Australia Outdoes U.S. by Crafting a Clean Energy Policy with a Carbon Price

by Tripp Brockway

The United States is yet again falling behind in the most important economic, social, and environmental issue of the 21^st century. On Sunday, Australian Prime Minister Julia Gillard announced her plan for a comprehensive clean energy policy. By doing so, Gillard has established Australia, the highest per capita carbon emitting country in the developed world, as a much needed international leader in the effort to address climate change.

Gillard’s plan has a realistic chance of passing votes in both houses of the Australian Parliament within the year. It includes a $23 per ton price on carbon, set to start on July 1, 2012, that will generate about $24.5 billion in revenue by 2015. Only the 500 biggest polluters in the country will pay the tax, which will exclude the forestry, agriculture, and transportation sectors. After three years, the price on carbon will be replaced by a market-based emissions trading system.

The Gillard administration is embracing the carbon-reduction plan as a way to stimulate the economy and keep Australia competitive.  It is designed to protect consumers and ensure a smooth transition for industry.  Gillard’s proposal includes targeted tax cuts and rebates for consumers drawn from the revenue generated by the carbon price, ensuring that the average Australian does not suffer if businesses pass on their costs.

According to expert analysis, the cost to the average household will rise by $9.90 per week, while average household assistance from rebates alone will be $10.10 a week. Furthermore, Australians making under $80,000 will see tax cuts, and those making under $18,200 will no longer pay any taxes. The policy will be a financial boon to the average consumer.

The Gillard plan includes $9.2 billion for industry assistance over the first three years, and particularly vulnerable industries are set to receive special assistance. The steel industry, for example, will receive free permits for carbon costs and $300 million in direct assistance to transition to clean energy. Gillard’s plan would not be viable if it did not address the economy; it ensures that jobs in vulnerable industries will not be lost, incentivizes the creation of new jobs in clean industries, and nearly pays for itself through carbon pricing.

While the proposal is modest in its ambition (estimated to cut 159 million tons of CO2 by 2020), it is exemplary in its efficacy. Similar to the proposed but never enacted Clean Energy Deployment Administration in the United States, the Gillard plan establishes a $10 billion Clean Energy Finance Corporation. This institution will promote investment and innovation in clean energy technology and help companies overcome the “Valley of Death,”—the financing gap between technological invention and commercialization that cripples the expansion of renewable sources of energy. Furthermore, the Gillard plan exempts farmers from the carbon price, allowing them to “farm carbon” and reap a profit by creating carbon sinks.

The Gillard government has taken bold steps in the effort to combat climate change in the face of a contentious political environment and powerful special interests. As the world’s biggest exporter of coal, Australia is not lacking in well-funded climate deniers. For example, the Institute of Public Affairs, which is funded by major mining and oil companies in Australia, funds and enables fringe climate change skeptics.

Gillard’s proposal shows that, with effective leadership, governments can stand up to special interests and protect the welfare of their people through the reduction of pollution and the promotion a vibrant clean energy economy. According to Prime Minister Gillard,

“Carbon pricing is a reform we need to make to keep our economy competitive, to protect our environment and to do the right thing for our children and future generations.”

The Gillard government’s success proves that moving forward with clean energy policy is possible, despite potential obstacles. It dares countries such as the United States, long hindered by well-funded climate dissidents, to overcome the culture of misinformation and again move forward on establishing effective clean energy policy.

— Tripp Brockway, energy intern at the Center for American Progress