The “Hot” Topic of Carbon Tax in Australia

The forthcoming introduction of a carbon tax in Australia has been the topic of
“hot” (excuse the pun!) debate. The Government has taken a small step
in the right direction from the point of view of raising the profile of climate
change amongst the general public and large businesses, however what are the likely
consequences of such a tax and will it really be effective in keeping a lid on
carbon dioxide emissions? Is there a better alternative?

Let’s take a look at other countries that have introduced carbon tax to see
the likely impact of our tax down under. The European Union’s climate change
policy currently costs $250 billion per year however will have little impact
on temperature increases in the long-term.

To have any real impact of keeping global temperature rises to below 2C, which
has been a target recommended by environmental experts, a tax on carbon would
need to be introduced in every country in the world of about $4000 per tonne,
which equates to more than A$9 per litre of petrol towards the end of this century.
Needless to say, this would go down like a lead balloon in Europe and Australia,
and hardly be feasible in developing countries.

The unforeseen consequence of the EU carbon tax has meant that more goods are
being imported from countries such as China, where there are fewer restrictions
and inefficiencies in production processes actually generate larger emissions.
The same scenario is likely to happen as a result of the carbon tax in Australia.

Australia is simply paying lip service to a serious global problem by introducing
a tax which will not have any significant impact on reducing carbon emissions
and will likely have the knock-on effect of increasing imports from third world
countries, thereby increasing emissions in the long-term.

Other unanticipated consequences are already occurring, such as unethical businesses
trying to make a fast buck by raising prices and blaming these increases on
the carbon tax, which has not been introduced yet!

Rather than trying to reduce carbon emissions by making carbon more expensive,
it would make more sense to direct our attention to making renewable energy
cheaper. For example, if solar panels were cheaper than burning fossil fuels,
then people would naturally change to green energy.

Given Australia’s commitment to at least “do something” about global
warming, I reckon that rather than burden large businesses with higher taxes,
which we the consumer will ultimately pay for, a better solution would be to
offer these businesses incentives to spend their own cash to reduce emissions
by investing in renewable energy sources. This could be done over a specified
period with pre-determined targets and milestones being put in place.

Your thoughts?

KK’s gut instinct

No news for this month.

Sporting tip of the month

The US to win the President’s Cup and Tiger shines – he’s back!