So if the carbon tax is not working, then what is?

We are told by the government the carbon tax is a huge waste of money. Emissions, they say, are not coming down. Despite throwing billions of dollars at it, there has been no appreciable result, they claim. It’s time to face the reality, and try a new approach - Direct Action.

Meanwhile, we are told the carbon tax is a dead weight on the economy and, at least as part consequence, industrial output is declining alarmingly.

But if industrial output is declining, shouldn’t emissions also be declining?

So what gives?

In fact, in the one key sector that counts - the electrical power sector - emissions are declining rapidly. It’s the sector that counts because it is most directly affected by the carbon tax. In case you are in doubt, just listen how the government alternates between describing the carbon pricing mechanism as a “carbon tax” or an “electricity tax”.

As illustrated below, the latest data (as downloaded 9th December, 2013) from the market operator, AEMO, reveals astonishing reductions in emissions from the electrical power sector. The three months of the 2013 spring season to the end of November, saw emissions from the electrical power sector at levels well below the bipartisan target range of 5% below 2000 levels.

Surely something must be working.

In fact, NEM-wide emissions have fallen 14% over the past two spring seasons since the carbon tax was implemented. In total spring emissions are down almost 20% since the peak in the spring of 2008, just five years ago.

As with spring, other seasons have all seen significant emissions reductions in the electrical power sector served by the NEM. The decline in winter demand for Victoria is particularly striking. In Victoria, in each of the last two winter seasons, total emissions have been more than 10% lower than any previous winter season since AEMO began reporting emissions in 2002.

The pattern in emissions reductions is starkly illustrated by comparing the year on year change across equivalent months. Early to mid 2012 shows up as a step change in the rate of emissions reductions, with a decline of about 8% between the 12 months prior to and following the end of June 2012 when the carbon tax was introduced.

It would be wrong to pin all of these reductions directly on the carbon tax. For one thing the decline in electricity sector emissions was well underway before the carbon tax started in mid 2012. Other well documented factors impacting the emissions intensity of our electrical power sector include, on the supply side, the Renewable Energy Target (resulting in more more wind power ), the breaking of the Millennium drought (more hydro power), and some notable infrastructure failures (the flooding of Yallourn coal pit early in the winter of 2012).

On the demand side, the high exchange rate, the rapid take up of rooftop solar photo-voltaics, and the combination of various efficiency drives such as better home insulation and milder winters have caused a sustained decline in electrical power usage that is disproportionately impacting the most emission intensive power generation.

At face value, the figures point to an increase in the rate of emissions reductions since mid 2012, coincident with the start of the carbon tax. On the back of a persistent decline in emissions, our electrical power sector emissions are falling at unprecedented rates.

While discerning cause from effect will remain open to debate, one has to wonder just how open the government is in its endeavour to further justify the case for dismantling the carbon tax.