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Policy
| 10/30/14

Australia’s climate-unfriendly policy backfires

TCE

Australia has gained a reputation for weak climate action and pro-industry policy. However, two recent events suggest this approach is backfiring. The Australian Academy of Science has issued a response to the Australian and Queensland governments’ multimillion dollar ‘Reef 2050’ plan to protect the Great Barrier Reef, which has lost about half of its coral since 1985 according to a 2012 Australian government report. The Academy notes that the government has not reduced emissions, despite climate change being the biggest threat to the Great Barrier Reef. Healthy coral actually contains two symbiotic creatures: the coral polyp, and golden-brown photosynthetic algae that live inside the coral and provide nutrients that benefit polyp growth. Growing global greenhouse gas emissions and associated rising sea temperatures cause the coral to expel the algae, leaving the coral white or ‘bleached’. That response has an economic impact: the Great Barrier Reef attracts two million tourists and nets an estimated AUD$5.7 billion in revenue a year. The coal industry, however, nets about AUD$47.8 billion, which may explain why Australia is instead ‘sustainably’ developing four nearby ports, including a coal export terminal at nearby Abbott Point. But it is that strategy that is backfiring. Four US banks have now refused to invest in the terminal over environmental concerns, including Morgan Stanley, Citigroup, Goldman Sachs and JP Morgan Chase, as well as Europe’s Deutsche Bank, Royal Bank of Scotland, HSBC, Barclays and Credit Agricole.

Meanwhile, the Australian Competition and Consumer Commission is investigating several Australian airlines, including Qantas, Virgin, and Regional Express, in a case that may show how small a burden the country’s scrapped carbon tax imposed. When the nation’s carbon tax was abolished this summer, airlines were asked to lower their ticket prices to reflect presumably lower fuel costs. This follows claims by the airlines in 2012 that the carbon tax would cost them millions, and that costs would have to be passed onto customers. However, the airlines now say they absorbed the costs rather than raise the price of tickets and therefore aren’t able to lower prices. As ThinkProgress says, the implication is that either airlines are overcharging or the tax was not onerous to begin with. Other data support this and suggest that the impact of the C tax was relatively benign. The Australian Bureau of Statistics said that despite an overall rise in consumer prices, some did fall after removing the tax, although the exact effects couldn’t be quantified. The largest drop was in electricity and fuel prices. Electricity prices fell by 5.1 per cent, directly attributed to the removal of the carbon tax; however this drop did not match how much those prices rose (15.3 per cent) when the tax was introduced two years ago. The fuel price drop (2.5 per cent) was attributed to world markets. Here in BC, the climate benefits of environmental taxes are clear, Gas price increases associated with the BC carbon tax (6.67 cents per litre) are about the same magnitude as up-and-down swings in market prices. A recent econometric study found that upward market swings on this scale have little impact on gasoline demand in BC, while, equivalent price increases specifically attributed to the carbon tax did reduce gas consumption significantly. This response likely reflects anticipation by drivers that the price would stay higher or continue to increase, and that appears to have led to behavioural change. And just like in Australia, there is little to no evidence that the carbon tax in BC has caused economic dislocation.

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