Australia’s government has failed to repeal the country’s carbon tax. An unlikely alliance of Labor, the Greens, the Palmer United Party and… one member of the Motoring Enthusiast’s Party voted down the proposal today. So what happened, and what’s next?

Done deal?

It seemed like a sure thing. Key Senate member Clive Palmer had agreed to support the Australian government’s plan to repeal Australia’s carbon tax, in return for keeping key renewable energy legislation in place.

So convinced was the Spectator Australia that the government would get its way, its cover for tomorrow’s edition declares ‘Our victory!’.

When a piece starts: “it looks as if the Senate will repeal the carbon tax; so allow us a little gloating,” you’d better be pretty sure it’s going to work out the way you call it. But this is perhaps a sign of exactly how unexpected the result was.  So what went wrong for opponents of the scheme?

Australia’s previous government brought in its carbon tax in 2012. But there were widespread protests against the measure, which the Liberal party – then in opposition – said would cost jobs and raise the cost of living. When the Liberals came into power, they said they’d repeal the tax by 1 July this year.

According to the Saturday Morning Herald, the government needed the support of six of the Senate’s eight crossbench senators to scrap the tax – and, luckily for prime Minister Tony Abbott, all of them want to get rid of it.

But one crossbench element is blocking the repeal.

The Palmer United Party (PUP), headed by former mining magnate Clive Palmer, had said it supports the measure – although it will vote to keep other climate legislation in place. There is one condition: the PUP said it would only support the repeal if any savings caused by the repeal of the tax were passed directly through to consumers.

According to the Herald, the government has given the Australian Competition and Consumer Commission powers to punish any companies that fail to pass on savings, but the PUP says those powers don’t go far enough – and has drafted its own amendments.

The government insists it has agreed to all three versions of Palmer’s amendments, despite fears from businesses that they will be unfairly penalised. But the PUP voted against it anyway. The Herald explains:

“[T]he whole process was conducted in a mad rush. The government, keen to fast-track debate on the bills, set an 11.50am deadline for a vote. But when it became clear it was in trouble, it ended up trying to delay a vote as it negotiated with Clive Palmer outside the chamber.

Behind the scenes the PUP had also been advised that its amendment – specifically the 250 per cent penalty – was unconstitutional because the Senate cannot introduce revenue-raising measures. In the end, the PUP withdrew its amendments and voted against the carbon tax repeal.”

What’s next?

So what does this all mean?  Supporters of the carbon tax probably have little cause to celebrate.

Next week, the legislation will be reintroduced into the House of Representatives, where the government has a majority, and then to the Senate. next time it’s expected to pass, says Fergus Green, a policy analyst at the London School of Economics.

The move would end any carbon pricing in Australia for the coming financial year, disappointing many who support national and international climate action. Green says:

“This would be a backward step for Australia, which had been one of the first countries to introduce a broad-based carbon price and demonstrate that it can be both an effective and efficient means of reducing emissions, while also falsifying scare-mongering concerning the economic impact of the scheme.”

However, Green says it’s important not to overstate the consequences of a repeal.

If the scheme did keep operating according to the previous government’s legislation, in a year’s time it would have switched from a fixed price of around AU$25 per tonne – effectively a carbon tax – to a floating price. That would make it an emissions trading scheme.

That’s where the value of the carbon price would have become questionable, Green says. The system would have been linked to Europe’s emissions trading scheme (ETS), meaning that the Australian carbon price would plummet to Europe’s rock-bottom levels. Green adds:

“Effectively, Australia’s future would be tied to the rocky politics or EU ETS reform. While the scheme’s impending demise is very unfortunate, Australia – with its soon-to-be-low carbon price, high per capita emissions, and globally significant (and growing) coal exports – would have remained a climate laggard in need of much more ambitious action.”

Without a carbon price, Australia may be accused of becoming a climate laggard. But even if the scheme didn’t get canned, unless the EU’s carbon market picks up it looks like it would have become one anyway.

Image credit – CC2.0 – Mugfaker