18 February 2024

Economists' carbon solution offers hope but politics stands in the way

| Ian Bushnell
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A large-scale solar farm. Australia is blessed with renewable resources. Photo: Australian Renewable Energy Agency.

Is the Albanese government, having made a virtue of its reworking of the Stage 3 tax cuts, capable of making an even bigger pivot to reintroducing a carbon tax to fund the transition to the new green economy?

That’s the question posed by two of Australia’s most eminent economists, Professor Ross Garnaut and former ACCC boss Professor Rod Sims, both of whom worked for the Hawke Government.

They have proposed a carbon solutions levy on fossil fuel production that would raise $100 billion and help industries, including steel and aluminium, move to a de-carbonised footing and offset the subsequent cost of living and energy bill increases.

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The levy would help Australia exploit its vast renewable energy resources of wind and solar to become a green energy superpower, reboot productivity and living standards, and do its bit in reducing greenhouse gas emissions to combat global warming.

The pair argue that fossil fuel producers reaping billions from an activity imposing huge costs on the nation should contribute to the solution, which makes perfect sense.

In any case, in 2026, Europe will tax all fossil fuels imported from Australia that haven’t already been taxed. So Australia may as well retain the proceeds and reap the benefits from such a tax.

But Labor remains traumatised by Tony Abbott’s successful campaign against the carbon tax, and while the Albanese Government makes all the right noises about climate change and the shift to renewables, actual policy is pretty timid.

No doubt the argument is that the preservation of a Labor Government must take priority if the nation is to make progress, albeit slow, on getting to net zero.

The problem is all the scientific evidence points to time not being on our side and that the continued ad infinitum extraction and burning of fossil fuels is a death wish.

Garnaut and Sims make an elegant case but acknowledge that politics will get ugly if it is taken up.

Opposition leader Peter Dutton, in need of an alternative path to net zero, has thrown his lot in with nuclear power – specifically small, modular reactors – despite the unproven technology, unresolved issue of waste, the exorbitant cost and the time lag needed to build a network of power stations.

Accompanying this are ongoing orchestrated attacks on renewables, fear campaigns about the lights going out, and the cost to our resources-based economy and living standards, amplified by their media mates.

The Dutton fantasy appears to be nothing less than a ploy designed for business as usual in the fossil fuel sector. Especially given the continuing denialism that still seems to drive the Coalition.

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It is a sad reflection on the state of politics in this country that we neither have the leaders capable of levelling with the nation and articulating what will be in our best long-term interests nor the political will to take us forward.

A carbon levy or tax, whatever it is called, is coming – but Australians should be the ones to be the beneficiaries.

Garnaut and Sims have offered a way forward. Is Anthony Albanese up to the challenge?

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It used to be a carbon credit scheme not a tax.

I suppose that they realised that if it were a trading scheme those whose households were carbon positive (lots of trees on their property for instance) they would be paid from the trading scheme. That was never going to happen it’s now being called what it is. Yet another tax.

HiddenDragon8:57 pm 19 Feb 24

“Garnaut and Sims have offered a way forward. Is Anthony Albanese up to the challenge?”

Chalmers ruled out a “Carbon Solutions Levy” in Question Time later on the afternoon of the Garnaut and Sims appearance at the Press Club last Wednesday, so the short answer to that question appears to be “no”, and there may be reasons for that which go beyond a lack of intestinal fortitude and/or vision.

A telling moment in the Press Club presentation was when Garnaut acknowledged that the reformist wave of the 1980s had been unwise when it resulted in selling off natural monopolies without putting in place very careful regulation and protections against the exploitation of privatised market power.

That was, in effect, an admission that reality doesn’t always follow theory, particularly when the theory rests on idealised assumptions about the operation of markets.

John Thistleton’s wistful piece about all of the things which Goulburn made in the days before the reformists got rid of protective tariffs (in the naive hope that other countries would likewise open up their markets to Australian exporters) is a reminder of the same point –


It may be that some elements of what Garnaut and Sims are proposing can be put into practice, but the full vision relies on other countries, many of which have a long tradition of shamelessly gaming and bending the rules, changing their ways and thus allowing Australia to capture a dominant position in strategic, jealously guarded industries.

privatepublic6:42 am 20 Feb 24

I Agree, you have a good a good point in relation to other countries. Europe and in particular Germany has missed their green targets for the past two years and most probably the next two years until they get their nuclear back online or suck more energy off the French and in the distant future Russia, post the Ukraine war.

