Productivity Commission’s submission on emissions
I’m just skimming the news at the moment and there seems to be a fair bit about an emissions trading scheme being hindered by MRETs according to the Productivity Commission. I was reading ABC Online’s article on it and replied to a comment inquiring about someone’s opposition to carbon emissions trading
Perhaps you can explain why taxing people who pollute, and giving rebates to people who reduce pollution will not reduce pollution.
My response is that often the governments setting up an emissions trading scheme bow to industry pressure to not be too tough. As a result, free permits get given out to big polluters, the market price for permits is low due to an oversupply of permits or there’s an extended “grace period” where violations of permitted emissions are not punished; all of these lead to inaction.
A carbon tax, though, is a great idea. Charge energy producers 50c/tonne of Carbon Dioxide and use the money available to offer tenders for renewable energy plants. The tax will give dirty energy suppliers an incentive to clean up their act because their customers will leave if the extra costs are passed on. The revenue pool is also used to drive further clean energy projects because that money is made directly available to companies looking to build new renewable plants in order to reduce the amount of carbon tax they pay per watt of energy produced. Further, any increased prices will lead to people adopting more energy efficient appliances and re-examining their lifestyles.
If you’re worried about the equity issue and hitting working families hard, one can always use the carbon tax revenue to provide assistance to lower income households (or anyone on Centrelink payments, really) provided they switch to a registered Green power plan.
As much as I want to believe that market forces can be captured for the good of society, there’s still too much money to be made in trashing the environment.
Edit: I am in favour of an examination of the tax incentives to trash the environment such as the fringe benefits associated with company cars.
Sam, a tax of 50c per tonne of CO2-e is not going to make any discernible difference, it needs to be many times that. Any cost on Carbon has to be sufficiently large that it actually changes behaviour and affects our decision making.
Ignoring energy directly for a moment, I did a thought experiment a few months back about the embodied energy in goods, and how a carbon price would impact on purchasing decisions. The best example I could up with for a high embodied energy good, and a low embodied energy good offering near identical utility, was with boats.
The most popular class of boat in Australia is the 14′ Aluminium runabout, these runabouts consist of around 150 kg of Aluminium, and Aluminium produces something like 20 tonnes of CO2-e per tonne for its smelting in Australia. A fibreglass boat is based around epoxy, a plastic, and has quite a bit of embodied energy in it too. A wooden boat on the other hand, would have comparatively modest CO2-e emissions associated with its production, and the building material is itself a Carbon sink.
Lets assume for the moment that the Aluminium runabout = 200 kg of Aluminium, (when you factor in material wastage, energy used in manufacture, mining, etc). With a Carbon price of 50c a tonne, this would increase the cost of an Aluminium runabout by the grand total of $2. Even at a Carbon price of $50 a tonne, its only going to increase the price of the most popular Aluminium boat in Australia by around $200, this price increase is unlikely to affect many boat buyers purchasing decision, the Carbon price would have to be hundreds of dollars per tonne before buyers would consider a hull made of a less energy intensive material. Similarly the Carbon price would need to be quite high for boat manufacturers to expend much effort in working out where they could save a couple of Kg of Aluminium in order to remain competitive.
Whoops, I meant to say that it should be $50/tonne rather than 50c. Boats aren’t purchased as frequently as other energy intensive things like home whitegoods, cars, etc. Not every Australian household owns a boat.
Even if it doesn’t affect the price at which boats sell, it affects the costs for the manufacturer. Bringing carbon pricing in will change how much they’re charged for electricity and may convince them to switch to buying Green power even if they are still keeping coal-fired plants operating by virtue of how much power they draw.
A carbon tax, like any other tax, can work even if the demand of the taxed item/behaviour is inelastic. If the patterns don’t change, there’s going to be a shitload of money around which can be used to pay for renewable energy research, the construction of new renewables plants by government or by putting out tenders for the private sector to construct renewable energy plants.
Having $50 a tonne as a starting price for C02-e would cause huge upheaval, and in an environment where many families are struggling financially, the political cost would be enormous. Just look at the way Nelson’s suggestion of a 5c a litre reduction in petrol excise was received, and contrast this with increasing the tax on unleaded by around 12c a litre (which is what $50 a tonne for CO2-e roughly equates to).
To my mind $50 a tonne, is not high enough. The Carbon price needs to eventually get to the point that trees are more valuable left in the ground, than they are for logging..