Sunday, March 06, 2011

Carbon Costs

Let’s be clear: All our political parties, The Greens, Labor, Liberal and National Parties believe climate change is occurring. This is despite Tony Abbott’s well-publicised comment about the science  being “crap”, and despite some nay-sayers. Most of the nay-sayers are from the Liberal & National Parties. It is a politically convenient position, allowing big-polluting supporters to continue to pollute.

What IS different is the politics. The Liberal & National Parties have abandoned the policy of an Emissions Trading Scheme (ETS) their former leader & PM, John Howard. Labor, having promised action on climate change under Kevin Rudd, and now Julia Gillard, have been unable to resolve the details of ETS to satisfy the Greens and Independent MP’s & Senators. The result is a proposed interim carbon tax, to be replaced by an ETS in 3-5 years. So, how do the policies compare?
The Greens (main points)
  • binding national emissions targets for 2012, 2020 & 2050, with a 40% reduction on 1990 levels by 2020
    • detailed strategy to reduce emissions from energy, transport,  industry, waste & land management
  • future energy needs to be met by sustainable, renewable energy sources
  • an equitable transition to a low carbon economy through a range of market-based and regulatory mechanisms reflecting the real costs of greenhouse gas emissions
  • address the social impacts of the transition to a low carbon economy
  • establish a national system of energy efficiency targets

Labor Party (current policy)
  • 5%-15%  reduction on 2000 carbon dioxide emissions by 2020
  • carbon tax (details to be advised), with a transition to an ETS in 3-5 years.
  • “businesses with the highest levels of pollution will have a very strong incentive to reduce their pollution.”
  • “The Government will then use every cent raised to:
    • Assist families with household bills
    • Help businesses make the transition to a clean energy economy
    • Tackle climate change”

The Coalition (Liberal / National Parties)
  • 5% reduction on 2000 carbon dioxide emissions by 2020
  • “direct action” involving:
    • an Emissions Reduction Fund (funded by taxpayers)
    • “incentives” for businesses
    • penalties for businesses that pollute beyond “business as usual levels”. Penalties to be set “in consultation with industry”.
    • plant trees, but not on useful land for farms
    • solar & biofuels

  1. policies from Labor and Liberal-National Parties have been subject to change to suit particular political climates at the time.
  2. the economics of a carbon price are complex.
    1. Electricity use might be more economically “elastic” than previously thought. See People in Sydney have REDUCED their “average electricity consumption in Sydney fell by 6 per cent between 2005-06 and 2009-10”, while the price increased by 50%
    2. Petrol, though, seems to be rather “inelastic”. That is, people will continue to buy, almost regardless of the price. But they can exert significant political resistance. remember, John Howard reduced the tax on petrol after it first hit the $1/litre mark because of the political backlash from motorists. He couldn’t, and wouldn’t, continue to reduce it, though,and petrol is well over $1/lire now.
    3. Taxes, including a carbon tax or ETS, are designed to force a change in people’s behaviour. Think of the effect of increasing interest rates on household spending – the effect is similar if people pay more tax.
  3. Consumers will pay one way or another: a carbon tax / ETS means they will pay pay as they use, and change behaviour accordingly; an Emissions Reduction Fund means they will pay through other taxes, and will not associate the (mostly income) tax with carbon pollution.
The Greens Labor Liberal / National
Quality / Idealness
9 / 10
6 / 10
5 / 10
5 / 10
5 / 10
6 / 10
8 / 10
6 /10
4 /10
Cost to Energy Consumers
Very High
High – via “cost”
High – via tax

Whatever the politicians do, I believe we should all strive to reduce our carbon emissions. We should do so because it is a good thing to do, because it will reduce the rate of increase in our costs, and because it will improve our environment.

See also: