Julia Gillard has broken an election promise, and for once I approve. Her government has decided to accept the Greens’ proposal of an interim carbon dioxide emissions (CO2e) tax, to come into effect next year, before a likely transition to an emissions trading scheme (ETS). Precious few details have been released, so I’m yet to get over-excited, but it’s better than I expected. When Rudd was running the show, a crippled ETS was all that was on offer. Many criticised the Greens for rejecting it, and if the Coalition had won the election, they might have been kicking themselves. But it has turned out that sticking to principle has paid off, and now Labor has been forced to accept a CO2e tax.
I am worried about the vague promises of ‘compensation’ from Gillard, because if they are badly targeted, they will defeat the purpose of the tax. Going by her public statements, she seems to understand what it is meant to do, but the cost-of-living argument pushes many of a politician’s buttons, and it’s possible that the tax’s intended effects will be dulled (or even negated) by poorly designed compensatory measures. The Rudd government’s original ETS proposal was shot down by the Greens for that very reason. I think there’s going to be an awful lot of argy-bargy between Labor, the Greens and the Independents over the details of this one, and those disagreements could scuttle the idea.
It’s a pity the Liberals nailed their colours to the mast so early (“no new big tax!1!!”), because this would be a great opportunity to get overall tax burden reductions. All they have to do is demand a reduction in income tax (ideally by increasing the tax-free threshold) and/or the reduction or elimination of any number of nuisance taxes, in return for supporting a CO2e tax. But under Abbott, that door is closed, partly because of his contrariness, and partly because of their hodge-podge of statist interventions euphemistically called ‘direct action’. More fool them.