AUSTRALIA It’s CARBON TAX IN AUSTRALIA

Australian Carbon Tax

The term that took the scientific world by storm in 1987 was “sustainable development,” a terminology that redefined the perception on economic growth, human development and environmental conservation. Scientists, engineers, policy makers, and a practically all communities need to get involved in meeting human development needs. However, this brings on a series of problems related to sustainability, especially considering that the contemporary society is experiencing a process of regression when taking into account pollution. People presently need to come up with ingenious methods of improving society without damaging the environment. This pursuit for having economic growth without damaging the ecosystem has lead to the design of new means of creating energy, better lifestyle, change in the human behavior, overall a fresh and innovative attitude towards nature and life. But there are challenges to be faced, and most of them come from the human activities; modernization, for example, has been rather unsustainable due to the use of fossil fuel and hydrocarbons, which are damaging the atmosphere and the aquatic ecosystem.

Section 1

A particularly important aspect is the one related to influencing the general behavior towards this situation; it is not necessarily a question of empathy and care for the environment, but rather a decrease in consumption habits in order to meet the designated budget.

The Environmental Tax Reform (ETR) mentioned above proposes the following:

a carbon tax levied at a rate of $23 per ton of CO2, which raises $6.3 billion per annum the abolition of payroll taxes the introduction of mandatory fuel efficiency standards for vehicle the reduction of sales taxes on the most fuel efficient vehicles by $500 million annually

For a better understanding of the carbon tax system, we need to take a look back and understand the model it was based on and the mechanism behind it. A common point of reference is the Toronto conference, where governments were asked to decrease CO2 emissions to a level of approximately 20% by the year 2005, as a global goal. In 1990 the Australian government established nine working groups to assist in developing a national strategy for Ecologically Sustainable Development; this strategy followed in 1992 under the name of The National Greenhouse Response Strategy, involving a number of initiatives aimed at reducing emissions from the energy sector. In the course of the Ecologically Sustainable Development process economic modeling was provided by the Centre of Policy Studies and the Australian Bureau of Agricultural Research and Economics, where major focuses were the economic aspects of the greenhouse gas abatement (Adams et al., 1991). The historical developments represent the introduction of the carbon tax as an instrument of greenhouse policy in the long run.

Since the reduction in CO2 emissions represents a public good, many countries will benefit from taking this action. Even if there are powerful international agreements that bind governments, there is the threat that climate change problems could remain unsolved. To fight against this event, we observe that many countries are coming together to introduce carbon emission policies (Brennan, 2009).

Section 2

Although many Australians have expressed their lack of enthusiasm in regard to the carbon tax, the government has considered the greater benefit for the country and for society as a whole and imposed the tax on its citizens. Australia has been one of the countries who has foreseen the disadvantages of common fuels, and adopted several means of reducing emissions: non-market mechanisms such as regulation, and market mechanisms such as tradable emissions permits and carbon taxes. Though both measures bring strong results, the preferred method in this situation is the market method due to its efficiency and the ease with which it is implemented and monitored across the nation; a carbon tax directly changes the price of fossil fuels and thus consumer prices, but indirectly for manufactured goods. “These price changes would alter the levels of final demands, and therefore fossil fuel use and aggregate carbon dioxide emissions” (Cornwell and Creedy, 1996). Though this is not a method to completely erase all the effects on the natural ecosystem, it is however a way of shifting the population’s needs and fuel necessities to other possibilities: electric cars, renewable energy and less dependency on industry.

Alongside its revenue raising and redistributive functions, the tax system may be used to support new activities that are environmentally positive and eradicate older and “toxic” ones. On a more practical side, the multitude of aspects in the existing tax system discourages employment and investment and encourages pollution and irrational resource use. By creating this taxing package the government is trying to advertise the creation on environmental-friendly jobs and industries to drastically reduce environmental damage (Hamilton, Hundloe and Quiggin, 1997).

The sectors that Australia needs to focus on are mainly agriculture and forestry, but according to business projections published by the Australian Greenhouse Office, a considerable amount of GHG emissions will also come from energy use, including transport. To attain the desired ecological outcome before 2020, a mixture of efficient energy use and renewable energy is wanted; in this matter neither coal with CO2 capture and sequestration (CCS) nor nuclear power could present a significant change before the outlined deadline. As Diesendorf (2007) shows in his GHG review there is a number of political tools and policies that will have a crucial role in achieving a sustainable framework:

– Economic instruments (carbon pricing schemes and other market mechanisms, R&D funding and the removal of some existing subsidies);

Rules and standards (energy markets are prone to failure);

Providing environmental education, training and knowledge;

Institutional change (e.g. fostering energy service companies; creating federal and state

Government agencies to coordinate implementation)

Coming back to the agriculture and forestry sector, there is no wonder why they are targeted as the two main areas where a change is imperative. These two industries require land use and this specific feature gives them great potential for taxing their carbon dioxide emissions. Thus, in the CO2 emission trading scheme among nations a change in this two areas could bring a higher rating and show the commitment Australia has to the reduction of GHG; this type of accomplishment will pave the way for the mitigation mission, especially for Australia and its developing country neighbors (Garnaut, 2008).

Though many countries fear that any changes in their industry, whatever it may be, could bring about a decrease in economic development, the answer to this is adaptation to new technologies and learning how to create economic value from them; this shift towards “green” energies will happen sooner or later taking into consideration that oil reserves will eventually come to an end.

