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How Much Will the Australian Carbon Tax Cost?

Written by The Informed Aussie
Published on Sunday, February 5th, 2012
Globalist Report

An image of Bob Brown and Pupet Julia Gillard, lovers and supporters of carbon taxesThe growing chorus of climate change enthusiasts demonstrates that there is consensus in the wider community that man-made climate change is real. To the frustration of everyone else who would like to further investigate if global warming is not man-made, the debate has now shifted from proving whether or not climate change is man-made to how it can be managed.

Unfortunately, most countries are now implementing a carbon tax to reduce global emissions. Australia has already passed legislation to introduce a carbon tax of which will take effect on July 1 2012. There has been little or no discussion about what effects a carbon tax will have on industry, business and employment. Evidence being publicized about the economic effects of a carbon tax is concerning and needs to be discussed in a wider public forum.

This article has no intention of proving whether or not climate change is real, its aim is to provide you with evidence on what the costs of a carbon tax will be from an Australian perspective.

COSTS OF A CARBON TAX

In Australia, it is expected that Australian families will be confronted with an increase in the cost of living under the carbon tax greater then they experienced when the federal government introduced changes to the taxation system with the introduction of a GST.

In a report released by the CSIRO last year, they concluded that there will be an overall rise in consumer costs of 0.6 per cent in the first year the carbon price is in place, based on a starting price of $23 a tonne. This sounds all well and good because the Australian economy is booming. So what happens if the markets crash? What happens if commodity prices collapse? What happens if the Greens Party gets in power (The Greens Party would prefer a much high carbon price be set)?

The cost of a carbon tax has already hit the consumer with higher air fare tickets even before it has taken effect. ‘QANTAS will raise surcharges for international and domestic flights by as much as 24 per cent, blaming higher fuel costs and the impact of carbon taxes in Australia and Europe. Qantas and its regional offshoot, QantasLink, will increase domestic fares by an average 2.5 per cent from February 9. This translates into a $5 fare increase for a flight between Sydney and Melbourne’ (O’sullivan, Matt. 2012). That doesn’t sound like a lot? But what happens when the carbon price rises to $50? With global oil supplies under threat, the aviation industry of which employs 10,000+ people in Australia stands to lose the most from a carbon tax.

The following are a few examples of what the Australian Government will pay for the introduction of a carbon tax.

  • $105 billion of taxes out to 2020/21 largely paid for in electricity, gas and diesel price rises.
  • A further $15 billion in direct government expenditure. This includes $10 billion of unfunded expenditure to buy shares in speculative energy companies that the private sector will not support. It also includes $3 billion in other energy programs and $2 billion to close down power stations.
  • $4 billion budget deficit in the tax and transfer payments associated with the package in just its first three years.
  • Purchase of at least $8 billion in foreign carbon credits to 2020. In 2020 alone, Australian companies will have to purchase $3.5 billion in foreign carbon credits on top of the Carbon Tax.

Julia Gillard is a carbon tax liar

Sadly, most supporters of a carbon tax are under the illusion that a carbon tax will force industry and change to reduce carbon output. This couldn’t be further from the truth.

In a report about the impact of U.S. climate legislation on trade with China written by Acuna et al. (2012), they demonstrated that ‘previous studies show that climate legislation will likely have little impact on regional and thus global emissions. At a carbon price of $31.70, very little change in output and, therefore, emissions will occur unless legislation provides incentives for technology change within each industry.

China is not likely to implement a domestic carbon tax and will either enter into negotiations with the U.S. Trade Representative to reduce the import barriers or will take a case to the WTO. If a case is brought to the WTO, the U.S. legislation as it currently stands is not likely to win, as ACESA’s exceptions for border taxes discriminates among U.S. trading partners.

Ironically, most of the coal mined in Australia is shipped off to China and India. As China and India will not be introducing a carbon tax, the reductions made to greenhouse emissions in Australia will be offset by the mega polluting coal power plants in China and India. Also, due to Australia’s very, very small population, the effect of global carbon emissions is only around 1.5%. For all the effort taking place, for all the potential hardship the Australian public is going to have to face with the introduction of a carbon tax, Australia only outputs 1.5% of global emissions and will reduce that to 1.2 % (20% Saving)

HOW THE GOVERNMENT WILL OFFSET THE COSTS OF A CARBON TAX?

