Carbon laws are working, like them or not | RenewEconomy

Carbon laws are working, like them or not

Australia’s carbon laws are about to turn 2 – pollution is down, the economy is up, scare campaigns exposed, wind and solar grow


July 1, 2014, marks the second anniversary of Australia’s carbon laws – the Clean Energy Act and other laws that price and reduce pollution, invest in renewable energy and support households and business in the shift to a cleaner economy.

The laws are working and have delivered impressive results in their first two years: Australia’s pollution is down; economic growth is up; unemployment and inflation remains under control; and solar and wind energy has soared.

The carbon laws have worked with the renewable energy target and economic changes to achieve these results.

windsThe Abbott Government intends to repeal the carbon laws, aiming to replace them with still uncertain policies that shift the burden of pollution reduction from big polluters to taxpayers, threaten the Renewable Energy Target, and may or may not place limits on our biggest polluters.

No independent assessment to date[i] supports the ability of these policies to achieve 2020 pollution reduction targets of at least 5 per cent below 2000 levels. By contrast, the default mechanisms in the carbon laws will achieve at least 15 per cent reductions. Australia continues to have international commitments of 5 to 25 per cent reductions – a pre-election promise of the Abbott Government.

Pollution is down

Total emissions from electricity consumption in the National Electricity Market (NEM) are down by 5.3 million tonnes in the 12 months to May 2014[ii]. This means emissions from electricity generation have fallen by 17.2 million tonnes or 10.3 per cent since carbon pricing was introduced.

The latest Australian Greenhouse Gas Inventory has shown that national emissions continue to drop and the Abbott Government’s own assessments estimate the carbon laws will decrease national pollution by 40 million tonnes[iii].

Our energy mix is cleaner

TCI carbonCurrent policies are also driving increased uptake of renewable energy like wind and solar, with electricity from renewables rising by around 37 per cent and natural gas by 1.3 per cent since June 2012. At the same time, the use of brown coal has fallen by 14 per cent and black coal by 7 per cent[iv].

Australia now has a cleaner electricity generation sector with carbon pollution per megawatt-hour down from 0.87 to 0.82 tonnes per unit of output, or 5.7 per cent since carbon pricing was introduced.

The Australian economy continues to grow and inflation impacts were minimal

The Australian economy remains strong. In fact growth was higher than expected (1.1 per cent) in the March quarter, with an annual growth rate of 3.5 per cent. Unemployment remains below 6 per cent and jobs in the renewable energy sector continue to grow.

Price impacts from the carbon laws have been as expected[v] or less and have had minimal impact on the Consumer Price Index. Latest figures show a 2.9 per cent rise in the year to March 2014, a rate that is within the Reserve Bank of Australia’s target range.

The Abbott Government’s December MYEFO highlighted the minimal inflationary impact of carbon pricing by predicting its removal would “lower headline and underlying inflation by less than ¼ of a percentage point in 2014-15”[vi].

The carbon price has not impacted on the nation’s overall economic performance. It has certainly not has resulted in the catastrophic impacts predicted by opponents of the carbon laws.

The carbon laws default mechanisms will reduce pollution by at least 15 per cent by 2020

From 1 July 2015, the carbon laws set not just a price but a limit on carbon pollution. The default mechanism in the laws automatically reduces that limit by 12 million tonnes per year.

The independent Climate Change Authority estimated this would help reduce Australian pollution levels to 15 per cent below 2000 levels by 2020[vii]. Estimates supported by the Parliamentary Library put this figure higher than 18 per cent[viii].

“Direct Action” will struggle to achieve even 5 per cent reductions

Independent modelling from Sinclair Knight Merz and Monash University of Coalition’s “Direct Action” plans showed that plan would increase pollution levels by 9 per cent by 2020, rather than decrease it[ix].

This included generous assessments including maintenance of the renewable energy target (now under review) and the expenditure of the promised $2.55 billion over the forward estimates from its Emissions Reduction Fund (ERF).

The Budget contained new estimates from Treasury that just $1.15 billion would be expended in that time meaning potentially higher increases in pollution levels[x]. Separate industry analysis released on 12 June estimates the ERF will purchase just 30 per cent of emission reductions needed to meet the 2020 target[xi].

