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Headshot of Jeffrey Simpson.Brigitte Bouvier/The Globe and Mail

Australia, Canada's cousin, has got climate-change policy right. Canada, predictably, has got it wrong.

Here are two countries with huge geographies, forbidding climates, vast distances, abundant fossil fuels and small populations. Climate-change skeptics and scoffers abound in both countries. Down Under, they're now in retreat; in Canada, they're part of the government and prominent in certain media outlets.

As of July 1 last year, Australia enacted a carbon tax of $23 a tonne that will become a cap-and-trade system in three years. It will be integrated with the European carbon tax. Half the tax revenues will be returned to homeowners, 40 per cent to business and 10 per cent for investments in clean technology and for assistance to emitting industries that are exposed to possible job losses.

There's a range of other measures in the package, including a Department of Climate Change and a Melbourne-based Climate Change Authority. The initial overall target for reductions is a modest 5 per cent by 2020; but if other countries (see China and India, among others) act faster, the target can rise as high at 20 per cent. (The Harper government target is 17 per cent, but no serious outside analysis, including by the Commissioner of the Environment and Sustainable Development and the now-defunct National Round Table on the Environment and the Economy, suggests it will be met.)

Critics, of course, said the sky would fall. Industries would flee; consumers would revolt; unemployment would skyrocket. China would eat Australia's lunch. Wrong on all counts. The Australian economy remains among the strongest in the world, posting better numbers than Canada.

John Howard, an Australian prime minister who befriended Stephen Harper and who's coming to Ottawa next month to speak at a gathering of conservatives, spent a decade in office (1996-2007) doing next to nothing about the challenge. His defeat unplugged the path to action, but that path was not a straight line.

Action on climate change split Australia. Debates contributed to internal leadership changes in the country's two major parties, caused an upsurge in support for the Green Party, and inflamed farmers and business leaders. Even under Mr. Howard, however, public opinion was shifting. Drought, floods and wildfires graphically illustrated that the continent's climate was changing. So much so that, this year, tarmac roads melted in South Australia, and fires ripped through Tasmania. The country's weather bureau added new colours to the map for temperatures above 50 degrees Celsius.

An election has been called for Sept. 14, and the climate-change policies of the Labor Party and the Greens who support it are likely to feature quite prominently. Opposition Leader Tony Abbott has pledged to dismantle the entire policy, which would be like unscrambling an omelette.

Mr. Abbott, like the Harper Conservatives, says a carbon tax is a "big new tax on everything." His alternative, at least to date, would be ludicrously ineffective: Plant more trees, manage soil better and invest government money in new technologies. A tax would export jobs overseas, he says.

Cement, aluminum, coal, mining, petroleum – the biggest emitters – fought against the tax and would presumably breathe sighs of relief if it were revoked, even though they're receiving adjustment money. Other sectors, including high technology and finance, favour the new policy, as do most of the country's economists.

Australia has changed radically in the past three decades, opening itself to Asia, deregulating major sectors of its economy and introducing (after Canada) a goods and services tax. Now, with this carbon tax, the country has taken a brave step toward changing incentives within Australia and contributing to the international struggle to curtail emissions.

It's quite a change from the initial Kyoto talks (when Australia negotiated laughably inadequate targets) and from the Howard years of inaction. Come September, we'll see whether the voters choose to remain on the new path.

A final note of comparison and irony: In Australia, a Labor government is using a central free-market tool, a carbon tax, to attack emissions. In Canada, a Conservative government that spouts free-market rhetoric is using the least economically effective tool possible, regulations imposed by government.

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