Julia Gillard’s first speech as Australia’s prime minister highlighted a number of new ‘forks in the road’ for her government. What will they do about the mining tax, what will they do about asylum seekers and, most importantly, what will they do about climate change?

In demonstrating one of the main reasons her colleagues turned away from Kevin Rudd and towards her, Gillard chose her words carefully. It was clearly no accident that, like President Obama, she is now talking about the need to price carbon rather than to cap and trade emissions.  There can be little doubt that Australia will introduce a carbon tax rather than an emissions trading scheme as its first major step towards tackling climate change.

The so-called carbon pollution reduction scheme (CPRS) typifies so much of what went wrong with Rudd’s approach to policy and to politics. It was complex in design, it was difficult to explain and, most importantly, it didn’t live up to the high expectations that Rudd himself had built. It promised the world but delivered only for the polluters.

A carbon tax has a range of significant benefits over a complex shemozzle like the CPRS. The first is that it is simple to design and, importantly, simple to explain. Kevin Rudd and Penny Wong relied on the complexity of the CPRS to conceal all of its design flaws. They bet that they could rush it through without the public becoming aware of its weaknesses, but they lost. Now that the schemes critics know where the bodies are it seems unlikely that anyone but the Department of Climate Change would simply recommend trying to push it through again.

The second big advantage of a carbon tax is it provides investor certainty. Of course the government always claimed that the strength of the CPRS was that it provided certainty, but for reasons they never really explained they were primarily interested in providing certainty to incumbent polluters. A carbon tax provides price certainty for new investors in alternative energy. You would think that if you wanted to create a ‘low carbon economy’ your priority would be to provide certainty to the new investors in new technology rather than to the current owners of the polluting assets.

The ultimate irony of the Rudd/Wong approach to the CPRS was that they placed an enormous premium on providing ‘certainty’; to the big polluters, and enormously generous taxpayer compensation to overcome any remaining doubts. But then when it came to the proposed mining tax they sandbagged the miners with a much deserved, but largely unexpected, 40% new tax.

The third advantage is that they actually have a very good chance of getting it through the senate. The Greens have been proposing a scheme based largely on the recommendations of Rudd’s own climate change policy adviser, Professor Ross Garnaut. While some argue that the ‘quantitative certainty’ associated with the CPRS is its biggest strength, the need to set a target that can be agreed to by 39 senators is in fact one of its biggest weaknesses. Why force parties who agree that we need a carbon price to disagree about what the target in 10 years time should be? Why not start off with what most can agree on, a price, and work towards consensus on a target over time?

Of course there are problems with trying to introduce a carbon tax, but if the policy development and the political strategy are more cohesively developed than was the case with the CPRS then it should be easier not harder to achieve reform.

The first big change needs to be in the design of the compensation. Rather than write a blank cheque and then have to fend off every firm that has ever exported anything as they claim to be ‘emission intensive’ and ‘trade exposed’, the government should simply allocate a fixed proportion of revenue for such compensation. If there is a fixed pool of funds you can safely bet that the exporters with a genuine case for compensation will be far more rigorous critics of the carpetbagger’s claims than the yes men and women at the Department of Climate Change.

A big ‘criticism’ of a carbon tax is that in fixing a price for carbon rather than specifying a quantity of pollution permits you can’t guarantee that Australia will meet any given international obligation to reduce emissions. The simplest response to that argument is that it is not obvious, nor even likely, that Australia will be constrained by any international abatement obligations in the near future.

A more fundamental response, however, is to point out that under the CPRS there was never any certainty about the level of Australia’s domestic level of greenhouse gas emissions. The government’s expectation was that most of ‘Australia’s reduction’ in emissions would be ‘generated’ in the form of imported offset permits from developed countries. Put simply, if Australia set a carbon tax that was not high enough to drive a desired, or required, level of abatement then there would be nothing to stop us from using some of the carbon tax revenue to import the desired, or required, number of offset permits. It is simply not true to suggest that countries who have a domestic carbon tax would be prevented from purchasing offsets  from other countries.

Wong and Rudd designed an appalling solution to an appalling problem, but they were right about many things. It is cheaper to act early than to delay. It is fairer for counties like Australia to act before the developing world rather than use them as an excuse to delay. And the cheapest way to tackle climate change is to rely heavily on a carbon price.

The Gillard government will face many forks in the road in the coming months but one of the easiest decisions should be the decision to abandon the complex and costly CPRS and replace it with the CPRT — the Carbon Pollution Reduction Tax.