The carbon tax debate damaged Julia Gillard’s leadership – and good climate policy for years to come

Carbon pricing and the Gillard government are fused together like molten glass in the memory of all those who witnessed the traumatic and consequential policy and political drama surrounding it.

The years-long affair is a cautionary tale of what happens when intense negative campaigning, misinformation and clumsy politicking collide to kill otherwise sound policy – and prime ministerial careers.

The great moral challenge

Climate policy became an increasing concern in the early years of the millennium. The UK government’s Stern Review on the economics of climate change in 2006 galvanised attention. So too did increasingly alarming United Nations Intergovernmental Panel on Climate Change (IPCC) reports.

In Australia, the Howard government, in the thrall of resource sector interests, leant against climate action.

In contrast, Labor Opposition leader Kevin Rudd declared climate change “the great moral challenge of our generation”.

Politics and policy share a love-hate relationship, but we can’t have one without the other. In this six-part series, we’re chronicling how policies have shaped Australia’s prime ministers, for better or worse, and what it means for how politicians tackle today’s big challenges. Labor promised to establish an emissions trading scheme – a market-based mechanism of the kind already used overseas to speed up decarbonisation of the economy. By bringing the market price closer to the real-world cost of its use, the scheme dampens demand for carbon-based energy over time, and makes other forms of energy more attractive. The Howard government promised such a scheme too, if re-elected, to improve its environmental credentials in the run-up to the 2007 election which Labor looked likely to, and did indeed, win. Read more: Climate explained: how emissions trading schemes work and they can help us shift to a zero carbon future A ‘great big tax on everything’ In 2007 Rudd, together with the states and territories, commissioned the Garnaut Climate Change Review. In 2008, the review recommended proceeding with an emissions trading scheme. In December that year, the government announced it would legislate the Carbon Pollution Reduction Scheme (CPRS) with a transitional fixed carbon price. However, it never came to fruition. Lacking a Senate majority, Labor needed either the Coalition or the Greens to support its passage through the upper house. Rudd did not secure the necessary support. He failed to grasp a brief opportunity to get Coalition backing under the opposition leadership of Malcolm Turnbull. After Tony Abbott succeeded Turnbull in December 2009, the Coalition’s position changed to trenchant opposition.

Making the perfect the enemy of the good, the Greens also opposed the CPRS on grounds that it didn’t go far enough.

In April 2010, a frustrated Rudd shelved the scheme.

“It seems the government has dropped its policy to deal with climate change […] because it is frightened the public think that this really is just a great big new tax on everything,” Abbott said at the time.

“I’m quite happy for the next election to be a referendum on Mr Rudd’s great big new tax on everything, and he’s frightened of that.”

The ‘real Julia’

This was the situation incoming Labor prime minister Julia Gillard inherited two months later when, in June 2010, she displaced the by now politically paralysed Rudd.

The next month, Gillard called an election for August. She quickly came under pressure in the campaign, squeezed in a pincer movement from the inside by an embittered Rudd and his allies, and on the outside by the Abbott opposition’s hard, negative campaigning.

Labor support slid. It was, she wrote later in her memoir, the “election campaign from hell”.

Attempting a mid-campaign reset, Gillard promised voters would now see the “real Julia” rather than the cautious, advisor-crafted persona seen so far.

This invited the damaging implication that there was an authentic and an inauthentic Gillard – a liar. The Abbott opposition campaigned mercilessly against Gillard during the election with this, and afterwards when she continued as prime minister in minority government.

Carbon pricing was at the eye of this storm.

A broken promise?

Gillard committed to establishing a carbon price in the campaign but ruled out a carbon tax.

The following year the government announced a carbon pricing scheme would begin on July 1 2012, created through the Clean Energy Act, which became law with the support of the Greens.

It established a transitional fixed carbon price that after three years would transition to a floating price set by market forces. The interim fixed price was not a tax but, from an economist’s view, could be characterised as operating like one.

From the moment it was announced, the opposition and media cast the carbon price as Gillard breaking her promise not to introduce a carbon tax.

Writing in 2013 as a recently departed staffer of then-treasurer Wayne Swan, Jim Chalmers observed that:

There was a lot of dishonesty in the carbon price debate, which set dangerous new precedents for the sort of tripe that the media would repeat. Abbott and his Coalition counterpart Barnaby Joyce were the worst offenders, claiming roasts would cost more than a hundred dollars, and entire towns such as Whyalla in South Australia and Gladstone in Queensland would be turned into ghost towns or wiped off the map.

In fact, the implementation went smoothly and the carbon pricing system worked well. Employment and the economy kept growing, emissions fell and, as Gillard later commented in her memoir, “Not one of the horror scenarios sketched by the Tony Abbott-led Opposition came true”.

This did not stop Abbott campaigning hard to “axe the tax” – something Gillard facilitated by unnecessarily conceding “we’ll get there via a three-year fixed price – effectively a tax, a carbon tax”.

At the time, Chalmers described the Gillard government’s carbon pricing initiative as “by far the biggest single environmental measure ever enacted in Australia”.

It did not survive the 2013 election of the Coalition Abbott government, which ended carbon pricing in 2014.