Australian Leader Scraps Tax on Carbon Emissions - NYTimes.com

Australian Leader Scraps Tax on Carbon Emissions 

Australian Leader Scraps Tax on Carbon Emissions

By MATT SIEGEL

Published: July 16, 2013

SYDNEY, Australia — Prime Minister Kevin Rudd of Australia announced a plan Tuesday to replace a deeply unpopular tax on carbon emissions with a market-based trading system a full year ahead of schedule.

The decision to scrap the politically toxic tax, which narrowly passed into law with the support of the minority Greens Party, is the most significant policy change unveiled by Mr. Rudd since he regained the leadership of the nation from Julia Gillard in a party coup last month. The announcement comes as a raft of new polls show his Labor Party running neck and neck with the opposition for elections scheduled for Sept. 14.

“The government has decided to terminate the carbon tax, to help cost-of-living pressures for families and to reduce costs for small business,” Mr. Rudd said at a news conference.

Mr. Rudd, who signed onto the Kyoto Protocol as his first official act as leader in 2007 and once famously called combating climate change “the greatest moral challenge of our time,” framed Tuesday’s announcement in terms more economic than environmental. That prompted politicians with the Greens Party to express fears that his new plan would be financed at least partially through cuts to environmental and clean-energy programs.

Christine Milne, the leader of the Greens Party, was quick to criticize Mr. Rudd for what she said was a shortsighted decision to sacrifice the environment to score political points with the electorate. Her party’s support was key in allowing Labor to form a minority government after a poor showing by Ms. Gillard in elections held in 2010, and it could be crucial to Mr. Rudd’s chances in case of a similar outcome later this year.

“What he is now doing in order to make it cheaper for the big polluters to pollute, in order to try and make a political point, he’s actually slashing a billion dollars out of environmental protection in Australia,” she told reporters. “You don’t protect the environment by cutting environment programs.”

Under the current system, Australia’s worst polluters pay a high fixed price on their carbon emissions. Since it went into effect last year after squeaking through the lower house of Parliament by just two votes in late 2011, the tax has proved wildly unpopular with big business and voters, due in part to a relentlessly negative campaign by the opposition.

The current system was supposed to remain in place until 2015, then be replaced by a system in which market mechanisms would determine the cost of producing a ton of carbon. The move to bring forward the market-based system a full year earlier is expected to quickly produce a sharp drop in the cost of carbon, from a predicted $23.30 per metric ton in July 2014 to around $5.50 per ton in American dollars.

Because the lower price means the government would lose about $3.5 billion in tax revenue for the next financial year, Mr. Rudd has proposed nearly $3.7 billion in cuts or deferrals to public spending, including environmental programs. Several clean-technology programs will face cuts, including investments in carbon capture and storage, which will be cut by $538 million over four years.

The path to the passage of the carbon tax was among the most perilous in recent Australian political history. It was key to the downfall of two sitting prime ministers and a popular opposition leader and culminated in a showdown on the floor of Parliament between guards and furious protesters.

Many blame Mr. Rudd’s decision, during his first term as prime minister, to abandon his own emissions-trading scheme for the plunge in popularity that presaged his ouster as leader in favor of Ms. Gillard in 2010. Mr. Rudd’s counterpart, Malcolm Turnbull, a popular opposition leader, was forced out in 2009 over his support for the government’s climate change policy.

By the same token, Ms. Gillard was haunted during her rocky three-year tenure as leader by a simple pledge given during a television interview in the run-up to the 2010 election: “There will be no carbon tax under the government I lead.”

Ms. Gillard, who subsequently used the tax to entice the Greens into supporting her minority government, was never allowed to forget those words, which the opposition used to devastating effect in painting her as dishonest. It seemed no coincidence that Mr. Rudd’s first major policy announcement since returning to the leadership was aimed at neutralizing that line of attack.

Tony Abbott, the leader of the opposition Liberal-National coalition, said Tuesday that Mr. Rudd’s decision vindicated his criticism of the policy. However, he dismissed the change in the timeline as mere window dressing, saying Mr. Rudd was simply accelerating the policies of Ms. Gillard’s government in an attempt to win votes.

“He’s not the terminator, he’s the exaggerator,” he told reporters. “He’s not the terminator, he’s the fabricator.”