Menu

Australian PM shifts away from unpopular fixed-price carbon tax ahead of elections

Australia's prime minister said Tuesday he will transform a deeply unpopular carbon tax a year ahead of schedule, in a bid to cut costs to households as a national election looms.

The fixed-price carbon tax on Australia's worst industrial polluters, which went into effect in July 2012, was supposed to remain in place until 2015. At that point, it was set to be replaced by an emissions trading scheme, in which the cost of producing a ton of carbon would be determined by free market forces.

Rudd is advancing that timeline by a year, with the emissions trading scheme now beginning on July 1, 2014. The move to a floating price will reduce the cost of carbon from a predicted 25.40 Australian dollars ($22.40) per metric ton in July next year to an estimated AU$6 per metric ton, Rudd said.

"This is the fiscally responsible thing to do," Rudd told reporters in the northern city of Townsville. "The nation's 370 biggest polluters will continue to pay for their carbon pollution, but the cost will be reduced, meaning less pressure on consumers."

The move is expected to save Australian households an average of AU$380 a year, Rudd said. It would largely be in the form of lower energy bills.

The government will make up for the predicted $3.8 billion shortfall in the federal budget with cuts to other programs, including scaling back funding for some environmental programs.

The carbon tax was enacted under the previous prime minister, Julia Gillard, who was ousted by Rudd last month in an internal Labor Party coup. Rudd had been ousted as prime minister by Gillard in her own internal coup three years ago.

Gillard pushed through the tax in a bid to gain needed support from the minor Greens party, despite a campaign promise not to do so. The government defended the move as a necessary weapon against climate change. Australia is one of the world's worst greenhouse gas emitters per capita because of its heavy reliance on massive coal reserves to generate electricity.

But the backlash from the public was intense, with some dubbing Gillard "Ju-liar." And conservative opposition leader Tony Abbott has repeatedly hammered Labor over the tax, using it to paint the ruling party as untrustworthy.

On Tuesday, Abbott criticized Rudd for saying the government was terminating the tax.

"All he's done is simply brought forward Julia Gillard's carbon tax changes by 12 months. He's not the terminator — he's the exaggerator. He's not the terminator, he's the fabricator," Abbott told reporters in the island state of Tasmania. "He's changed its name, but he hasn't abolished the tax. All he's done is given Australians one year only of very modest relief."

Under Gillard, Labor looked set for an overwhelming defeat at this year's elections. But recent polls suggest the race has tightened since Rudd took back the reins. Gillard had set elections for Sept. 14, though Rudd can hold them as early as August. He has refused to publicly announce a date, though said "there's not going to be a huge variation" from Sept. 14.