Australia Repeals Carbon Tax

Hanna Hebert / July 18, 2014

Australia has become the first developed nation to repeal its carbon tax after the Australian Senate voted to dismantle the tax on Wednesday in a 39–32 decision.

The carbon tax has been hurting Australian consumers and businesses since its implementation, so much so that Tony Abbott, Australia’s prime minister, made eliminating it part of his electoral platform.

In October 2011, Abbott stated, “I am giving you the most definite commitment any politician can give that this tax will go. This is a pledge in blood.” Abbott’s speech clearly resonated with his constituents after he won the election by a landslide, defeating the Labor Party incumbent responsible for the tax’s implementation, Julia Gillard.

“Today the tax that you voted to get rid of is finally gone, a useless destructive tax which damaged jobs, which hurt families’ cost of living and which didn’t actually help the environment is finally gone,” Abbott announced in a news conference.

Within a year of the carbon tax’s enactment, household electricity prices increased by 15 percent, and unemployment rose by more than 10 percent, hurting an already economically depressed nation. Most of Australia’s exports are emission-intensive; therefore, the carbon tax fundamentally served as a tax on exports, contributing to the closure of a record 10,632 companies in 2013. The carbon tax also served as a regressive tax, primarily hurting those with lower incomes.

Gillard proclaimed in 2012, “When the dust settles following the furious debate that we’ve had about carbon pricing, I think Australians will come to see that this has been an important reform at the right time.” Well, the dust has settled, and this is clearly not the case.

Although Australia has cut its losses by ending the tax, all of the damage inflicted by the carbon tax cannot be mitigated. Now, the International Monetary Fund wants the United States to introduce a similar carbon tax, echoing the Obama Administration’s climate change agenda. The Environmental Protection Agency recently proposed the latest addition to the climate action plan with harmful regulations on power plants that would increase energy prices for almost no environmental benefit.

President Obama and Congress should look at the Australian case before America moves any further in President Obama’s climate action plan, which would harm citizens, especially the poor. Hopefully the U.S. will learn from Australia’s mistake and avoid making more of its own.

Hannah Hebert is currently a member of the Young Leaders Program at The Heritage Foundation. For more information on interning at Heritage, pleaseclick here.