shire: Key Considerations

Legal aid services play an essential role in ensuring access to justice for all. For people in the Sutherland Shire who may not have the financial means to pay for private legal assistance, legal aid ensures that everyone has access to representa...

Watercolor vs. Oil vs. Digital: Which Medium Fits Your Pet's Personality?

When it comes to immortalizing your pet’s unique personality in art, choosing the right medium is essential. Each artistic medium, whether watercolor, oil, or digital, has distinct qualities that can bring out the spirit of your furry friend in dif...

The Times Features

How much money do you need to be happy? Here’s what the research says

Over the next decade, Elon Musk could become the world’s first trillionaire[1]. The Tesla board recently proposed a US$1 trillion (A$1.5 trillion) compensation plan, if Musk ca...

NSW has a new fashion sector strategy – but a sustainable industry needs a federally legislated response

The New South Wales government recently announced the launch of the NSW Fashion Sector Strategy, 2025–28[1]. The strategy, developed in partnership with the Australian Fashion ...

From Garden to Gift: Why Roses Make the Perfect Present

Think back to the last time you gave or received flowers. Chances are, roses were part of the bunch, or maybe they were the whole bunch.   Roses tend to leave an impression. Even ...

Do I have insomnia? 5 reasons why you might not

Even a single night of sleep trouble can feel distressing and lonely. You toss and turn, stare at the ceiling, and wonder how you’ll cope tomorrow. No wonder many people star...

Wedding Photography Trends You Need to Know (Before You Regret Your Album)

Your wedding album should be a timeless keepsake, not something you cringe at years later. Trends may come and go, but choosing the right wedding photography approach ensures your ...

Can you say no to your doctor using an AI scribe?

Doctors’ offices were once private. But increasingly, artificial intelligence (AI) scribes (also known as digital scribes) are listening in. These tools can record and trans...