Tax or trade, the war on carbon pricing has been raging for decades

The Coalition government has revived its anti-carbon tax campaign in the wake of Labor’s commitment to bring back an emissions trading scheme and increase the contribution of renewable energy to 50% by 2030.

And in announcing Australia’s 2030 climate target of 26-28% below 2005 levels by 2030, environment minister Greg Hunt was careful to note:

What we have done is crafted a position for Australia which shows that we [do] our fair share, we do the right thing by the planet, we also do the right thing by families.

For the past eight years the Australian political elite has torn itself apart over whether and how to put a price on carbon.

But carbon tax debates have been happening ever since the late 1980s, when policy-makers first started taking the “greenhouse effect” seriously.

Early battles

A 1990 Canberra Times article by Maria Taylor, states:

A spokeswoman in the Department of Arts, Sport, the Environment, Tourism and Territories said one suggestion making the rounds in policy circles was “some kind of fossil-fuel tax”.

“But you’d have to consider the enormous effects on the tourism industry,” she said. “A tax on petrol would also have the greatest effect on the less well-off.”

The heat intensified in 1991, after Labor Prime Minister Bob Hawke’s cabinet promised Australian greenhouse gas levels would be 20% below 1988 levels by 2005 (the so-called “Toronto target”).

This was superseded when Australia agreed a less onerous target - stabilisation at 1990 levels by 2000 - at the June 1992 Rio Earth Summit.

In 1991 carbon taxes and trading schemes were discussed in government working groups on ecologically sustainable development.

In 1992 the environment department released a report on tradeable emissions, which examined the feasibility of a global permit scheme, and “the use of such an instrument within Australia”.

Most ominously the government’s Industry Commission (a forerunner of the current Productivity Commission) also mooted emissions trading or taxation as a way to meet Australia’s emissions goals.

Business backlash

These discussions alarmed business. BHP, CRA (the forerunner to Rio Tinto), Shell, the Australian Coal Association and the Australian Mining Industry Council (now the Minerals Council of Australia) commissioned economic modelling that warned a carbon tax of A$153 per tonne would be needed to achieve the Toronto target. The headline to an article by the general secretary of the miners’ union captured the tone - “Carbon Tax Spells Disaster for Our Industry”.

The intense lobbying succeeded. Emissions trading did not appear in the National Greenhouse Response Strategy agreed at the end of 1992; the strategy contained only voluntary measures.

By mid-1994 it was clear that Australia would struggle to reach even its Rio target of stabilising emissions at 1990 levels. Environment minister John Faulkner took a proposed emissions trading scheme to cabinet under Labor Prime Minister Paul Keating.

The Australian Conservation Foundation and The Australia Institute both pressed for a carbon tax, to no avail. The Business Council of Australia, the Liberal Party (led by John Howard) and Victorian Premier Jeff Kennett led the charge against such a scheme.

A compromise programme of voluntary actions, the Greenhouse Challenge, was designed in collaboration with big polluters, and so toothless it survived the transition from Keating to Liberal Prime Minister John Howard.

Howard overrules his Cabinet

In the lead-up to international climate meetings in Kyoto in 1997 Howard announced a renewable energy target, and also set up the Australian Greenhouse Office. Between 1998 and 2000 the office published four emissions trading reports, which gained significant political buy-in.

Then, however, George Bush became US president, reneged on his campaign promise to cut emissions, and declared the Kyoto Protocol dead, giving Howard the political room to defer emissions trading.

According to Guy Pearse’s excellent High and Dry, in July-August 2003 Howard also vetoed an emissions trading proposal the rest of Cabinet supported. Howard later said he couldn’t recall every submission before Cabinet.

State-level pressures force Howard’s hand

In the 2000s, first New South Wales and then ACT governments introduced carbon trading schemes. The sky did not fall.

In 2004, in the same way that cities in the USA acted despite Federal intransigence, the states combined, forming the Inter-jurisdictional Working Group on Emissions Trading, which began to hold hearings and write reports.

By late 2006, Howard faced an unending drought and growing public awareness triggered by the release of former US vice president Al Gore’s documentary An Inconvenient Truth.

In response, Howard created a taskforce into emissions trading, appointing several fossil fuel executives, which proposed a scheme that, according to Guy Pearse in High and Dry:

enabled Howard to embrace emissions trading but allowed Australia’s emissions to grow indefinitely… Everyone else would pay more for electricity, but the worst offenders would get off the hook…

Howard’s end was in sight, however, and Kevin Rudd swept to power, ratified the UN’s Kyoto Protocol and promised to deal with what he had called “the great moral challenge of our generation”.

However, Rudd and his environment minister Penny Wong became bogged down in a Green Paper, a White Paper and two failed attempts to get increasingly unpopular legislation through parliament. The Carbon Pollution Reduction Scheme lost green support because of the compensation it offered to large polluters and the free permits that were to be allocated.

Carbon taxes defeated, but at what cost?

As the price of Green Party support in forming a minority government, Julia Gillard had to introduce an emissions trading scheme, which led to prolonged and well-funded public campaigns by mining interests and others to defeat the scheme.

Opposition leader Tony Abbott and others predicted economic armageddon and swore a “blood oath” to repeal the “great big tax on everything”.

Gillard’s friendless carbon tax was swept aside by the incoming Abbott government.

Australia has been talking about pricing carbon for a generation. It’s in this context that we should understand the reporting of journalists such as Laura Tingle, who writes about the costs of reaching emissions reductions via the government’s Direct Action policy:

if the proposed reductions were only being delivered by the business subsidies offered through the emissions reduction fund, the cost to taxpayers would be hundreds of millions of dollars a year, possibly hundreds of billions by 2030.

The battles against emissions trading and carbon taxes were won, but it was the mother of all own goals.

Marc will be one hand for an Author Q&A between 2:30 and 3:30 pm on Thursday, August 13. Post your questions in the comments section below.

Marc Hudson does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.