Australia’s carbon mess a warning to the world – by Clyde Russell (Reuters India – July 17, 2013)

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Clyde Russell is a Reuters market analyst. The views expressed are his own.

LAUNCESTON, Australia, July 17 (Reuters) – Any government thinking of introducing policies to limit carbon emissions should look at Australia for an example of how not to do it.

Australia’s efforts to combat climate change have been poison to politicians from all sides of the debate, contributing so far to the demise of two prime ministers and an opposition leader, and there may be more to come. The latest twist has seen Prime Minister Kevin Rudd decide to switch from a straight tax on carbon emissions to a floating emissions trading scheme (ETS) a year earlier than planned.

This has nothing to do with improving the workings of the scheme or limiting carbon emissions and everything to do with trying to win back voters angered by rising electricity prices and industries that have seen their international competitiveness eroded by the tax.

The theory is that power and other prices will decline as the cost of carbon permits is expected to be around A$6 per tonne – the level at which European permits are currently priced – compared to the tax of A$25.40 ($23.09) per tonne that had been planned from July 2014.

Assuming European carbon permits don’t rise in price, which is a fairly big call given efforts to reduce the supply of permits, Rudd’s changes will save the average Australian household A$4 a week in electricity costs.

Whether this is enough to assuage public anger and help Rudd’s Labor Party win re-election will become clear in the coming months as he has to call a federal election by end-November.

But Rudd’s efforts to remove the carbon tax as an election issue only serve to underline how badly the whole thing has been handled.

When Rudd was first elected prime minister in 2007 he called climate change the “greatest moral, social and economic challenge of our time”, signed Australia up to the Kyoto Protocol and proceeded to design an ETS.

This even enjoyed rare bi-partisan support from the then leader of the Liberal opposition Malcolm Turnbull.

However, it was Turnbull’s support for the ETS that helped undo his leadership and he was ousted by his colleagues in December 2009, being replaced by the more conservative Tony Abbott, who withdrew his party’s support for Rudd’s plans.

Rudd’s own popularity fell as he struggled to gain public support for his carbon scheme and a controversial new mining tax, leading to his ouster in a party coup in June 2010.

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