Europe by exercising a carbon tax (tariff) will be to their own demise. Also, Australia should think very carefully on a carbon tax. Our major clients such as China, SEA Asia, Japan, others and India in particular will be increasingly buying more raw material from Australia. There are hundreds of millions in India who only received their first electrical connections in the last five years, enough to run a CRT or light globe, if only for a few hours per day. Better than burning wood.

Lets get real, Europe (no offence guys, beautiful place and people) needs Australia more than Australia needs Europe. Depending on the site/organisation reporting economic data, Russia is now around no 5-6 GDP PPP, all due to energy, agriculture and the defence industry booming. The world is evolving at a rapid rate.

Look at what just happened in Victoria, Houses are still without power. Had Yallorn still been operating the blackout ( & it was a blackout) wouldn’t have been half as bad. Green energy = blackouts. The more green/ renewable energy the more blackouts.

Look at what happened in Victoria?

You mean where large storms took out major transmission lines and caused the older and less flexible Loy Yang coal plant to trip? Which took a long time to get back on line due to the aging and inflexible nature of large coal plants?

This is actually an argument for far more distributed renewable power, the blackouts had zero to do with the increasing prevalence of cheaper renewable energy.

Well unless you count the previous Coalition government’s lack of clear energy policy leading to increased network risks as the older, more expensive fossil fuel generators are retired that is.

This crap didn’t happen when the power distribution was government owned. Now it has to be profitable so costs get cut.

Absolutely fabulous, hiking a carbon tax again. Hopefully the ALP are stupid enough to bring it back. It cost Krudd/ Dillard/Krudd government and another tilt by the ALP at this windmill will certainly get them booted 2025.

That solar farm isn’t an eyesore at all.is it? I wonder what crops or stock used to be on that land for food production.

Yeah another carbon tax will solve all the problems we currently face. But even better would be to.vote these clowns into political oblivion.

Capital Retro9:27 am 19 Feb 24

If Dutton’s nuclear plan is a fantasy, the transition to a “green economy” proposed by Garnaut and Sims is a dark fantasy.

I’ll be stockpiling lots of renewable firewood if what they say is seriously considered as “a way forward”.

GrumpyGrandpa10:48 am 19 Feb 24

Hello CR,
If only the ALP-Greens didn’t plan to also ban your wood-fired heating. Of course, sourcing wood to burn makes the assumption that there are trees that aren’t projected.

I guess the solution is obvious. We should all save the planet, by buying an EV (and owning it long enough to payback the upfront-carbon costs). We could power them by charging them from a big battery (also made from rare minerals and large upfront carbon costs) that source their “free” energy from the sun via solar panels placed on good agricultural land.

Agricultural land is a bit overrated anyway, afterall we’ll all have more spare time to grow vegies on our apartment block balconies, because our EVs won’t be able to pull our caravans and are pretty useless when it comes to four-wheel driving anyway. Camping in the great outdoors is crap anyway; there’s no WiFi.

Thank goodness our apartments will be a LR route because that extra travel time from Woden to the City will give us more time to read “books” on our rechargeable Kindles.
I’m not sure about you, but I’m keen on those larger capacity Kindles for that eventual LR trip from Tuggeranong to the City. Ok, I’m getting ahead of myself a bit here.

Oh they are in process of banning gas appliances as well. So stock up on the candles mate. Although how maby candles does it take to biol a pit of water?

Why do these proposals invariably involve a ‘levy’, ‘duty’ or some other aspect of government or business sticking their hands into the everyday punters bank account. Imagine if an economist, especially Boomer economists, could work a solution that didn’t involve sticking it to the punter or making the wealthy wealthier or increasing or introducing some form of coercive tax. Policies can be done through coercion or incentive, sadly to often, coercion is dressed up as incentive.

“They have proposed a carbon solutions levy on fossil fuel production that would raise $100 billion and help industries, including steel and aluminium, move to a de-carbonised footing”

“Help industries” …by hitting them with $100 billion worth of additional taxes?

Gotta love your articles Ian, they are just comedy gold.

The absolute idiocy of this ALP Government is that they don’t realise no coal means no steel and dear energy means no metallurgical refining what so ever. What do these ideology driven fools think goes in the blast furnace sside from iron ore? The answer is tons and tons of coal.

“Is the Albanese government, having made a virtue of its reworking of the Stage 3 tax cuts, capable of making an even bigger pivot…”

Pivot? That’s certainly one way to describe a blatant lie and broken election promise.

Add this to the large taxes they are going to levy onto cars they don’t approve of… which they also didn’t mention going into the election… lower electricity prices etc

Sure, why not? What’s another one added to the list?

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