A carbon tax is the best solution for a Government with a gaping hole where its climate change credibility used to be.

It’s clear now that the Government’s decision to shelve – on a very high, very hard-to-reach shelf – its emissions trading scheme in an effort to neuter a Coalition scare campaign has inflicted substantial damage not merely on Labor’s progressive flank but on Rudd’s own political credibility among all voters.

Some of the damage will be temporary.  Voters thought highly of Rudd for a long time, thinking he wasn’t your average politician.  Now they’ve fallen out of love with him, and there’s nothing quite so ex as an ex.  They’ll get over it, in time.

But the idea that Rudd is ready to ditch even policies he believes in strongly in, in order to save his political skin, has taken hold – rightly – and can only be negated by the Government getting back into the game on issues it has previously insisted were crucial.

The RSPT, for all its critics, will help, because at least the Government looks like it is standing up for something.

That won’t help on climate change, however.  The Government needs a new policy.  The Prime Minister’s “Task Group on Energy Efficiency” won’t do the trick, since its recommendations will be in concept indistinguishable from the Coalition’s nonsensical “climate action” policy, and will be no more effective than the Howard-era climate change programs that achieved emissions reductions at the cost of several hundred dollars a tonne.

Remember the Government (and, ostensibly, the Opposition, or at least the few of them that believe in climate change) has committed to a 5% reduction in our emissions by 2020.  Energy efficiency won’t get us there.

A carbon tax, while second-best as an efficient means of addressing climate change, would be the ideal way forward for a Government looking to get out of a political fix.

The Greens have been urging the Government accept their proposal of an ETS-tax hybrid, with a permit price fixed at $20 a tonne.  But that retains the complexity and trade-offs that dogged the CPRS debate.

A straight carbon tax, levied on imports but not exports, avoids any need for compensation of trade-exposed industries, enabling the Government to direct revenues toward fully compensating – and over-compensating, if necessary – households.  Tony Abbott will run his increasingly over-exposed “great big new tax” line but if the Government emphasises that householders and small businesses (who missed out under the CPRS) will be fully compensated, the Coalition appeal to the hip pocket will be weakened.  A key element would be to ensure that the tax is revenue-neutral.

The tax could be portrayed as an interim measure, designed to enable Australia to meet its unilateral 5% commitment in the absence of a global trading scheme, with a return to an ETS in later years once international cooperation has been secured.  It would be far simpler to explain than an ETS, the detail of which remains beyond most of the population two years into a debate over its merits.

The Government would be exposed to the charge of inconsistency, naturally.  If an ETS was such a good idea, why doesn’t it move to introduce one as soon as possible?  That’s where the Government’s own reasoning for shelving the CPRS would help.  Not merely has an emissions trading scheme been rejected by both the Coalition and the Greens in Parliament, but there is no international trading scheme to link with and won’t be for some time.

The CPRS has been a policy and political debacle.  A political and policy fix is needed, preferably before the election.  A carbon tax is the least-worst solution on both counts.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey