The outcome of the election means that Australia may again move towards putting a price on carbon. Our current view is that it is more likely that this will consist of some form of emissions trading scheme, rather than a carbon tax. In this briefing we explore the power brokers, the outcomes, and the likely policy in the climate change arena.

On 21 August Australia went to the polls, ostensibly to choose, as it has always done, between the two major parties; the Labor Party and the Coalition. Climate change was one of the few areas with significant difference between the policy platforms taken to the electorate. Ultimately, the choice was between a promise to work towards pricing carbon and a promise to combat climate change through direct government support for emissions reducing activities.

The incumbent Labor Party promised an assembly of 150 ordinary citizens, aimed at building a deep and lasting community consensus on pricing carbon with a view to implementing an emissions trading scheme in late 2012 or 2013. The Labor Prime Minister, Julia Gillard, promised to lead this public debate. However, many in the community remained cynical as to the likelihood of seeing an emissions trading scheme under Labor due to the dumping of the existing emissions trading legislation (the Carbon Pollution Reduction Scheme or ‘CPRS’) in April 2010 after it failed on two occasions to pass through the Senate.

The Coalition promised a ‘Direct Action’ policy platform involving the creation of an Emissions Reduction Fund that would support projects that reduce CO2 emissions, protect jobs, result in no additional cost to consumers and have additional environmental benefits. The Coalition policy expected a large proportion of emission reductions to come from soil carbon projects and changed agricultural practices.

It soon became clear on the night of 21 August, during the vote count, that neither of the major parties could form government outright, a result that has not been seen in Australia (at the Federal level) for 70 years. Requiring 76 seats to form government outright, the Labor Party reached 72 and the Coalition 73. It also became clear from the count that any party that ultimately formed government would have to work in the Senate with a Greens party holding the balance of power from 1 July 2011.

As no party had the majority required to form government, many of the policy dichotomies between the major parties, including climate policy, were thrown up in the air as the decision on which party would form minority government came down to four independent members of Parliament and one Greens member. Intense focus descended on these members as they embarked on the process of deciding which of the major parties to back.

The newly empowered parliamentary members were the Greens member Adam Bandt (Greens) and the independent members Andrew Wilkie, Bob Katter, Tony Windsor and Rob Oakeshott. The climate policies of those members have been stated as follows:

  • Adam Bandt is a supporter of pricing carbon, firstly through an interim carbon tax and subsequently through an emissions trading scheme, in line with the Greens’ stated policy position
  • Andrew Wilkie is a former Greens candidate and strong supporter of pricing carbon through either a carbon tax or an emissions trading scheme
  • Bob Katter is a vocal climate change sceptic and his list of 20 priorities for this term of government included “no carbon tax” and “no emissions trading scheme”. Mr Katter supports legislating for 22 per cent ethanol in transport fuels, however this may be related to his support for his constituent cane growers rather than any climate change beliefs
  • Tony Windsor is a strong supporter of pricing carbon. In 2008 he introduced a private member’s bill calling for a price on carbon through either a carbon tax or an emissions trading scheme and for overall emissions reduction targets for Australia of "at least" a 30 per cent reduction in emissions by 2020 and "at least" an 80 per cent cut by 2050. Mr Windsor voted against the CPRS legislation in the Lower House as he saw the 5 per cent emission reduction target by 2020 as not being sufficiently high to make the required cuts in Australia’s emissions to play its part in global action to avert dangerous climate change, and
  • Rob Oakeshott is a vocal supporter of pricing carbon through an emissions trading scheme. He was outspoken about the compromise reached on the design of the CPRS with the Coalition, arguing that it had moved away from the design envisaged in the Garnaut report. Following the demise of the CPRS he said that there had been a failure “…. to tell the story of climate change and energy security, and a failure to explain in context why it is in the national interest to put in place a range of energy measures, with one being a price on carbon leading to true pricing in the energy market”.

On 1 September the Greens and Labor signed an agreement that they would support Labor to form minority government. The agreement commits the government to establishing a ‘well resourced Climate Change Committee … [made up of] … experts and representative ALP, Greens, independent and Coalition parliamentarians who are committed to tackling climate change and who acknowledge that reducing carbon pollution by 2020 will require a carbon price’.

On 2 September the independent Andrew Wilkie signed an agreement with Labor formalising his support for Labor to form minority government. This agreement does not commit the parties to action on climate change However, Mr Wilkie is expected to support moves to price carbon as part of his platform of policies included that ‘[a] price must be put on carbon pollution, possibly as part of an enhanced Emissions Trading Scheme’.

The three rural independents (Mr Katter, Mr Windsor and Mr Oakeshott) worked together in the process of negotiating an arrangement to form government with one of the major parties. An announcement was set down for 3 pm on 7 September, but the perennially independent Bob Katter announced his support for the Coalition in an impromptu media conference less than two hours before the agreed announcement was due. At 3 pm the two remaining independents made their announcements, both backing Labor, giving it a slender 76 to 74 majority required to form government.

With all of the independents supporting the minority Labor government supportive of pricing carbon in one form or another, it is likely that an emissions trading scheme will be passed in the next term. The process agreed between the Greens and Labor, the Climate Change Committee, will likely provide the pathway forward in that regard. The earliest a scheme could be passed is July 2011 when the Greens take control of the balance of power in the Senate.

The design of an eventual emissions trading scheme is likely to be influenced heavily by the new political landscape. Whereas the CPRS was negotiated between Labor and the Coalition, resulting in a scheme that gave significant exemptions for large emitters and powerful interest groups, the current process is likely to result in a scheme that compromises with the new forces required to pass the legislation; the Greens and the rural independents. This means that there will likely be greater emissions reduction ambition in the scheme overall, and agricultural emissions are likely to be brought into the scheme over a longer period of time. Further, it is likely that in the short term more opportunities for carbon offsetting through changing agricultural practices is likely to form a part of the broader policy landscape.

It is also anticipated that rural communities in Australia will see greater development in renewable energy and clean energy infrastructure as part of a $10 billion regional development deal struck at the eleventh hour between two of the independents and Labor.

The Greens are keen for rapid progress on climate change through the Climate Change Committee. The Greens’ deputy leader, Christine Milne, has recently said “this is the best political opportunity collectively we’ve ever had,” and that “this committee will be on track fast and furious”.

Speaking just days after forming government, Julia Gillard said “I'm not going to pre judge how quickly it can be done… [T]here's a determination to approach this in a different spirit to the way the carbon pollution reduction scheme ultimately ended up being approached where consensus was shattered and it was a matter of high partisanship between the major political parties."

It is more likely now than at any time since the decision to delay the CPRS that Australia will ultimately move to having a price on carbon. We consider it is more likely that this will consist of some form of emissions trading scheme, rather than a carbon tax, given that there is still significant policy momentum invested in the market based design which underpinned the CPRS, and that the key independent and Green members consider an emissions trading scheme as the best long-term option for pricing carbon. The issue which is still uncertain is when such a price may be imposed, and whether the timing will remain 2012/2013 in accordance with the current Labor policy or whether the Greens will manage to push something through Parliament after July 2011 when they have the balance of power in the Senate.