Carbon tax: friend or foe?
The carbon tax could be good or bad. Who the hell knows? |
As of this Sunday, some in Australia would have you believe
the world is going to end.
Yes, that’s the day the carbon tax officially comes into
effect in Australia. The Government’s
big initiative to fight climate change; it’s being championed as ‘world-leading’
and ‘culture-changing’ by its proponents.
I had intended on doing a major piece of research into this,
but seeing as it’s just for my blog and I’ll probably only get 100 people
reading this, I had to prioritise the job that, you know, pays me.
However, I do feel there are a few points that need to be
made. And it starts with a conversation I
had a few days ago.
I was talking to an eminently successful businessman1
earlier this week and asked him straight: What do you think about the carbon
tax? He replied, “If you want to change
behaviour you have to hit the hip pocket. A market-based mechanism is the way
to do it because it impacts at a relative rate.”
This led to a back-and-forth between us on what a shift in
consumer behaviour actually is.
Is it using less power? Is it using our resources more effectively? I reckon so. Surely that’s what we want people doing? If we want to reduce CO2 emissions, then we want people using less stuff that emits CO2.
Obviously, taxing stuff to make it more expensive seems like
an effective way to do it? If you
increase taxes on cricket bats, less people will buy them. The problem is, I think it’s not as simple as
that.
Anyone who knows anything about economics2 will tell you
that raising taxes isn’t an effective way to encourage consumer behaviour. It saps confidence. It stops people spending and stagnates
economies.
Given we’ve just emerged from a global economic downturn,
and another one could turn up any day now, implementing a new tax is not the
best way to protect the economy.
The Government has persisted with an argument that the tax
is only on the big polluters – not everyday citizens. But I don’t reckon this passes what I like to
call the ‘common sense test’.3
Taxing companies sees their revenue drop. Therefore, in order to reclaim this lost revenue, companies will shift costs (usually by raising prices or reducing the size of their workforce). Either way, everyday citizens are the ones who’ll face the effects – either paying more or losing their job.
One possible alternative the Government should consider is
not throwing around so-called compensation or household assistance packages,
but using a carbon tax to offset a cut in company or payroll tax. By getting rid of these inefficient taxes
they could free up businesses to not offset the impact on their revenue and
simplify the tax system.
I actually asked a friend of mine who’s an economist whether
the carbon tax was sensible economic policy.
He reckons it creates a misallocation of resources.
He used an example of three grocery stores in Bondi and the Government choosing to tax one of them. The flow-on effect of this is that the taxed business becomes uncompetitive. If you replace groceries with aluminium-smelting in this example then this is what the carbon tax will do.
He used an example of three grocery stores in Bondi and the Government choosing to tax one of them. The flow-on effect of this is that the taxed business becomes uncompetitive. If you replace groceries with aluminium-smelting in this example then this is what the carbon tax will do.
Furthermore, the Government is implementing some fairly
Orwellian tactics to stop any vocal opposition to its tax.
For example, the Department of Treasury released modelling claiming
the carbon tax’s impact on prices will be negligible for a variety of
products. One such product is beer which
Treasury reckons will only face price increases of around 1% despite the fact
that beer is pumped with gases, uses tonnes of electricity in factories, is
delivered around the country on trucks and then stored in giant refrigerators.
According to the Australian Hotels Association’s budget submission, they expect price increases to products like beer of around 5% or
higher. Other sectors like dairy
manufacturing are expected to be hit with a 12% rise.
However, the ACCC has threatened to fine anyone it finds to
be making ‘misleading’ statements about the impact of the carbon tax on price
(as mentioned by David Bradbury in Question Time just this week).
What this means is that industry bodies like the AHA can’t
really talk about their concern for their industry and members because they
don’t have exact figures to back up their claims, meaning they could be subject
to the ACCC’s wrath.
It’s the parliamentarian equivalent of me saying “Anyone who
calls me an idiot will be fined.”
So the long hand of the law is wrapped firmly around the debate. And this doesn’t even touch on the fact that it will likely be completely ineffective to combat global warming given the decided lack of action being taken by the rest of the world.
Shanghai, for example, has as many people living in it as
all of Australia. It also exists in a
24/7 haze of smog due to the non-stop pollution being pumped into the
atmosphere. The lookout is absurd as you
can barely see 100m on the horizon.
The argument goes: if one city is generating more pollution
than our entire country, then surely the ‘net impact’ of our carbon tax, while figuratively
important domestically, is largely ineffective in reality.
So there you have it.
As you can see, I’m not much of a fan of the carbon tax. However, it would be remiss of me not to
touch on the Coalition’s so-called alternative.
Let me be blunt: their ‘direct action’ plan is pretty
rubbish. As my ‘businessman’ friend told
me – direct action is far more expensive because it doesn’t incentivise any
change in behaviour. All it does is try
and offset current emissions by spending money. Furthermore, it’s also irresponsible
in a fractious economic environment.
So, the unfortunate reality is that both major parties’
plans aren’t great. What do I think we
should do? I’m glad you asked!
I’m fairly certain that, whatever you think of the science
of climate change, pumping pollution into the atmosphere can’t be a good
thing. The problem is, there are no effective
alternative technologies to switch over to.
So, why don’t we try and create them! Surely the Government should be taking the revenue
generated by the carbon tax and throw as much as possible into research &
development of clean energy technologies.
The sooner we create viable and effective clean energy
solutions, the easier it will be to change to a low-carbon economy.
Well, congrats! You’ve
got me to write over 1,000 words on the carbon tax, so if you’re still with me:
thank you. If you’ve left the site and
not finished reading, well, I hate you too.
If you disagree with me or want to add ‘constructively’ to
the debate, please comment as I’d love to hear from you.
NOTES
1: In other words, way more successful than me
2: I’m not including me in that sample
3: I always fail this test
Comments
From a political perspective, the whole thing appears a schmozzle. It does not come across as a win - instead, after spending so much politcal capital making this a reality, everyone seems to be ducking for cover.