Carbon pricing: the policy Australia keeps avoiding

Australia's relationship with carbon pricing has been one of the most frustrating policy sagas in our nation's history. We've had more carbon pricing schemes announced, implemented, and scrapped than almost any other developed nation. Yet here we are in 2026, still without a comprehensive price on carbon, while our emissions remain stubbornly high and our international reputation suffers.

The carbon pricing merry-go-round

Let's recap this policy rollercoaster. We had the Carbon Pollution Reduction Scheme proposed in 2008, blocked by Parliament. Then came the carbon tax in 2012, repealed in 2014. The Coalition's Direct Action policy limped along until 2022, achieving minimal emissions reductions at enormous cost. Labor's current Safeguard Mechanism, while an improvement, still falls short of implementing a proper economy-wide carbon price.

The irony? Every major review of climate policy in Australia has recommended carbon pricing as the most efficient mechanism for reducing emissions. The Garnaut Review, the Productivity Commission, the Climate Change Authority – they've all reached the same conclusion. Yet our political system keeps rejecting expert advice in favour of electoral calculations.

Why carbon pricing works

Carbon pricing isn't some radical environmental policy – it's basic economics. When you put a price on carbon emissions, you:

• Create market incentives for businesses to reduce emissions in the cheapest way possible
• Generate revenue that can be returned to households or invested in clean technology
• Provide certainty for long-term business investment in clean alternatives
• Harness the power of markets rather than having governments pick winners and losers

Countries with carbon pricing are seeing results. The UK's carbon price helped it reduce emissions by 29% between 2012 and 2019 while maintaining economic growth. Even conservative estimates suggest a modest carbon price of $30 per tonne in Australia could reduce emissions by 15-20% within a decade.

The cost of political cowardice

Our politicians' fear of implementing carbon pricing has come at an enormous cost:

• Economic inefficiency: Direct Action spent $2.55 billion to reduce emissions by just 13.1 million tonnes – roughly $195 per tonne of CO2. A carbon price achieves the same result at a fraction of the cost.
• Investment uncertainty: Without clear, long-term carbon pricing signals, Australian businesses have delayed billions in clean energy investments.
• International isolation: Australia is increasingly isolated in international climate negotiations, damaging our diplomatic relationships and trade prospects.
• Missed opportunities: While we've dithered, other countries have built competitive advantages in clean technology industries.

Where we stand in 2026

The Albanese government's Safeguard Mechanism covers about 215 large industrial facilities, but this represents less than 30% of Australia's total emissions. Transport, agriculture, and smaller businesses remain outside any carbon pricing framework. Meanwhile, Australia's emissions in 2025 were still 8% above 2005 levels, well short of our international commitments.

The current approach essentially lets the majority of the economy emit carbon for free while imposing complex regulatory requirements on a small subset of large emitters. It's the worst of both worlds – bureaucratic complexity without economic efficiency.

The political problem

Why do our politicians keep avoiding comprehensive carbon pricing? The answer is political fear. Both major parties have been burned by carbon pricing debates and are terrified of giving their opponents a weapon to use against them.

But here's the thing: polling consistently shows Australians support carbon pricing when it's explained properly. A 2025 Lowy Institute poll found 64% of Australians support a carbon price if the revenue is returned to households through tax cuts or payments. Even in regional areas, support sits at 52%.

The problem isn't public opinion – it's politicians second-guessing the public and being more concerned about attack ads than good policy.

How direct democracy changes everything

This is exactly why we need direct democracy in Australia. When politicians are afraid to implement good policy because of electoral consequences, we get policy paralysis. But when citizens can vote directly on issues, we can cut through the political games and focus on evidence.

Imagine if we could put a well-designed carbon pricing proposal directly to Australian voters, complete with:

• Independent economic modelling showing costs and benefits
• Clear explanation of how revenue would be returned to households
• Comparison with alternative policies like regulation and subsidies
• Examples from other countries that have successfully implemented carbon pricing

Free from the filter of political spin and scare campaigns, Australians could make an informed choice about our climate future. The evidence suggests they'd choose the economically efficient option that experts have been recommending for over a decade.

Breaking the cycle

We can't afford another decade of carbon pricing policy paralysis. Every year we delay implementing comprehensive carbon pricing, we make the eventual transition more expensive and disruptive. The longer we wait, the more dramatic the policy changes will need to be.

Direct Democracy believes Australians are smart enough to understand these trade-offs and make good decisions when given accurate information. Our current political system treats voters like children who can't handle complex policy discussions. We think you deserve better.

Ready to take policy-making power back from the politicians? Take our policy quiz to see how your views align with fellow Australians, or join our movement to bring direct democracy to Australia. Because on carbon pricing – and so many other issues – it's time to let the people decide.