Economists typically recommend a carbon price as the best approach to reducing emissions. In the words of William Nordhaus of Yale University, “Whether someone is serious about tackling the global warming problem can be readily gauged by listening to what he or she says about the carbon price”.
The Greens score highest on this front, promising a “strong, effective price on carbon”. On this issue, they are in the same camp as the World Bank, International Monetary Fund, and International Energy Agency.
Labor is notably more ambitious than the Coalition on climate, proposing emissions reductions of 45 per cent from the 2005 level by 2030. The Coalition’s commitment is a 26–28 per cent reduction. Labor also has targets of reaching 50 per cent renewables by 2030, and net zero emissions by 2050. Labor’s proposed return to emissions trading is, however, rather light-touch – with large roles for obligation-free baselines and cheap international permits.
How the Coalition intends to achieve long-term emissions reductions is yet to be fully explained, with the important decisions likely to be left until after a climate policy review slated for 2017. Australia has already had many reviews on climate policy, and there are costs associated with policy delay. The Coalition has yet to signal any change to its position on carbon pricing.
Regardless of who wins the 2016 election, Australia has much to gain from a change of gear on climate policy. The policy flips and arguments of recent years have introduced substantial uncertainty for investors. An area that offers so much opportunity has become the trauma zone of Australian policy.
At the global level, innovation in clean-energy technologies is proceeding quickly, from solar panels to electric vehicles. If our policy settings are right, Australia could achieve substantial emission reductions in a way that delivers exciting benefits for the Australian economy. The task awaiting the next Parliament is an important one.