Australian support for climate action is rebounding

Polling released by the Lowy Institute in early June shows support for climate action rebounding and that almost two-thirds of Australians think the government should take a global leadership role. Only 28 per cent believe we should wait for international consensus – often a proxy for inaction. Just 7 per cent think Australia should do nothing[xii].

International action, carbon pricing and pollution limits are becoming common practice 

Inaction by major emitters like the United States and China has long been used by the Coalition as a reason to hold back on efforts here. But both countries are now embarked on ambitious plans to control pollution, invest in clean energy and to help negotiations on a global framework agreement in 2015.

The US has committed to reduce national emissions by 17 per cent below 2005 levels by 2020. This equals 21 per cent below their 2000 levels by 2020.  If Australia was to keep pace with the US commitment of 17 per cent below 2005 levels by 2020 this would equal a 12 per cent reduction off our 2000 levels.

The US has just announced new rules to reduce carbon pollution from American coal and gas power plants. The new rules add to existing federal regulations, state based carbon markets and renewable energy target schemes which are in place in 29 American states.

China has committed to reducing its carbon emissions per unit of GDP by 40-45 per cent by 2020. China is also ramping up efforts to clean up its energy supply and improve energy efficiency.

Last year China launched five regional carbon markets, invested $54 billion in renewable energy, and set limits on coal use. It is moving to establish a national carbon market by 2020. Other countries which have introduced, or are planning, market based emissions trading schemes and carbon taxes include South Africa, South Korea, New Zealand, the UK, Germany, Italy and France.

John Connor is CEO of The Climate Institute

[i] Coalition Climate Policy and the National Climate Interest, Climate Institute, August 2013 –

[ii] Cedex Carbon Emissions Index report, June 2014 –

[iii] Australia’s Abatement Task and 2013 Emissions Projections, Department of the Environment –

[iv] National Electricity Market Review, May 2013. (Renewables includes ‘intermittent’ sources, as defined by AEMO)

[v] E.g. Colebatch .T Carbon Tax Inflation Fears Evaporate

[vi] Mid Year Economic and Fiscal Outlook, p12,



[ix] Coalition Climate Policy and the National Climate Interest, Climate Institute, August 2013 –


[xi] Reputex





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  1. Beat Odermatt 6 years ago

    I agree that laws to reduce CO2
    emission work, however a carbon tax remains a very clumsy and
    ineffective tool. With the global environmental issue of ozone
    destruction substances, laws mandated a gradual removal of harmful
    substances from production and use. It did work at very little cost
    to the economy.

    In regards to reducing CO2 emission,
    laws to move towards a low carbon economy can be far more effective
    if they are not coupled with a tax. A tax is a punitive and
    unproductive tool, which actually removes funds which could be used
    to reduce CO2 emission.

    I suggest that the Government should
    introduce legislations for example to force all providers of
    electricity to increase the renewable component of their products by
    say 2.5% per year.

    All businesses and Government
    Departments would also be obliged to reduce CO2 emission by 2.5% per
    year. It would be up to the electricity generators to find the best
    and most economical solution to achieve the targets. Businesses and
    Government Departments would also be free to chose how to reduce
    carbon energy dependency. They may chose better energy efficiency,
    they may want to install solar PV or buy more “green” energy.
    Targets would have to be challenging, affordable and achievable. In
    most cases such laws would provide a win-win situation for all.
    Businesses would be able to achieve sustainable cost savings and the
    Government would achieve an opportunity to meet international
    obligations at the best possible cost.

    • wideEyedPupil 6 years ago

      Here’s an idea, instead of taxing the worst CO2 and CH4 emitters (that’s cows BTW) and use the money to fund ARENA and CEFC and whatnot how about you pay the worst emitters (only if they’d like to) to reduce CO2 and CH4 pollution. Starting with a super ambitious 5% target. It’s a budget emergency don’t you know!

      • Beat Odermatt 6 years ago

        There is no need to give anything to anybody or take away from anybody. Legislate that ALL do the right thing and punish the law breakers. Make it simple and it will work.

        • wideEyedPupil 6 years ago

          I forgot to use the sarcasm font 🙂 That is LNC direct action I was describing under Chief of Pantomime Greg Hunt.

          But I disagree with the simple prescription, this world is both complex and complicated and while simplicity is good, markets need things like the RET to help them with direction. By all means I’d like to see the RET doubled or tripled.

