Carbon Tax An Incremental Step

The (Labor) Federal Government’s Carbon Tax Policy has been released today. Some details were provided by the print media, but the main show began at the midday press conference. The main speakers were Julia Gillard, Greg Combet & Wayne Swan.

Summary:

1. A flat-rate carbon tax begins 1-July-2012. It changes to an Emissions Trading Scheme (ETS) in 2015.
2. Carbon tax price is $23 per tonne of Carbon Dioxide (CO2).
3. Approximately 500 companies will pay the tax. (those producing more than 25,000 tonnes of CO2)
4. Household fuels are exempt.
5. Significant changes to the tax system accompany the introduction of the carbon tax. Most taxpayers, and pensioners and self-funded retirees will be compensated.

Comparison with the GST:

	Carbon Tax (Labor Government – to start July 2012)	GST (Coalition Government – July 2000)
Inflation Effect (CPI) 1	0.7% (Treasury-Predicted)	2.75% (Treasury-Predicted) 3.0% (Measured)
Targets	Big polluters – those that produce more than 25000 Tonnes of CO2 per year.	End-Consumers
Exemptions 2	Facilities that produce less than 25000 Tonnes of CO2 per year. Small Businesses Forestry, Land, Agriculture	Fresh Food Health and Medical Care Health Insurance Educational Supplies and Childcare ”Specified Items”
Compensations 3 (reduce by 1.3% per year from 2013)	Income tax Cuts: Households, amount dependent on income 94.5% Compensation: High-polluting trade-exposed industries (eg steel-making, cement) are more than 90% compensated 66% Compensation: Lower-level polluting trade-exposed industries 50% Compensation: Liquefied Natural gas producers	Income tax Cuts: Households, amount dependent on income

The Politics:
Politically, the government has tied tax reform to the carbon tax. This makes it harder for a future Coalition government to undo. It cannot undo the Carbon Tax / ETS without undoing the tax cuts, increasing rates of tax, or introducing new taxes to replace it.

Meanwhile, News Ltd papers and websites continue their pro-Coalition, anti-climate change, campaign to influence public opinion, possibly with the lack of ethics his media have shown in Britain. Consider the following “Polls” 4 :

1. ”Will the carbon tax change your energy consumption?”
   It’s a good question, and targets one reason for the carbon tax. (the other reason is as a transition mechanism to a market-based ETS)
   A reasonable person, and a person constructing a survey would expect a Yes/No answer only.
   Not so, Rupert Murdoch’s media: there are 4 options, the 4th one exists to further their agenda to create public opinion. The 4th option is “No,climate change is a myth”
   From a closed question requiring a Yes/No answer, News Ltd has managed to include an option to manipulate public opinion.
   
2. “How would you describe the compensation measures”
   Again, a fair question, and you would expect responses like: Excellent, Good, Fair, Bad.
   Again, the long arm of Murdoch’s political agenda has intervened: the 4th option is “Disgraceful, we shouldn't have this tax at all anyway”.

News Ltd polls are not used to gauge public opinion. Their existence is to help manipulate public opinion in favour of the Coalition.

The Greens, Bob Brown and Christine Milne in particular, have been spruiking their contribution. 5 They have talked about “no new coal-fired power stations” being built. This is a possibility, but equivalent gas-fired power stations will be needed.  Hazelwood Power Station in the La Trobe Valley of Victoria uses brown coal and 6 x 200 MW generators to create 1200 MW (1.2 GW) of electricity. Brown coal is a very ‘dirty’ form of coal, and there are significant mines in Victoria. Since its electricity assets were privatised, I understand there has been little investment in power stations.

The Effects:
The intended effects of the carbon tax include: to promote investment in renewable energy sources,  to reduce carbon emissions, to move towards an ETS. The initial target is 5% reduction in CO2. This is a small, but achievable, target.

For all the conservative and (some) media furore over the ‘great big new tax’, the bottom line is if you want to reduce your carbon tax, reduce your use of carbon-based energy. Heat your house to 18-20 degrees in winter, and cool to 24-25 degrees in summer. More tips to reduce energy use can be found at: http://www.yourhome.gov.au/technical/fs61.html and http://www.low-impact.net/index.php/20080128/reducing-home-electricity-consumption-simple-steps/

The carbon tax is an incremental change towards changing our environment for the better. The inclusion of tax reform as part of the package is politically smart, making it harder for a future government to undo, and makes the package more significant and palatable.

John

In researching this post, I also looked at:
1) http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1405&context=commpapers
2) http://www.gstaustralia.com.au/what-are-gst-free-supplies/
3) http://www.abc.net.au/news/stories/2011/07/10/3265775.htm
4) http://www.news.com.au/money/money-matters/julia-gillard-unveils-her-plans-for-carbon-tax/story-e6frfmd9-1226091665916
5) http://www.theaustralian.com.au/national-affairs/carbon-plan/better-or-worse-verdict-on-the-gillard-governments-carbon-tax/story-fn99tjf2-1226091746969
6) http://au.tv.yahoo.com/sunrise/factsheets/article/-/9816119/kochie-your-guide-to-the-carbon-tax-and-compensations/