September 19

Carbon dioxide tax: constitutional issues

Parliament will be dominated over the next few weeks by the introduction of the complex legislative scheme to establish a tax on carbon dioxide emissions. (A list of the bills, with links, can be found at the end of this column.) 

The opposition is strongly opposed to the tax and has indicated that if it were to become the government of Australia it would repeal the legislation.

ACM of course takes no position on the theory of anthropogenic global warming nor on the policy appropriate to this. This comment is restricted to the constitutional issues which surround the proposed legislation.

If  the Liberal National coalition were to be invited to form a government, whether before or after an election, the present Labour Green alliance would still hold a majority in the Senate.

On current polling the Liberal National coalition would win a commanding majority in the House of Representatives. There is of course no guarantee that current polling will be reflected in the next general election. There are no grounds for a double dissolution, so the existing Senate would continue after the general election.

…after a  general election….

If an election for half the Senate were to be held at the same time as the next general election for the House of Representatives,  the new senators would not take their seats until 1 July 2014.

One strategy that Mr Tony Abbott could adopt if he were to become prime minister after the next election would be to rush repealing legislation through the House. It were rejected twice by the Senate, with a three-month delay in between Mr. Abbot could advise the Governor-General to hold a double dissolution election.

If after a double dissolution the Liberal National coalition were to win a majority in the House of Representatives, but not gain a majority in the Senate, the new Senate might be inclined to give way on repealing legislation on the political ground that an Abbott government had a mandate to repeal the legislation.

If it did not, the legislation could then be referred to a joint sitting which is only being held once in the life of our Commonwealth.

(All this assumes that  the yet to be examined carbon tax legislative scheme –  19 bills totalling 963 pages – is within the power of the federal parliament.)

….. the compulsory acquisitions power….

 Another constitutional issue was recently raised in relation to the carbon tax legislation. This relates to the power of the federal parliament to compulsorily acquire property. It is being argued that the government proposes to put in place "poison pills" in the legislation to make it difficult to repeal this. The government has denied this.

(Continued below) 

The federal parliament has only those powers granted to it in the Constitution.  Most of these are set out in section 51 which provides  that “The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to…” a  list of powers.  (Each of these clauses are referred to as a placitum.) 

Placitum  (xxxi.)  grants a power to the federal parliamnent in  relation to "The acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws”

 Notice that  there are two conditions on the exercise of this power.

First the acquisition must be on just terms and second the purpose must be a purpose for which the Parliament has power to make laws. 

Writing in The Australian on  16 September ,"Labor plants poison pills in carbon tax,” Henry Ergas  says:

It was Mark Dreyfus QC, Parliamentary Secretary for Climate Change, who let the cat out of the bag.

Once the carbon change legislation is in place, he said, repeal would amount to an acquisition of property by the commonwealth, as holders of emissions permits would be deprived of a valuable asset.

As a result, the Commonwealth would be liable, under s.51(xxxi) of the Australian Constitution, to pay compensation, potentially in the billions of dollars. A future government would therefore find repeal prohibitively costly.

That consequence is anything but unintended. The clean energy legislation, released this week, specifically provides that "a carbon unit (its generic term for a right to emit) is personal property".

“This, the government says, is needed to give certainty to long-term trades. But that claim makes little sense, for even without such protections there are flourishing markets for fishing quotas and other tradeable entitlements.”

Professor Ergas says this does not reflect international practice where he says  governments have generally ensured pollution permits are not treated as conventional property rights, precisely so as to be able to revise environmental controls as circumstances change.

 Rather, he says, this provision is to serve one purpose only: “to guarantee any attempt at repeal triggers constitutional requirements to pay compensation, shackling future governments.”

The answer for a future coalition government may be not to touch the property and just to remove the tax.

There is also the  economic consideration. Some say that the CO2 trading market will crash. According to one blog Every other Co2 trading market has at one time or another been suspended because of a lack of volume, corruption or the price was too low. Essentially, the permits become too risky to hold by investors. The legislation may still be in place but the system just cannot work without active government support. Some people will get burnt but tax-payers won’t have to pay up.”

Such a result would of course not involve constitutional issues.  

….the legislative scheme…. 

Clean Energy Bill 2011

Clean Energy (Consequential Amendments) Bill 2011

Clean Energy (Income Tax Rates Amendments) Bill 2011

Clean Energy (Household Assistance Amendments) Bill 2011

Clean Energy (Tax Laws Amendments) Bill 2011

Clean Energy (Fuel Tax Legislation Amendment) Bill 2011

Clean Energy (Customs Tariff Amendment) Bill 2011

Clean Energy (Excise Tariff Legislation Amendment) Bill 2011

Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment Bill 2011

Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment Bill 2011

Clean Energy (Unit Shortfall Charge—General) Bill 2011

Clean Energy (Unit Issue Charge—Auctions) Bill 2011

Clean Energy (Unit Issue Charge—Fixed Charge) Bill 2011

Clean Energy (International Unit Surrender Charge) Bill 2011

Clean Energy (Charges—Customs) Bill 2011

Clean Energy (Charges—Excise) Bill 2011

Clean Energy Regulator Bill 2011

Climate Change Authority Bill 2011

Steel Transformation Plan Bill 2011



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