Adam Triggs, Dan Andrews | Australia's attitudes toward climate change poor: OECD

The results for Australia aren't great, but they give some valuable insights into how to enhance the public appeal of sensible policies - on climate, and everything else.

When it comes to climate change, Australian attitudes rank poorly compared to the rest of the world.

Our willingness to limit heating or cooling in our homes is half the average for other rich countries.

We are much less willing to limit flying and beef consumption, or to drive a fuel efficient or electric vehicles.

If you think Australians are just opposed to onerous limits on consumption and favour a market-based approach, think again.

Australians are less supportive of decarbonisation policies compared to other rich countries, including market-based approaches like a carbon tax or an emissions trading scheme.

Our knowledge of climate change isn't great, either. When asked to rank the carbon footprint of different activities or give ballpark estimates of how much we need to reduce emissions to avoid temperature increases, we flunked compared to other countries.

One reason is that our views on climate change are heavily politicised. The more right wing you are, the less knowledge you have on climate change and the less you support action on climate change. This is true across countries. But the correlation is much stronger in Australia compared to other rich countries.

Alarmingly, it's even true for our political center which is less supportive of climate action than the political centre in other countries, despite possessing comparable climate knowledge.

That's the bad news. What's the good news?

The good news is that the survey contains a recipe on how to make sensible policies more appealing to the public. This is particularly useful for climate change, but it's a good recipe for other policies, too.

A sensible climate policy is one that harnesses the power of markets so as to reduce emissions while minimising the cost to the Australian public.

Unfortunately, this concept of least-cost abatement has been forgotten by those who advocate banning coal exports and combustion engines, or insist we do all the heavy lifting through massive public spending programs.

These policies are obscenely costly, both economically and socially, and hurt poor people the most. Having the private sector do the heavy lifting by improving their incentives is cheaper, fairer and faster.

The best way to achieve least-cost abatement is through a price on carbon. Turns out, Australian's support for a carbon tax hinges on how it is paired with other reforms. Only 35 per cent of Australians support the introduction of a carbon tax on its own.

This is unsurprising to anyone familiar with the history of a carbon tax in Australia.

But what's interesting is that, when we design the policy to combine it with other initiatives, its popularity increases significantly.

Much of it hinges on what you do with the money raised through the carbon tax. If carbon tax revenues are recycled to finance other initiatives, the support profile for a carbon tax changes significantly.

Support for a carbon tax increases from 35 per cent to 37 per cent if the revenue is transferred directly to households in a lump-sum payment.

It rises to 40 per cent if the revenue is recycled to reduce the deficit, 51 per cent if it's redistributed to poor households, 53 per cent if it finances personal income tax cuts and roughly 60 per cent if it funds low-carbon technology subsidies or environmentally friendly infrastructure.

Careful sequencing can make reforms more politically appealing, and economically effective. Yet, this a lesson we too often forget.

The biggest missed opportunity was COVID-19. The government and Reserve Bank were injecting hundreds of billions of dollars into households during the pandemic. It was the perfect time to get some serious microeconomic reform done. Alas, we did none.

The environment today is much less supportive given government budgets are loaded with debt and the Reserve Bank is increasing interest rates. But there is still plenty we could do.

We could scrap wasteful, environmentally reckless policies like the diesel rebate and, given it primarily goes to agriculture and mining, turn it into a green investment allowance for farmers and miners.

This is a win for the environment, a win for those affected and an improvement to the budget in the medium-term. We could reduce inflationary pressures through competition reforms that reduce prices and then use the revenues to improve the adequacy of the social safety net.

We could incentivise states and territories to undertake microeconomic reforms by having the federal government pay them back the billions it makes through increased tax revenues from these reforms. It worked for Paul Keating's National Competition Policy and it would work again today.

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To mobilise comprehensive tax reform, we could bring in the states and territories by directing the efficiencies gained towards state-based infrastructure spending.

And we could scrap labour mobility-sapping state taxes and use the growth dividend to fund retraining programs, to confront the structural adjustment costs of decarbonisation in regional Australia.

There's plenty we could do. The key message from the OECD research is this: we can't hide from the fact that reforms create winners and losers. That's what makes them hard. But by carefully sequencing reforms, we can make sure more people are winners and that there is less pain for the losers.

When parents say "there's no dessert if you don't finish your vegetables" they are embracing this concept of making the unpleasant thing more palatable by pairing it with the things we like. Why don't our governments?