Once more with feeling: Principles for reducing greenhouse gas emissions and improving the wellbeing of most Australians

by Richard Denniss and David Richardson

While the 2007 election was fought on a promise by the ALP to introduce a carbon price the 2010 election was fought by both the ALP and the Coalition on a promise not to do so. For the ALP the promised inaction was until at least 2013 and for the Coalition the promise was open ended. The Greens, on the other hand, campaigned on the need for a carbon tax. The election result saw a big increase in the Green vote and the public’s failure to endorse the ‘agenda’ of either major party. Despite much of the election being allegedly fought on ‘economic management’ neither the ALP nor the Coalition were asked to explain how it was that they simultaneously claimed to be ‘good economic managers’ yet were determined to ignore all economic evidence about the best way to tackle climate change. This election has shown just how much of a challenge new issues such as climate change are for old political structures. This paper spells out the economic principles that should underpin an effective, efficient and equitable approach to reducing Australia’s greenhouse gas emissions at the lowest possible cost. In addition to providing an overview of the principles that should underpin the development of efficient emission reduction policies it also provides evidence to support the claim that the introduction of a carbon price would benefit most Australian families. Put simply, the collection of a carbon tax should not be seen as a cost to the economy but a redistribution within the economy. If the proceeds of a $25 carbon tax were provided directly to Australian households rather than returned directly to the polluters a family of four could be paid a ‘carbon dividend’ of $2,100 per year.

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