The carbon tax should be repealed
On July 1 2012, the highly controversial price on carbon took effect in Australia as part of the Gillard government’s Clean Energy Bill 2011. Australia currently contributes about 1.5% of the world’s greenhouse gas emissions (GHG), which translates to one of the largest per capita emitters globally. Australia is extremely vulnerable to the effects of climate change and has a strong interest in seeing an effective international response to global warming issues.
How does it work?
As part of the Government’s plan for a ‘Clean Energy Future’, legislation was passed in 2011 to tax about 500 of Australia’s highest polluting companies for every tonne of carbon dioxide or carbon dioxide equivalent that they emit over 25,000 tonnes per year. The price has initially been set at $23 a tonne for 2012-2013, but this will rise 2.5% every year until 2014-2015. From July 1 2015, the carbon price will switch to a flexible emissions trading scheme with the price on carbon being determined by the market.
At its most basic level, the goal of the price on carbon is to reduce Australia’s carbon emissions. The government has stated that a price on carbon, together with other energy efficient initiatives in the Clean Energy Future policy, is the best way to address carbon emissions. In the long-term, the government has said that Australia will aim to reduce carbon pollution to 80% below 2000 levels by 2050.
Internationally, the approach to reducing emissions has been mixed, as countries have been hesitant to pursue energy efficiency at the expense of economic growth. Nevertheless, 118 countries have renewable energy targets and 33 countries have national carbon trading schemes.
Politically, the most important point of contention is that before being elected, PM Gillard declared in August 2010 that ‘there will be no carbon tax under the government I lead’. As a result, Tony Abbott has attacked the Prime Minister for breaking her mandate to the electorate. Other criticisms of the scheme are that it will increase everyday costs such as electricity for Australians, that it attacks the most important and profitable sector of the Australian economy (mining) and that it will do little to reduce emissions.
Responses to the criticisms and political party positions
Labor has maintained that a price on carbon is the cheapest and most environmentally effective way of reducing Australia’s emissions. The Labor Party introduced a Household Assistance Package to respond to the increase in living expenses. The Package helps 9 out of 10 households through tax cuts and it increases some government payments such as pensions.
The Liberals have repeatedly promised that if elected, they will immediately introduce legislation to repeal the carbon tax. Their alternative policy to reduce emissions and protect the environment includes a ‘Green Army’ of 15,000 Australians and a Direct Action Plan to reduce carbon emissions.
The Greens support the price on carbon as they see it as a vital first step towards addressing climate change and other environmental issues. The party would like more action on environment policy and an increase in the cost of carbon emissions.
The leader of the National Party, Warren Truss, has highlighted how expensive the tax is when compared to European programs and has also spoken of the negative effect it has on the economy. The National Party supports the repeal initiative of the Liberals.
The tax hurts businesses and households.
Although only payable by the 300 top emitters, the tax will flow through to prices we all pay every week - particularly food and power. Every Australian will be paying more for basic needs. At the same time, it will make it harder for highly energy-dependent businesses to survive, and reduce some kinds of investment, leading to job losses.
The tax is pointless.
In the global context, Australia's carbon tax will make almost no difference to GHG emissions and the rate of global warming. Its effects if any will swamped by rises in emissions from developing countries who've been notably reluctant to commit to any limits on their burgeoning emissions.
The tax is badly designed.
The Gillard carbon tax has myriad design flaws. Its starting price ($23 per tonne) is much too high, relative to global carbon markets, and when the tax converts to a genuine trading scheme, the price will crash. And arguably it is taking fundamentally the wrong approach: we should be taxing consumption, not production.
The timing is bad.
The global economy hasn't fully recovered from the GFC and yet stands on the brink of another crisis, potentially more profound. European economies are failing, the US is effectively bankrupt and even China is slowing down. Australia's two-track economy is leaving millions struggling to maintain their standard of living. This is not the time to be subjecting ourselves to a tax which, by design, is meant to crush economic activity based on our abundant cheap energy.
The tax is illegitimate.
The Gillard Labour government was elected in part on the back of promise: "There will be no carbon tax under a government I lead." Under pressure from Green partners, the carbon tax was subsequently introduced, despite popular opinion (as measured in the polls) being against it. It is undemocratic to introduce such an important change to the Australian economy, with attendant risks of great economic harm, knowing that it does not have majority and bipartisan support.
The tax is the best way to reduce global warming.
Lets keep in mind why the carbon tax was introduced in the first place. According to the scientists, rapid, drastic cuts in global greenhouse emissions are needed to reduce global warming. According to the economists, markets are the most cost-effective way to reduce emissions. The carbon tax is just such a market mechanism. Repealing it would leave us either with an inferior approach or in neglect of our fundamental moral obligations to future generations.
The tax helps usher in a new economy.
The tax, and its associated measures, are helping reshape the Australian economy in directions we all know it must eventually head: knowledge-based services, advanced technologies, and bountiful clean renewable energy.
Repeal would create business uncertainty.
Business needs as much clarity and certainty as it can get to make long-term investments. The doubt and debate over carbon policy over the past decade or more has clouded the strategic horizon. Threatening to repeal the carbon tax just prolongs and increases that cloud of uncertainty. If the carbon tax was to be repealed, the immediate question will be whether some similar scheme will be reintroduced.
The tax would be too hard to unwind
The carbon tax is already in place. Business have made plans and adjustments on that basis. The various components of the Clean Energy Future package, of which the carbon tax is the centrepiece, are being implemented. Payments have been made to millions of Australians. Unwinding all this is a practical impossibility and a fools errand.
Repeal would a budget nightmare.
The carbon tax is scheduled to generate billions every year. Repealing would leave a huge budget shortfall. Meanwhile the new Abbott government would be trying to find the additional billions needed to fund its own inefficient emissions reduction program. They only outcome for the Australian people: dramatic cuts to government services such as health, education and environmental programs.
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