Australia introduced a carbon tax on July 1. The emissions intensity of Australian electricity in the third quarter was down 7.6% from the 2011-2012 mean, 5.6% from the previous quarter:

The takeaway from this chart is that the response of businesses to clear policy and price signals can be very rapid. In fact, most of the change took place in June, just before the policy took effect.

That’s just the short-run impact. Further reductions are working themselves through investment decisions, for instance the mothballing of coal plants. It doesn’t help coal that Aussies are installing solar roofs as if there might be a tomorrow.

Julia Gillard’s Labour government has has a difficult couple of months over the issue. Gillard had to deal not only with rabid opposition from Tony Abbott’s Opposition but her own U-turn. Politics has now moved on, and it’s Abbott who is stuck with an unpopular position, even seen as obsessive. The policy has had no dramatic effects on the standard of living of voters, since the tax is largely recycled as tax rebates. Reality is winning out over spin.

I wonder if anybody will be watching Oz when the negotiations begin in Washington over the fiscal cliff (assuming Obama wins, touch wood, finger rosary, spin prayer wheel, slay chicken). There are several carbon tax and cap-and-trade proposals floating unloved round the Capitol. Perhaps some smart operator like Henry Waxman can get one of them on to the table in January.

Though it would be better if Candidate Obama had a climate change policy to go with the clean energy tie.


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