          You outlaw coal tomorrow, great, you get a CSG gas boom with just as bad or worse emissions in the 20 yr timeframe — and 20 yrs is significant regards tipping points given the polar warming situation.

          • Beat Odermatt 6 years ago

            I agree that the RET must stay. I however don’t thinks complicated carbon taxes which provide compensation to polluters will ever work. Legislate and let the market work out the best renewable options.

          • wideEyedPupil 6 years ago

            Most countries acting on CC use more than one mechanism. The more mechanisms the less gaming the system and chance of failure in my view. Sure it may not be entirely as economical but it’s safer and safety, after all, is the goal here.

          • Beat Odermatt 6 years ago

            Bureaucracy is often a very aggressive cancer of society. Fair and simple solution do always produce better results for all.

          • wideEyedPupil 6 years ago

            That’s a vague generality laced with a motherhood statement.

            I’ve worked in a bunch of industries including building/architecture, software dev, design & film (although nothing to do with taxation or economics) and quite often the more simple something appears on the surface the more sweat and complexity goes into constructing that ‘simplicity’ in the structure behind the appearance. As a builder once said to an Architect, ‘simple’ is more expensive and more complicated.

            The fact is we need to shift finance — of which this country has a lot of available to it — from fossils to renewables. There are impediments to that happening at this time that need to be removed urgently. A carbon price, be it a tax which is quite direct or an ETS which is more ‘flexible’ and therefore more appealing to many economists, helps flag fossil generation assets as potentially stranded assets. This is critically important. The divestment movement highlights how a little bit of communication about the potential risks of a project in the future can have a devastating on the confidence of investors, especially very public investors with reputations to protect from consumer backlash, like the banks.

          • Beat Odermatt 6 years ago

            Sorry, there is no need to make a simple thing more complicated. I know we have a massive public service keen to make anything more complicated and we have whole industries doing nothing else than making more and more red tape to serve themselves. Simple is always better.

          • wideEyedPupil 6 years ago

            Talk in specifics or conversation over. Libertarian small-government rants I’m not interested in.

    • wideEyedPupil 6 years ago

      While RETs and FiTs have clearly delivered where carbon pricing has not in most countries, I think you need a broad range of mechanisms to bring pressure on the economy to move it in the right direction. If only to stop existing coal miners having a fire sale on coal just to get something rather than nothing on their sunken assets. The more mechanisms the less room for gaming the system by finance wiz-kids.

    • juxx0r 6 years ago

      They should have just taken every cent from the tax and used it for hardware and installation of Wind, Wave, Solar, Geothermal. Self solving equation. Also not to be used for any feasibility studies, that comes out of their own pockets.

      Also they should have made it so that the people paying the tax can keep it as long as they complied with the above. And it should have started off low and doubled in rate every two years. We’d be at 100% renewables in no time.

      I can’t believe that the tax is “working” given how convoluted it was and the awesome job they did with the mining tax. Mine would have worked 1000 times better.

      • Catprog 6 years ago

        So instead of looking for what is the best option, just choose something they like?

        In a way they do get to keep the tax. The consumers who end up paying the tax got a reduction in their income tax.

        What is convoluted? Every ton of CO2 emitters means those subject to it have to pay the fine.

  2. howardpatr 6 years ago

    Try telling that to Mad Monk Abbott – he will say he agrees with you when it suits and do and say the opposite when it suits.

    Like he tells Obama that he, Obama, has finally come onside with his “direct action”.

    What a national and international embarrassment the Monk is.

  3. Tim Buckley 6 years ago

    The price on carbon pollution is working exactly as planned. It is straight-forward and in place, doing what it was designed to do I.e. to encourage the switch to cleaner energy sources with minimal impact on the economy. Electricity sector emissions down 10.3% since the carbon price was implemented – a significant milestone, thanks John for highlighting this. Maybe someone in our government is listening? Maybe they are even reading the Lowy Institute poll and realise the electorate wants Australia to do its fair share! Maybe we should call out Abbott for his “wrecking ball” comment. There is a FAIL!

  4. Ray Del Colle 6 years ago

    I like limits on carbon! “The worst thing we can do for our economy is sit back and do nothing about climate change.”

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