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Carbon price boosted fair go

By Andrew Leigh - posted Tuesday, 19 August 2014

The Prime Minister's key business adviser, Maurice Newman, has two preoccupations, perennially aired in these pages. He believes global warming is a hoax and, by extension, initiatives such as Australia's now-defunct emissions trading scheme are unnecessary. And he thinks inequality doesn't matter - or if it does, then the solution is weakening labour laws and cutting the top tax rates.

He could not be more wrong. Climate change and inequality represent major threats to our quality of life, which is why many developed nations believe they should be central to the G20 meetings in Brisbane.

The most recent figures show the largest drop in Australian emissions in 24 years, reducing the nation's carbon footprint by 11 million-17 million tonnes, according to Australian National University's Frank Jotzo. But scrapping the carbon price also increases inequality, at home and overseas. First, climate change hits low-income Australians hardest. Poorer Australians are more likely to live and work in places that aren't air-conditioned.


An increase in floods and fires also disproportionately affects those with low incomes because richer Australians are more likely to have home insurance and savings to get them through hard times.

Second, the global impact of climate change will hit the world's poorest people, who already get by on just a dollar or two a day. In the Pacific, poverty abounds. Some of the communities most under threat from rising sea levels are in Kiribati and Solomon Islands - with average incomes of less than $2000 per person per year. Imagine how Pacific Islanders must feel about Australia abandoning any serious commitment to tackling climate change.

Finally, abolishing the carbon price costs about $6 billion a year. As Ross Garnaut has pointed out, the carbon price wasn't just a sound environmental policy; it was also an important fiscal policy. Scrapping the carbon price has blown a huge hole in the budget, and the government has chosen to make up the revenue by cutting health, education, pensions and social payments. This means fewer resources for a child in a disadvantaged school, for indigenous legal aid, or for a young man who loses his job in Devonport.

Politicians don't often get the chance to tackle three major problems with one policy, but the emissions trading scheme was just such a solution.

By providing a strong incentive for companies to reduce emissions, it allowed Australia to do our bit globally. By generating revenue for the commonwealth, it helped government fund the health, education and social services all Australians rely on. In doing both those things, the carbon price also worked to damp down rising inequality across our community. Left unchecked, inequality means some Australians will be unable to achieve their full potential.

With climate change posing a real threat to our environment, our economy and our social fabric, the last thing Australia needs is a know-nothing, do-nothing approach from the national government.


Last year, when I wrote Battlers and Billionaires: The Story of Inequality in Australia, I argued that a generation of rising inequality should act as a clarion call to all Australians to reclaim our proud egalitarian ethos. Instead, we have so far seen the Abbott government pursue policies that hurt the most vulnerable. The environmental costs of scrapping emissions trading are bad enough. But when the poorest are also made worse off by this flawed policy, it's clear that for this government, even the fair go is fair game.

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This article was first published in The Australian.

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About the Author

Andrew Leigh is the member for Fraser (ACT). Prior to his election in 2010, he was a professor in the Research School of Economics at the Australian National University, and has previously worked as associate to Justice Michael Kirby of the High Court of Australia, a lawyer for Clifford Chance (London), and a researcher for the Progressive Policy Institute (Washington DC). He holds a PhD from Harvard University and has published three books and over 50 journal articles. His books include Disconnected (2010), Battlers and Billionaires (2013) and The Economics of Just About Everything (2014).

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