Did Julia Gillard Lie?

It is often claimed that Julia Gillard is a liar on the basis that she said before the last election that she would not introduce a Carbon Tax. The argument continues that as she is now introducing a Carbon Tax she lied. Some people have taken to calling her JuLIAR.

There are two issues to consider here:

1. What did Gillard actually say before the last election?

2. What is the nature of the legislation that is currently before the parliament?

The day before the election the Australian published an article on Gillard that can be found at this link.

Here is the direct quote from Gillard from that article:

"I don't rule out the possibility of legislating a Carbon Pollution Reduction Scheme, a market-based mechanism," she said of the next parliament. "I rule out a carbon tax."

The Carbon Pollution Reduction Scheme mentioned in the quote is the Emissions Trading Scheme (ETS) that was negotiated between the Rudd Government and the then Opposition led by Malcolm Turnbull. (The Opposition kicked out Turnbull, but only by one vote, the then reneged on the agreed ETS.)

So she ruled out a Carbon Tax but not an Emissions Trading Scheme.

See this post and this post for analyses of the differences between a Carbon Tax and an Emissions Trading Scheme.

So what is the Government introducing a Carbon Tax or an Emissions Trading Scheme (ETS)?

The clear answer is that it is an ETS.

There is an interesting wrinkle though. For the first few years of the scheme it will operate somewhat like a Carbon Tax as the price per tonne of carbon released will be charged at a fixed price ($23 per tonne). There are differences though as the permits can be traded.

The reason why there will be an initial price placed on carbon emissions is to facilitate the transition to a full ETS and avoid the problems of excess permits that occurred in the early years of the European ETS.

So the simple answer to the question: did Gillard Lie, is clearly no.

She did not rule out an ETS before the election and she is now introducing an ETS to the parliament.

It is significant that the quote from Gillard came from the Australian newspaper. This is not some left of centre paper. The Australian has made its life work to destroy the Gillard Government.

Here is a link with comments by Gillard on how the price mechanism would work.

The best speech in the Federal Parliament given on the topic of Carbon Pricing was by Malcolm Turnbull. The speech can be found here.

This post emphasises the importance of checking original sources. For an interesting take on this issue see this post.

The climate policy worked out by the Multi-party committee - Government, Independents and Greens - is based on the Garnaut review, the summary of which can be found here.

Pricing Carbon

Some politicians and journalists are spreading confusion about the Government's Carbon Pricing Mechanism. In her appearance on QANDA the Prime Minister was asked the following question:

AUDIENCE MEMBER: Prime Minister, isn’t the whole point of having a carbon tax to affect the prices that consumers pay? If there’s no change in consumer behaviour, you’re not going to achieve what you’re trying to achieve to reduce carbon pollution. So if it’s compensating households, aren’t you simply undermining the effect that your tax is going to have and ultimately make no change?

She gave a brief but clear explanation:

JULIA GILLARD: That’s a very perceptive question and I think a lot of people are thinking about his, about how does it work? If I’m getting compensation, what’s actually changing? Let me just explain that. The carbon price affects the big polluters. Yes, they will cause some price impacts for consumers. That’s true. We will then assist consumers and I can understand why people then intuitively go, well, how does all of this work? Isn’t, you know, sort of money going in and money going out? What’s the effect? Well, the effect is that in the shops when you come to buy things, products that are made with relatively less carbon pollution will be cheaper than products that are made with more carbon pollution. So you’re standing there with your household assistance in your hand. You could still keep buying the high carbon pollution products if you want to or what you’re far more likely to do is to buy the cheaper, lower carbon pollution products. That means that the people who make those things will get the consumer signal, gee, we will sell more, we will make more money if we make lower pollution products. That drives the innovation. So I want you to have that household assistance in your hand but I also want you to see price effects which make cleaner, greener things cheaper than high pollution commodities. That’s why it works.

In parliament she gave a longer and more politically charged answer:

Let me explain in detail our mechanism for pricing carbon. The first proposition is an incredibly simple one. At the moment carbon pollution can be released into the atmosphere for free. There is no disincentive for doing that. We will put a price on carbon, a price on every unit of carbon pollution. It will be paid for by businesses and as a result, because our business community is smart and adaptable and innovative, they will work out ways of pursuing their business and generating less carbon pollution. They will work out ways of making sure they pay less of a price when carbon is priced. Then they will enter into contracts, they will make investments on the basis of understanding the rules and understanding that carbon will be priced. And as they go about making those transitions, innovating, making the new investments of the future, we will work with those businesses in transition to a clean economy.

Having priced carbon and seen that innovation, yes, there will be pricing impacts; that is absolutely right. That is the whole point: to make goods that are generated with more carbon pollution relatively more expensive than goods that are generated with less carbon pollution. But because we are a Labor government this will be done in a fair way. We will assist households as we transition with this new carbon price. What that means is that people will walk into a shop with money in their pocket, the government having provided them with assistance. They will see the price signals on the shelves in front of them—things with less pollution, less expensive; things with more pollution, more expensive—and they too will adapt and change. They will choose the lower pollution products, which is exactly what we want them to do. Between the business investment and innovation, between households who have been assisted in a fair way by a Labor government responding to price signals, we will see a transition to a cleaner economy, to a clean energy economy, to a low-pollution economy.

What does that mean? Put very simply, it means jobs. It means that our economy will keep pace with a transition that is happening around the world. Our economy will keep pace and we will have the jobs of the future. What is the alternative? The alternative is to keep emitting carbon pollution. It is to see Australia left behind the tide of history with a high-pollution economy. It is exporting jobs to the rest of the world—jobs that Australian kids could have to build a future on. It is leaving households to deal with escalating electricity prices, which are going up because of a lack of investment certainty, and without household assistance in their pockets. And, of course, if we follow the Leader of the Opposition’s plan, it is also about ripping $30 billion off taxpayers. The efficient way to transform our economy is to price carbon and that is what we will do.

Source here

Gillard is to be congratulated in noting that there would be price rises. As she explains, a large amount of the money raised will go to people to compensate for the price increases. It is important to notice though that people will still choose the cheaper, low carbon, alternatives.

Although this was a clear explanation from Julia Gillard, the prize for the best speach on pricing carbon in the Australian Parliament still goes to Malcolm Turnbull, which can be found at this post.