Tuesday, November 8, 2011

Carbon price passes - Australia to (finally) act on climate change

With a vote of 36-32 the carbon price has passed the senate is now set to become law. This means that the price on carbon pollution (and the associated compensation to households and business) will begin next year. Australia will now (finally) join the growing list of countries taking meaningful action on climate change.

It is probably worth repeating why putting a price on carbon pollution is so important and why it (necessarily) forms the foundation of climate change action.
Currently it is free for companies to emit unlimited amounts of carbon dioxide and other greenhouse gasses into the atmosphere, but these emissions still have a cost, through the negative effects of climate change. It is just that currently we, (the taxpayers), have to foot this bill, effectively providing a subsidy for polluting industries. In such a situation why would companies spend money to reduce their pollution? A carbon price changes this by shifting the cost to the polluters, giving them an incentive to reduce pollution. By applying the carbon price across most (or all) of the economy we can let business find the cheapest ways to reduce pollution and grow new industries based on clean technology.
A carbon price is also different from the Coalitions so called "direct action" measures where the government would use taxpayers money to pay some businesses to reduce emissions. Because this policy doesn't apply across the economy, many businesses would still be increasing their levels of pollution and have no incentive to do otherwise, nor will there be a market mechanism to find the cheapest carbon reduction possibilities. This makes it debatable whether the Coalitions direct action policy would be able to reduce emissions at all, as a decrease in one area could be canceled out by increases elsewhere.

Although the carbon price is the foundation of the "Clean Energy Future Package" there are other important elements. As we noted previously the "Carbon Farming" aspect of the package has already passed into law. Still to pass into law is the formation of ARENA, which is a new independent agency that will integrate existing money and programs for renewable energy. The Coalition have stated they will support this so expect the law to pass early next year. Also still to be introduced into parliament is the independent Clean Energy Finance Corporation which will have $10 billion dollars in new funding for commercialization and deployment of clean energy and energy efficiency projects. Like the carbon price the Coalition opposes this money for clean energy and so we can expect a new fight over CEFC early next year. 

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