Carbon Tax Repeal: Article by Jennifer Westacott in the AFR

This opinion article by BCA Chief Executive Jennifer Westacott was published in The Australian Financial Review on 19 November 2013 under the title ‘Keep Politics Away from Carbon Policy’.

With the introduction this week of legislation to repeal the carbon tax, business is looking on with anxiety yet again as federal politics threaten to overtake the capacity to find sensible common ground on a key economic policy.

Australia’s carbon tax is one of the highest in the world and is making our important industries less competitive every day it stays in place. This is especially so for those industries which have to compete globally against companies that pay no carbon price or a much lower one.

The former Labor Government announced it would terminate the carbon tax because of the high cost it was imposing on businesses and households.

Yet now Labor is in Opposition it says it will not support the repeal of the carbon tax unless its conditions are met on how Australia reduces emissions, which effectively means businesses and households will continue to pay one of the world’s highest carbon prices for an extended period. For example, any delay in the repeal will have adverse effects on companies liable under the current legislation, because they will continue to face compliance obligations and associated non-recoverable costs for a yet-to-be-determined period, possibly into the next financial year or longer.

The Opposition’s stance is classic politics, but the problem every Australian should be concerned about is that parliament risks letting politics dominate instead of focusing on the sensible economic principles that would underpin an emissions reduction policy able to stand the test of time.

Business will adapt to a range of policies to reduce carbon emissions, provided they enable emissions reduction at the lowest cost, don’t damage the competitiveness of our industries relative to those overseas, and enable adjustment so that Australia is in line with global action.

We must separate the immediate priority of repealing the carbon tax from the process of designing how we reduce our emissions over the longer term.

Getting rid of our unconscionably high carbon tax should not be held hostage to political point-scoring. The Coalition Government has been elected with an unambiguous policy to remove the carbon tax and put in place a direct-action policy to reduce emissions. But parliament has an important role to ensure the government gets the detail of its policy right; getting the detail right cannot be rushed, and it cannot be done within parliament’s timeline for considering the repeal of the carbon tax.

We cannot repeat the poor process which characterised the introduction of the carbon tax, an outcome that the current Opposition – when it was in government itself – recognised as flawed.

Business needs a competitive environment and policy stability before it will make the sort of long-term, large-scale investments that are going to be required to develop and employ lower-emissions technologies.

Federal parliament has not provided that stability in the past few years.

Parliament can finally put politics to one side on this critical economic issue and take the first step towards that competitive environment and policy stability by removing the carbon tax. The second step is to focus debate on ensuring Direct Action is workable and meets the important principles for reducing emissions while maintaining a strong economy.

What we are seeking is an approach to reducing carbon emissions that works for business and the economy as well as the environment, and which is developed in the context of a comprehensive energy policy that ensures secure and reliable energy and preserves our competitive advantages.