What price pollution? D-day for a carbon tax
“We’re all doomed, you know. The whole, silly, drunken, pathetic lot of us. Doomed by the air we’re about to breathe.” Or so says Julian Osborne in an Apocalyptic Melbourne in the doomsday classic On the Beach. The vehemently debated July 1 introduction of Australia’s first carbon tax enacts an effort to save ourselves from such a dire fate* and sends a global signal about the growing importance of ‘polluter pays’.
Global trends in carbon taxation: We are not alone.
While opponents to the carbon tax in Australia frequently roll out the, “No one else is doing
it, why should we” argument, the facts of global carbon taxation are more nuanced. The ever-trendy Finnish led the way with the world’s first carbon tax in 1991, followed closely by Sweden (The same year the Swedish won the Eurovision Song Contest. Coincidence? I think not.). That’s a whole year before Rio 1.o, folks!
Other countries and states which have successfully rolled out carbon pricing or taxation include Great Britain’s climate change levy; and Norway and Costa Rica’s taxes on hydrocarbon fuels; while Quebec and British Columbia, Canada and the US states of Colorado, California, and Maryland each have their own versions of carbon tax. Meanwhile, our good neighbours across the Tasman in Middle Earth have had an emissions trading scheme in place since 2008.
“It’s too expensive. And it will strangle our economy.”
Hailing from a country honed in the fiery rejection of taxation without representation, I am keenly aware of the emotional nature of taxes. Certain opponents of Australia’s carbon tax would have us believe that the crushing taxation and flow-on increases in consumables’ costs to dinky-di Aussie households will send us back to the dark ages. Will millions of Australians spend tonight, the first night under carbon taxation, huddled lampless in the cool glow of their battery operated iPads, wordlessly deconstructing their Thonet chairs for firewood as the cold winter’s night closes in? I doubt it.
Despite complaints about the rapaciousness of Australia’s carbon tax rate, currently set at AU$23.00/tonne (US$23.50), it is by no means the world’s most expensive. As of 2007, Sweden’s carbon tax rate was EU101/tonne (AU$124.93). Yet since the introduction of its carbon tax (and even in light of the Great Recession), Sweden has seen economic growth of 48% and a 9% reduction in total greenhouse gas emissions (GHG). Australia expects at least a 5% reduction in GHGs, no small feat when we consider that Australia produced 546.3 Megatonnes of CO2 emissions in 2011.
The Australian carbon price represents a highly studied entry point to carbon taxation. The price will be increased slowly to AU$24.15/tonne in the 2013-14 financial year, then to AU$25.40/tonne in FY2014-15, before being set by the market the following financial year. Despite strong criticism, this seems a fair and appropriate economic process which ultimately opens carbon taxation to the free market, once the scheme is better established and understood. Lest we forget, similar levels of fear-mongering and opposition surrounded the introduction of Australia’s goods and services tax (GST) at the turn of the century. The Australian economy is still going strong, and the majority of us now pay GST unconsciously, as yet another part of life.
“Get out the draft snakes, Shirl, it’s gonna be a cold one.”
The carbon price has spurred Aussie homeowners to improve their homes’ energy efficiency. Anecdotal reports indicate that glaziers, insulation installers and energy efficiency companies have seen a spike in business in the months leading up to the carbon tax, as individuals attempt to reduce energy consumption in the face of rising electricity costs. Although homeowners interviewed stated they were making efficiency improvements for cost, not environmental reasons, Australia’s company-focused carbon tax appears to be having a positive, indirect influence on individual households’ environmental friendliness, nevertheless.
Meanwhile, close to one-quarter of Australians will receive tax cuts or direct government subsidies intended to off-set any flow-on costs of the carbon tax, especially in relation to electricity and food bills. Such action by the Government will overcompensate at least 6 million Australians for the estimated price rises related to the tax.
Balancing taxation with a happy electorate
As Australia approaches its next Federal election, the carbon tax will take centre stage – and I hope other countries will learn from the debate. With an Opposition party which looks likely to take Government, their declaration that the carbon tax will be repealed on Day One of their new Government places an ominous backwards step on our horizon. Nuclear fall-out it may not be, but retrograde removal of responsibility from Australia’s 500 top emitters sends a dangerous message about priorities for the future.
*Yes, I know On the Beach is about nuclear fall-out, not CO2 emissions, but you get my point.