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It’s All Over: Australia Repeals Carbon Tax

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Rob Taylor and Rhiannon Hoyle, The Wall Street Journal

After almost a decade of heated political debate, Australia has become the world’s first developed nation to repeal carbon laws that put a price on greenhouse gas emissions.

Australian Prime Minister Tony Abbott. Associated Press

In a vote that could highlight the difficulty in implementing additional measures to reduce carbon emissions ahead of global climate talks next year in Paris, Australia’s Senate on Wednesday voted 39-32 to repeal a politically divisive carbon emissions price that contributed to the fall from power of three Australian leaders since it was first suggested in 2007.

Australia, the world’s 12th largest economy, is one of the world’s largest per capita greenhouse gas emitters due to its reliance on coal-burning power stations to power homes and industry. In 2011, daily emissions per head amounted to 49.3 kilograms (108 pounds), almost four times higher than the global average of 12.8 kilograms, and slightly ahead of the U.S. figure of 48.2 kilograms.

The former Labor government, while introducing a price on carbon, said the move would help slash emissions by 160 million metric tons by 2020. It offered voters billions of dollars in compensation through tax breaks and welfare payments for increased costs stemming from one of the most dramatic reforms ever attempted in the energy-reliant economy.

But after the global financial crisis took hold in 2008, followed by the end of a decadelong mining boom in 2012 that slowed growth and employment in the A$1.5 trillion (US$1.4 trillion) economy, Australian voters turned against climate laws—recognized by the International Energy Agency as model legislation for developed countries—blaming them for rising energy bills and living costs.

The World Bank in May produced a State and Trends of Carbon Pricing report counting carbon pricing programs in 40 nations and 20 regions worth a collective US$30 billion, while also singling out repeal plans in Australia as one of the biggest international threats to the rollout of similar programs elsewhere, given its example.

Prime Minister Tony Abbott, who made a pre-election “pledge in blood” to voters and business to prioritize growth above climate shift, delivered on his promise after independent senators with deciding votes in the upper house sided with his conservatives, following a power shift this month that ended years of domination by the pro-environment Greens party.

“Today the tax that you voted to get rid of is finally gone, a useless destructive tax which damaged jobs, which hurt families’ cost of living and which didn’t actually help the environment is finally gone,” a jubilant Mr. Abbott told voters in a news conference after the Senate’s decision.

He said the carbon price was acting as a A$9 billion a year handbrake on the economy, which was adjusting to the end of a record mining investment boom that helped shield Australia through much of the recent global economic downturn.

Without matching emissions policies in other industrialized countries, Mr. Abbott has said earlier the tax was an unfair shackle on local companies and individuals, unequaled except in Europe, where an emissions market has operated since 2005.

Labor and Green opponents of the government said the repeal would make the country an international “pariah” on efforts to combat climate change.

“This is a fundamental moment in Australia’s history. We are about to devastate the future of this country,” said Labor Senator Lisa Singh in an impassioned speech warning the government that climate warming would impact most on future generations.

The carbon tax and plans for an eventual emissions market dominated Australian politics for years, gaining momentum in 2007, when former Labor Prime Minister Kevin Rudd called climate change “the greatest moral challenge of our time” and made signature of the Kyoto climate protocol one of his first political acts after winning power. Mr. Abbott defeated Mr. Rudd—then in his second stint as prime minister—10 months ago, in an election fought largely over the carbon price and its impact on energy costs.

The carbon tax has affected industries ranging from mining and energy to aviation, and was widely opposed by manufacturers and a majority of business representative groups including the country’s main chamber of commerce. […]

But his repeal may reverberate internationally ahead of global climate talks next year, when major economies like China, India and the U.S. will consider global greenhouse targets beyond 2030 that climate scientists say will be necessary to limit global temperature rises to two degrees Celsius (3.6 Fahrenheit) above 19th century levels, even as many nations grapple with how to boost manufacturing and spur sluggish economies.

A 2009 climate meeting in Copenhagen ended in disagreement between the U.S. and China over how to deal with emissions, prompting some critics to give it the disparaging sobriquet “Brokenhagen.”

The Brookings Institution has previously described Australia as an “important laboratory and learning opportunity” for U.S. thinking about climate change and energy policy, as it was one of the first major countries outside Europe to adopt a carbon price. The country was also comparable in many ways to the U.S., with similarly energy-intensive lifestyles, industries and per capita greenhouse gas emissions.

Emissions programs are already in place in Europe and parts of the U.S. and Canada, as well as Japan and Australia’s trans-Tasman neighbor New Zealand. South Korea is expected to begin emissions trading next year, while China is proceeding with pilot schemes in seven locations. Europe’s emissions market covers 31 countries and 40% of total greenhouse gas output inside the bloc.

Britain in 2008 also committed to slashing emissions by at least 80% by 2050 when measured against 1990 levels, while the U.S. Environmental Protection Agency has finalized regulations that aim to deliver carbon pollution cuts of 30% from power plants by 2030 when compared with 2005 levels, giving teeth to U.S. President Barack Obama’s promise to tackle climate shift through mechanisms putting a price on carbon.

But there have been backward moves as well. Japan last year retreated on pledges to cut greenhouse emissions, blaming the shutdown of its nuclear plants in the wake of the 2011 Fukushima nuclear disaster for a decision to release 3% more greenhouse emissions by 2020 instead of a 25% cut on 1990 levels previously promised. Closing down nuclear power forced the world’s fifth-biggest emitter to rely on fossil fuels for electricity generation.

Canada withdrew from the Kyoto protocol in 2011, with the conservative government saying the agreement would unfairly penalize its fossil fuel-reliant economy for failing to meet a promised 6% cut. Mr. Abbott, who shares the Canadian government’s conservative ideology, said during a recent visit to Ottawa and the U.S. that climate change was “not the only or even the most important problem that the world faces”.

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