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Thanks to a narrow victory for the Government yesterday, Australia now looks set to join the EU and New Zealand as one of the first countries to introduce a comprehensive policy making carbon polluters pay for the damage they cause. This is very good news . It has been an uphill battle with the Opposition and business lobby all but claiming that the sky would fall in should the Bill be passed.

But once the dust settles and the lamenting subsides, the majority of people of Australia will likely find that this Bill benefits them. Much of the money raised from the carbon price of £15 per tonne of emissions will be recycled back in the form of tax breaks and compensatory payments. It will also be used to stimulate investment in new clean energy technologies leading to new jobs and increased inward investment. Hopefully over time this will increase both Labour and the Green’s popularity and ensure that the policy is protected.

Australia’s energy system is amongst the most polluting in the world thanks to its heavy reliance on coal – but Australia’s climate is also vulnerable to the impacts that climate change brings. Acting to reduce emissions is in the country’s self interest in the longer term especially if it can act as an inspiration for other countries to follow suit. Both South Korea and China are looking to introduce emissions trading schemes and all eyes in the global carbon market are now firmly looking eastwards. There could be significant advantages for Australia’s financial institutions in being amongst the first to participate in this market just as London has benefitted from being the hub of the European carbon market.

Interestingly the price being charged is fixed for the first three years, unlike in the European system where prices have reached rock bottom thanks to an oversupply of pollution permits. This has interesting implications for the EU which has long basked in the glory of being able to claim that it is leading the world on climate change. With yesterday’s victory, Australia can now fairly claim that they have now taken the lead.

Being out in front has its advantages and certainly confers a moral superiority but there will always be forces of conservatism who will be made to feel uncomfortable. It is therefore more important than ever that countries in the ‘early adopters’ group work together to defend their actions and encourage more into the fold. No-one, either in Europe or Australia, can now claim to be going it alone and with luck soon many more will step up and join the race to the top. As Australia has shown this will not be easy but we must defy those who would rather participate in a race to the bottom where ultimately everyone is a loser.