This is not the case for the Australian agricultural and resource industries — they have shown a great adaptive capacity to changes, and also a keen sense for taking the appropriate measures. Like many other sectors of the economy, the survival and efficacy of these two sectors relies on the production of carbon credits, especially for the rural areas of Australia. Nevertheless, the rural areas need to present a higher degree of technological development in order to surpass the industrial barriers and adopt the comprehensive global carbon accounting. If the rural areas are ready or not to take on a new strategy is still a research subject, highly debated among Australian scholars and political minds, but it is definitely present in the governmental agenda (Garnaut, 2010).

Section 3

The carbon tax is likely to have a negative effect on the tourism industry as a result of the fact that many Australians will choose to travel abroad because of the price associated with staying in the country. Tourists would virtually have to pay the carbon tax if they want to travel by plane within the country’s borders while traveling abroad would only have them play a regular ticket. This makes it difficult for the carbon tax to be accepted for its efficiency, given that a plane travel abroad normally burns more fuel than a journey inland.

The main question remains the actual effectiveness and potency of a carbon tax, but recent studies have shown that this kind of action would have a real outcome, especially when it is combined with a new tax, in order to tackle the different kinds of fossil fuels, as shown in the following study.

R.A. McDougall (Centre of Policy Studies), states in his paper Energy Studies and Greenhouse Gas Emissions in Australia that “while a carbon tax would be the theoretically ideal instrument for carbon dioxide abatement, any tax bearing heavily on the cheapest fossil fuels would be reasonably effective.” He also draws attention to the question whether an energy tax would also contribute to the CO2 emissions, since it would target different fossil fuels (for example coal has a higher emission coefficient than oil and gas).

The economic policy towards climate change is still under consideration. Many policy interventions generated by the government still present scarcity in their action and structure. A strategic scheme in the reduction of GHG emissions should include stability between the marginal costs and the marginal benefits of the expenditures made on adaptation process to climate change. But taking into consideration the actual levels of technical advances, this is unlikely to work; together with technological modernization the social pillar needs not to be neglected since it fluctuates with all the changes in the economy. The critical issue, which still requires a final result, is developing a cooperative agreement with other national governments (Freebairn, 2007).

Finally, a carbon tax in Australia, and other countries, is not only a simple measure that is adopted and respected by the citizens; one major variable in this equation is the attitude they have towards benefiting the environment. Though today’s society is highly reliant on industry, cars and energy, a less overspending and demanding behavior would not only ease the stress we put on nature but it would bring more wealth in each household.

Climate change policy is a classic case where international cooperation is essential, and the design of an effective policy can be difficult. In order to create a comprehensive and holistic policy framework there are certain features that need to be closely analyzed and included: coverage, equity, politics, institutions, economic fundamentals and flexibility. Global climate change policy could move forward, with the help of international joint effort and national governments working together in devising an economically, socially and ecologically effective plan. This is a great opportunity for Australia not only to set an example to the world, but to create a milestone in environmental governance (McKibbin, 2007).

To sum up, a carbon tax based only in Australia would only get a small part of the problem fixed; as said above the GHG emission reduction scheme is a global issue and each country has a smaller or bigger contribution to it. There is no reason in pointing the finger at the guilty, but to learn from past mistakes and try to make a better future, where human kind has a sustainable and healthy life style in a healthy environment.

References:

Adams, P.D., Dixon, P.B., Paramenter, B.R., and Peter, M.W., (1991). Prospects for the Australian Economy 1989 to 2029-30: ORANI-F projections for the Ecologically Sustainable Development Working Groups. Final report to the ESD Working Groups, Monash University Centre for Policy Studies

Brennan, G., (2009). Climate change: a rational choice politics view. Australian Journal of Agricultural and Resource Economics, Volume 53, Issue 3, pages 309 — 326

Cornwell, A. And Creedy, J., (1996). Carbon Taxation, Prices and Inequality in Australia. Fiscal Studies, vol. 17, no. 3, pp.21- 38

Freebairn, J., (2007). Policy Forum: Climate Change: Some Economic Policy Issues Economic Issues with Climate Change. The Australian Economic Review, vol. 40, no. 4, pp. 402 — 9

Diesendorf, M., (2007). Greenhouse Solutions with Sustainable Energy: A Submission to Garnaut Climate Change Review. Institute of Environmental Studies — University of New South Wales.

Garnaut, R. (2008). The Garnaut Climate Change Review. Cambridge University Press, Melbourne

Garnaut, R. (2010). Climate change and the Australian agricultural and resource industries. Australian Journal of Agricultural and Resource Economics, Volume 54, Issue 1, pages 9 — 25,

Hamilton, C., Hundloe, T. And Quiggin, J. (1997). Ecological Tax Reform in Australia: Using taxes, charges and public spending to protect the environment without hurting the economy. Discussion Paper Nr. 1, The Australia Institute

McDougall, R.A.,(1999). Energy Studies and Greenhouse Gas Emissions in Australia. General Paper, Nr. G-104, The Centre for Policy Studies

McKibbin, W.J., (2007). Policy Forum: Climate Change: Some Economic Policy Issues From National to International Climate Change Policy. The Australian Economic Review, vol. 40, no. 4, pp. 410 — 20

“Australia: Carbon Tax to Hit Tourism — MP,” Retrieved October 9, 2011, from the Tradenewswire Website: http://www.tradenewswire.net/2011/australia-carbon-tax-to-hit-tourism-mp/