To offset the costs of a carbon tax, the federal government will change the tax system to subsidise low to middle-income earners. On the surface this sounds good, however isn’t the point of introducing a carbon tax to reduce emissions, not keep them the same? If middle and low-income earners have no incentive to change their habit’s, what emission’s will be reduced? Also, the additional costs that the coal industry will be charged is apparently meant to incentivize the coal industry to change is habits and for other industries to sprout and replace coal-fired power plants. Again, this sounds good on the surface but there are a few questions that need to be answered.

  1. How does the government know that the coal powered power industry will change? What if this is not possible?
  2. How long will it take for alternative power sources to enter production?
  3. What if alternative power sources never become available? Or take 50+ years to go online?
  4. Shouldn’t it be the job of the consumer to change his or her behaviour? At the end of the day, consumers are the ones who use the power. What if they don’t change their habits? What if they can’t afford the anticipated rise to $40 per tonne emissions costs? What happens if the Australian economy collapses 10 years into the program? Will Australians be left without power?

CONCLUSION

There is compelling evidence to suggest that the introduction of a carbon tax will hurt the Australian public financially. This article has not attempted to prove whether or not global warming is real, but what the potential costs of the introduction of a Globalist carbon tax will be. In Australia, the carbon emission savings that are anticipated to be made by the introduction of a globalist carbon tax is only .3% of total global emissions. The globalists and the Australian Government have lied to the Australian public and now they are about to pay a heavy price.

Cited Sources
  1. Acuña, S. Akujuobi, C. Brigance, N. Kasper, B. Nearbur, T (2012) The Impact of U.S. Climate Legislation on Trade with China
  2. O’sullivan, Matt (2012). Qantas puts carbon taxes in frame for fare increases.
  • Andrew Puhanic

    Dear Keith,

    Thank you for your comment and input into the debate.

    My position has been, and always will be, is that Carbon Taxes are another form of control and are based on an unproven theory. Why on earth anyone would allow our beloved federal government to dictate and influence the decisions we make in such a cruel and unforgiving way is remarkable.

    Also, claims that climate change (global warming) is real are heavily over-exaggerated and are derived from the left in academia. The evidence that climate change is real is weak, therefore why on earth are we being forced to pay a tax on a supposed theory that has not been conclusively validated?

    Instead, shouldn’t we be focusing on other ‘real’ environmental issues such as the poising of our water (fluoridation), the over cultivation of our farms and the over fishing of our waters?

    I’m interested to hear what everyone else has to say in response to your comments.

    Take care Keith.

  • Keith

    There is a lot of misinformation here. First of all, India has had a carbon tax (note, not an ETS) since 2010, and is committed to a 25% reduction of 2005 carbon levels by 2020. And if you’re going to claim that it doesn’t count because it’s so relatively small (about $1 US per tonne), consider that India has a GDP per capita of around $1k, while Australia is around $65k. The carbon pricing legislation’s goal is an 80% reduction of emissions from 2000 levels by 2050, and it’s expected that 40% of total energy generation will come from renewable sources by 2050.

    The main purpose of an ETS is to influence long term investment in more efficient energy generation, it is not an expensive “quick fix” like direct action is. ETS is known to be the most cost efficient method of reducing emissions for Australia (ask the productivity commission, Costello/Howard, Turnbull, Rudd, overwhelming majority of economists in Australia, reports by prof Garnaut, etc), not the fastest.

    That the communist party in China is not choosing to use a market based mechanism to deal with climate change should hardly be surprising, their government likes to keep a firm grip over production, especially the energy and resources sector. That certainly doesn’t mean they’re not doing anything, the Chinese government is investing over 1 trillion US dollars over the next 5 years in clean energy technology and other ghg reducing initiatives, their investment in this area is truly astounding. It is likely that there will be a global agreement on carbon pricing in the near future (in the next couple of decades), and we are particularly vulnerable to such a scheme because our emissions per capita are the highest in the world. We need to address this right now, or we are putting our economy at great risk.

