Australia’s Liberal government succeeds in getting rid of the carbon tax

Australia’s Senate on Thursday (July, 17) voted 39-32 to repeal the country’s carbon tax introduced by Labor government in 2011, planned to pass into a cap-and-trade system linked to the EU ETS from 2015.

The vote marked a victory for Libera Prime Minister Tony Abbott who made abolition of the carbon pricing mechanism a major issue during his election campaign in 2013, Reuters reported. According to ABC, this was the third attempt to scrap the tax since the election. The Government’s reason for abolishing the carbon levy was that it “will lower costs for Australian businesses and ease cost of living pressures for households”.

The “Carbon tax repeal” bill removes the obligation on about 350 companies to pay A$24.15  for each tonne of CO2 they emit, with effect from 1 July 2014. Liable entities must still meet their carbon price obligations for the 2013-14 financial year, Australia’s Clean Energy Regulator explains on its website. The decision will ease economic pressure on the countries big emitters, especially on mining companies, but it was estimated to take $6.931bn out of the federal budget in net fiscal terms, Australian Associated Press reported.

The new bill also started implementation of the Direct Action Plan, the Government’s alternative policy “designed to efficiently and effectively source low cost emissions reductions”. It consists of the Carbon Farming Initiative, allowing farmers and land managers to earn carbon credits by storing carbon or reducing GHG emissions on the land, and then sold those credits to people and businesses wishing to offset their emissions, and of a A$2.55 billion Emissions Reduction Fund (ERF) to provide incentives for abatement activities.

Under the Cancún Agreements adopted in 2010 at the UNFCCC annual Conference of the Parties (COP16), Australia has committed unconditionally to reducing its overall emissions by 5 per cent by 2020, compared with 2000 levels. The country also promised to reduce its GHG emissions by 25 per cent by 2020 “if the world agrees to an ambitious global deal capable of stabilising levels of GHGs in the atmosphere at 450 ppm CO2e or lower”, and by up to 15 percent “if there is a global agreement that falls short of securing atmospheric stabilisation at 450 ppm CO2-e under which major developing economies commit to substantially restraining their emissions and advanced economies take on commitments comparable to Australia’s”.

Thursday’s abolition of the tax raised criticism, and doubts on whether Australia will be able to meet its targets.

“By repealing the carbon pricing mechanism, it is entirely unclear how this may now be achieved,” associate director with Australian carbon advisory firm Reputex Bret Harper told Reuters.

EU Climate Action Commissioner Connie Hedegaard expressed “regrets” on behalf of the European Union.  “The EU is convinced that pricing carbon is not only the most cost-effective way to reduce emissions, but also THE tool to make the economic paradigm shift the world needs” Hedegaard wrote on Thursday in a statement. “With today’s repeal of the Carbon Pricing Mechanism, the discussions to link the Australian system and Europe’s carbon market will evidently be discontinued”, she added.