After only about one year, Australia plans to scrap its controversial carbon tax and move to an emissions trading scheme in an attempt to bolster support for the Labor government ahead of November’s mandatory election.
“This is essentially a political move,” Kobad Bhavnagri, an analyst at Bloomberg New Energy Finance, told Bloomberg. “It’s designed to neutralize public angst about the carbon tax, to try to remove the word tax from public debate and to appease the business community who are concerned they are paying much more than in the E.U.”
Australian Prime Minister Kevin Rudd said that the country would scrap its carbon tax, which is the highest in the world, and move to an emissions trading system which is expected to lower the price of emitting carbon dioxide.
“The fixed carbon price of $24.15 a ton will be removed in favor of a floating price, thought to be between $6 and $10 a ton,” ABC Rural reports.
“The government is moving in this direction because a floating price takes cost-of-living pressures off Australian families and still protects the environment and acts on climate change,” Rudd told reporters. “We have still got a fair bit of budget work to do, as this has to be a budget neutral undertaking.”
This move would help businesses suffering from “high energy prices and lost competitiveness,” according to the Australian Industry Group, a major business lobby. Australia’s carbon price is four times higher than Europe’s.
“Energy prices would be lowered both for businesses and for households,” said Innes Willox, the group’s CEO. “This would help stimulate the economy at a time when it is struggling to transition from the slowdown in mining investment.”
Australian business have been hit hard. News Limited Network reported in March that the carbon tax was contributing to a record number of firms facing insolvency.
Australian Securities and Investments Commission data showed that a record 10,632 businesses faced insolvency in 2012 — up from 10,481 for 2011.
Australia’s carbon tax was implemented under Labor Prime Minister Julia Gillard last year and has recently been met with intense political opposition as businesses and homeowners face higher energy costs.
Opposition Liberal-National leader Tony Abbott, who pledged to get rid of the tax entirely if he is elected, has accused Rudd of playing political games and simply changing the name of the tax.
“Rudd can change the name but whether it is fixed or floating, it is still a carbon tax,” Abbott said in an emailed statement.
However, the Rudd is also taking hits from his left.
“The decision to scrap the fixed carbon price is cowardly,” Australia’s Greens leader Christine Milne said in an emailed statement. “If you believed that climate change was the greatest moral challenge of our time, and it is, you would not now be moving to have the big polluters pay less.”
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