Labor is seeking to turn the politics of the carbon tax back on Tony Abbott, saying its decision to bring forward the start of the lower floating carbon price means coalition policy represents the real “great big new tax”.
The government is now scouring for more than $3bn in budget savings from carbon price compensation schemes, to pay for revenue forgone when it brings forward the date on which the Australian price is set by the international price from July 2015 to July 2014. The international price is much lower than the $25 a tonne currently legislated.
The decision, expected since Kevin Rudd returned as prime minister and likely to be announced as early as Tuesday, will also eventually need parliamentary approval – either from the Greens, who vehemently oppose it because it will reduce the amount paid by “big polluters”, or from the coalition, who claim it is just a trick to dupe voters into thinking Labor is getting rid of carbon pricing altogether.
The extreme difficulty of getting a change through parliament was a key reason the idea was rejected when it was considered under Julia Gillard’s prime ministership. But with an election now imminent it is possible Rudd will say that is a fight he will have after polling day, just as Tony Abbott would face parliamentary opposition to his policy to repeal the carbon tax.
Labor intends to use the move to shift the toxic politics of the carbon tax, claiming the move could reduce household power bills by $150 a year. It would make the coalition’s $10.5bn direct action climate policy the real “great big new tax”, Labor will say, because it proposes to subsidise polluters with expensive government payments – the cost of which must be born by taxpayers.
“Families will see a big benefit from what we are bringing forward … [Abbott] is proposing a great big new tax to subsidise people who are already polluting,” the treasurer, Chris Bowen, told Channel 10 on Sunday.
Bowen said industry assistance “will be calibrated to match the new price, of course it will be”.
But even after the automatic reduction in the cost of free permits to trade-exposed businesses the government will need to find at least $3.4bn in 2014-15 according to an analysis by Deutsche Bank.
“On current forward prices, moving to a floating price one year ahead of schedule would cost the federal budget around $3.4bn in 2014-15, with $7bn less revenue partly offset by a saving of $3.6bn from the lower cost of free carbon units,” Deutsche Bank analyst Tim Jordan said in a note released on Friday.
Business has strongly advocated bringing forward the internationally-linked floating price because it means the price they pay for an Australian permit is likely to fall from the legislated $25 in the final 2014-15 fixed price year to less than $10.
The climate advocacy group the Climate Institute says because Australia would effectively become a “price-taker” on international markets, bringing the change forward should allow Australia to increase the ambition of its emission reduction cuts without any extra impost on business.
It is demanding the government maintain the role of the independent Climate Change Authority, which was set up during the difficult negotiations between Labor and the Greens on carbon pricing to leave open the possibility of higher emissions reduction targets than the minimum 5% by 2020.
The authority advises on Australia’s fair share of global emission reductions and what targets, and annual emission reduction caps, should be set domestically.
Its first chief executive, Anthea Harris, told Guardian Australia last week an earlier start for a floating price would not need to interrupt the work of the authority.
“If the scheme were to change to have a floating price sooner the Climate Change Authority would not be constrained in its ability on emission reduction goals,” Harris said.
“The government has several options to do that, they could set the default cap in legislation to get the ball rolling, or they could select a cap themselves for the first year which we would take into account for our recommendations for years after that.”
Both Labor and the Coalition have agreed to a minimum 5% reduction by 2020, rising to 15 or even 25%, if the rest of the world began ambitious climate change action.
“It is likely that for most if not all of the bipartisan-backed 2020 range of pollution reductions from 5 to 25%, our pollution permit price will be shaped by the European price,” Climate Institute chief executive John Connor said.
“The debate should now be about taking targets of at least 25% to global negotiations to help boost actions and avoiding worsening climate impacts.