Australian Senate votes to repeal the carbon tax

July 17, 2018

On 17 July 2014, the carbon tax was repealed. After passing the House of Representatives on 14 July, a new batch of Senators elected on 7 September 2013 (but only taking their seats from 1 July 2014), voted 39 to 32 in support of the carbon tax’s repeal. Labor and Greens Senators voted against the repeal.

The carbon tax repeal reduced the cost of electricity and gas significantly for businesses and households (around $550 per year for the average household), after steep rises in the preceding years.

But while this was a welcomed change in the trend, the savings were soon overtaken by rising energy costs from:

  • power companies shutting down coal-fired power stations,
  • state-based gas moratoriums,
  • expensive and subsidy-reliant renewable power continuing to enter the market under the RET, and
  • more concentration and strategic behaviour in the wholesale and retail energy markets (see further details below).

Despite its significant but short-lived effect, celebrate the repeal of the Gillard government’s carbon tax by:

  • via this Action Plan, revisiting:
    • Ms Gillard's infamous August 2010 pre-election promise of 'There will be No Carbon Tax under a government I lead,'
    • followed by an unclear election result,
    • a minority Labor government,
    • a Senate balance of power held by the Greens,
    • and finally, a deal with the Greens resulting in the February 2011 carbon tax
  • noting the steep upward trajectory of Australian electricity prices over the last decade, including the effects of the carbon tax and its repeal



Further details on what’s driving our energy (electricity and gas) prices

The benefits of repealing the carbon tax were quickly swamped by a number of factors continuing to drive up our electricity prices.

The ambitious renewable energy targets (both large and small RETs) remained in place, drawing in heavily subsidised wind turbines and photovoltaic solar panels. These fickle, intermittent power sources increasingly rendered slow-response, baseload power stations (eg coal-fired) unprofitable.

[These reliable power sources are not compatible to share an energy grid with a mass of intermittent sources like wind and solar, which are currently not required to produce their own predictable, baseload power (and will be grandfathered after 2020 under the proposed NEG). To avoid overloading the grid, baseload sources must withdraw, then re-supply, their power as wind and solar sources (with no fuel costs) unpredictably supply and withdraw their power. Fuel burn rates, and therefore costs, as well as carbon dioxide emissions remain largely constant for these coal-fired plants regardless of how much dispatchable power they are forced to waste by withdrawing it from the grid - not to mention the associated revenue (and thus profit) shortfall suffered.]

Unsurprisingly, coal-fired generators began to close down sooner than once planned, without replacement (of sources of similar efficacy), reducing the market’s supply of affordable, reliable baseload power – with more exits to come.

Moreover, gas exploration and extraction bans began to proliferate, ensuring gas supplies and (fast-response) gas-fired electricity became less likely and more expensive – curtailing an ideal backup for unreliable, wind and solar power. 

These factors ensured fewer, cheap and reliable generators supplying our electricity market (with no threat of entry of new rivals). But worse, our myriad energy market regulators and experts allowed our dwindling, reliable sources of power to be concentrated and vertically integrated with the retail market. Now we also have behemoth “Gen-Tailers” and strategic market behaviour, with-holding supply to drive up short and longer term prices in wholesale and retail markets – on top of the impacts of RETs and gas bans.

The combined impact of these reckless, diabolical policies and regulatory failure over the last decade has meant that - leaving aside the significant but short-lived relief of the carbon tax repeal - Australia's power prices have resumed their steep upward trajectory.

The same experts, regulators and policymakers now assure us that the proposed 'National Energy Guarantee' (NEG) will be different – allegedly providing certainty to ensure future power supplies are reliable. It is hard to predict how, if the NEG is put in place, outcomes will be significantly different.

The NEG’s primary focus is to reduce emissions – a form of emissions trading scheme or carbon “pricing mechanism” (as Gillard called her carbon tax). With emissions controls rolling out to:

  • non-road engines (eg mowers, blowers and marine engines),
  • road vehicles (ie imminent European Union style car emission restrictions) and
  • agricultural activities (eg livestock emissions),

the ghost of the carbon tax is haunting the Coalition - whether by oversight, or design, remains to be seen.

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