R.I.P. Carbon Tax

The Carbon Pricing Mechanism, known to its friends as the carbon price and its critics as the carbon tax, passed away today in Canberra, aged two, after a long battle with slogans.

While it won praise from most academic and business economists at home and abroad, it will perhaps be best remembered for its controversial relationship with Australian voters, the stinging criticism it endured from certain politicians, and comparisons with its nemesis, Direct Action.

While no-one thought it was perfect, the carbon price was achieving the task that was asked of it, and won expert recognition as an important pillar of any sensible climate policy portfolio.

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The carbon price was conceived in the throes of passion of market theory. Pollution has a social cost, so it seemed like a good idea to economists to incorporate these costs into the market system, with its respected properties of being relatively good at allocating resources and minimising costs.

Its backers had big ideas. Incentives to lower emissions would permeate throughout the economy from bolstering low-carbon investment, encouraging consumers to switch into low carbon goods and services, and supporting technological and social innovation. Emissions-reduction efforts could also be easily scaled up by raising the carbon price or reducing the number of permits for sale.

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In its dying weeks, the carbon price sometimes couldn’t tell whether it was hallucinating. Within days of Joe Hockey crowing over the strength of the Australian economy, having put on 100,000 new jobs, much of it in the sectors the carbon price was supposed to be destroying, it thought it saw Tony Abbott on television on the other side of the world claiming that carbon taxes are “job killing” and would “clobber our economy”. Now exhausted, the carbon price only had the strength to sigh.

It died six weeks later.

Mourners are asked not to send flowers, but rather to help conserve the water, as Australia has just smashed another temperature record for the 12 months to June, with increasing signs of another El Niño this year.

http://theconversation.com/obituary-australias-carbon-price-29217