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Carbon tax fight politically costly down under

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Working out a way to deal with climate change by cutting carbon emissions has long tied Australia in political knots.

The country relies so much on coal and other fossil fuels for its energy that it is one of the world’s highest emitters per head of population. Bitter battles over carbon pricing have cost two prime ministers and an opposition leader their jobs.

When he led the conservative Liberal-National coalition to power 10 months ago, now-Prime Minister Tony Abbott made it his chief electoral promise to "axe the tax." On July 17 Abbott claimed victory when parliament approved legislation to abolish the previous Labor government’s tax on carbon emitters.

Abbott rose to the top of the Liberal Party as a skeptic about climate change. It was how he toppled Malcolm Turnbull as the party’s leader in late 2009, after Turnbull had struck a bipartisan deal with the Labour leader of the time, Prime Minister Kevin Rudd, over a cap-and-trade scheme for carbon emitters. Rudd’s party, in turn, ditched him as leader when he walked away from that plan. Julia Gillard, Rudd’s successor as prime minister, introduced the carbon tax in 2012.

More than conviction, it was populism that drove Abbott’s campaign to abolish the tax. As voters’ support for action on climate change wavered, he branded the tax a "wrecking ball across the economy," raising the cost of business and destroying jobs. He forecast that industrial cities such as Whyalla in South Australia would be "wiped off the map."

These predictions have not come to pass. Indeed, there were signs that the tax was starting to work, by encouraging Australians to switch to cleaner forms of energy. The Climate Institute, a research group committed to green policies, says that the proportion of Australia’s electricity sourced from brown and black coal has fallen by 10 per cent in the two years since the tax started, while that from renewable sources, such as wind and solar, has risen by more than a third, albeit from a very low base.

The carbon tax brought the federal government revenue of more than $6.5 billion U.S. last fiscal year. In its place Abbott proposes a "direct action" plan. Details are sketchy, but its main feature is a public fund, worth about US$2.3 billion in the course of four years, to pay big polluters to cut emissions.

The plan is a nod to greens, and suits business by shifting the cost to taxpayers, but it sits oddly with the Liberal Party’s free-market instincts. There also are doubts about whether it will achieve Australia’s bipartisan commitment to cut carbon emissions by 5 per cent from 2000 levels by 2020. Meanwhile Abbott is resisting a bid by U.S. President Barack Obama to include climate change on the agenda of the G20 leaders’ next summit, set for November in Brisbane.

Fulfilling his pledge to axe the tax has not gone entirely Abbott’s way. An alliance in the Senate between Labour and the Australian Greens at first blocked the bill after the lower house had approved it. A new upper house, reflecting the result of last year’s election, took over on July 1. Enter Clive Palmer, a legislator and a Queensland mining billionaire. Though he sits in the lower house, three new members of his Palmer United Party gave Abbott, on his third try, the votes needed to get the abolition through the Senate.

Some of Palmer’s tactics are calculated to grab political attention. At a recent press conference in Canberra, where he stood alongside former vice president Al Gore of the United States, now a climate-change campaigner, Palmer laid out his conditions for supporting Abbott. He insisted that two public bodies Abbott had wanted to eliminate be saved: the Climate Change Authority, which advises the government, and the Clean Energy Finance Corporation, which offers loans for energy-efficient projects.

Palmer also wants an emissions-trading scheme to replace the tax, but one with the price pegged at zero until Australia’s main trading partners adopt similar schemes, as some already have.

No one is sure how or whether this will happen. Now even Abbott’s modest direct-action plan faces its own hurdles in the Senate.


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