    If the Australian economy collapses 10 years into the scheme, (say, China goes into a deep recession and suddenly stops buying our minerals at outrageous prices) then production will collapse, emissions will collapse, and the carbon price will collapse, that should be pretty obvious, and is exactly what we have seen in the EU.

    California, which if it was a country would be the fifth largest economy in the world, has had an ETS for some time. The EU, which has a combined GDP larger than the USA, has had an ETS for some time. New Zealand has an ETS. Obama administration wants to introduce an ETS but knows it cannot get it through congress, and is on record about this. A number of other countries, such as Japan, have delayed implementing an ETS after their economies went into deep recession after the GFC. Fair enough, but that is not our position.

    Alternative power sources -are- available, all they need is investment. Then you essentially have two choices to meet the emissions targets that both parties have agreed to, either that investment will come primarily from government, or primarily from the private sector. An ETS relies on evidence that business’ make more efficient decisions to reduce their emissions than government does. Direct action relies on government decisions being more efficient than the decisions of individuals business’, it is an extremely inefficient way of reducing emissions. For instance, many people seem to really love subsidising solar panels for individual homes. These schemes are constantly collapsing due to their abhorrent inefficiency. The government can end up paying anything up to $500 per tonne of co2 emissions reductions under such a scheme.

    Tony Abbott’s scheme is going to end up being much more expensive than the governments over the long run, presuming he sticks to the same targets and actually spends the money needed to meet them. Not to mention, he also wants to introduce an enormous paid parental leave scheme, paid for by a tax on over 3000 business’ and provide up to $75,000 in welfare to women earning up to $150,000. Between this, his direct action policy, his promise to keep the tax reform and increased pension payments, and his promises to cut various other taxes -and- return huge surpluses, it’s very hard to take him seriously.

    Sure, the government could spend hundreds of billions renationalising Australia’s energy industry and hundreds of billions more directly investing in renewable energy. That would obviously work to reduce ghg emissions drastically in a relatively short amount of time (still talking decades). There are a lot of things that would work to reduce emissions, and a lot faster than an ETS. But there is no one who I am aware of, who has any expertise, who says that an ETS is not the cheapest way to reduce emissions and can back that up with evidence.

    I can understand why for instance, the GOP is against an ETS, because they as a party are basically against AGW and are “not convinced” or “sceptical” or whatever you would like to call it, about the underlying science of any serious policy efforts to reduce ghg emissions.

    But for the Coalition (who apparently accept AGW and our 2020 targets, though you’d be forgiven for thinking they don’t) to do a complete backflip on ETS policy, going from supporting an ETS with an initial fixed price period of 1 year in late 2009, to calling an ETS with an initial fixed price period of 3 years, a great big new tax on everything that will ruin Australia’s economy, is completely ridiculous. Even calling a fixed price period of an ETS a “carbon tax” is pretty ridiculous and hypocritical, seeing as they supported and almost identical policy 3 years ago. And then holding up their under costed direct action scheme as some sort of silver bullet, despite the fact it isn’t support by any economists or scientists, whilst promising not to raise taxes, and implementing a huge new paid parental leave scheme with a tax on over 3000 businesses, promising to slash the public service, whilst hiring a “green army” of 20,000 for their “direct action”, and a whole host of other contradictions… it just leaves me dumbfounded that anyone would even consider voting for such policies.

    But then, Alan Jones is super popular, Bob Katter is adored by his electorate, Andrew Bolt is the most popular Australian political blogger (according to himself), Reality TV and soapies are king and queen of our TV networks, disgusting infotainment (ACA, 60 minutes, breakfast shows, commercial news in general) is super popular, pathetic tabloids and gutter press reporting is super popular, the idiot Monckton was practically worshiped when Gina Rinehart paid him to come over here, and on and on it goes.

    I really despair when blogs like this claim stuff like, “there are questions that need to be answered”. Because of course, a blogger asks the extremely basic questions that the productivity commission, Prof. Garnaut, and other economists, who have dedicated thousands of hours to investigating carbon pricing policy, haven’t thought of asking.