Behavioural strategies to support climate change resilience

Environmental taxation reform is often intended to provide a strong incentive for adopting sustainable behaviours that can assist in achieving climate change resilience, such as Pigouvian taxes on energy use and other price mechanisms (Martin and Werren 2009, p. I). Arguably, these are often the 'first best' instrument to support climate change resilience. Yet such 'first best' instruments are often abandoned, with governments demonstrating a limited appetite for these mechanisms in the light of high political transaction costs (Martin and Werren 2009). A failure to implement the recommendations of the recent Henry Review of Australia's taxation system (which also incorporated prior proposals for a carbon emissions trading scheme) provides a clear illustration of how the political economy can frustrate a policy package. This has left Australia with no specific economic mechanisms to deal with climate change since implementation of the preferred carbon pricing scheme has also been delayed. In the absence of a credible market-based instrument focused upon climate change, the 'first best' instrument choice seems not to be immediately available.