Reducing emissions: Keep Australia's carbon pricing

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Australia's new government may ditch the nation's pioneering carbon-pricing scheme in a move that would send a negative signal to other countries with plans for carbon trading or taxation (see E. Diringer Nature 501, 307309; 2013). Researchers and policy-makers need to be more effective in communicating such schemes to the public, to help guard against adversarial politics leading to inferior policy outcomes.

In Australia's present carbon-pricing system, emitters buy government permits for a fixed price of Aus$24 (US$22) per tonne of carbon dioxide produced. Under current law, this scheme is due to become a market-based emissions-trading scheme in 2015 and will allow trading with the cheaper emissions permits from the European Union.

The latest proposals retain Australia's target for lower emissions, but aim to replace the carbon-pricing scheme with government payments to companies that reduce emissions below a specified baseline. Critics include environmentalists, who fear that such a scheme would fail to meet Australia's emissions-reductions target, and economists, who say that it would compromise efficiency.

Although most experts regard a carbon price as the most efficient way of cutting emissions, it has been discredited in the popular discourse by opponents branding it as a punitive tax. In my view, inadequate communication with the public is partly to blame: Australia's former government failed to explain that carbon-pricing revenue is returned to low- and middle-income earners (under the new scheme, the taxpayer would pay to reduce emissions). Moreover, economists should have proclaimed their almost unanimous support for putting a price on carbon emissions.

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  1. Australian National University, Canberra, Australia.

    • Frank Jotzo

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