Carbon Tax Nonsense

12 Jul

The Australian government recently announced their Carbon Tax plan – a tax of $23 per tonne of CO2 pollution applied to about 500 big companies, and compensation in the form of tax breaks and family assistance for low-income households.

There’s a lot of nonsense about the tax going around in the media and social media. Here’s my take on some of it.

Carbon Dioxide - this is what all the fuss is about

Carbon Dioxide - this is what all the fuss is about

Nonsense 1 : I don’t pollute, so why should I pay? It’s unfair!

With no Carbon tax, nobody pays, whether they pollute or not. That’s unfair – it’s especially unfair on our children and grandchildren, who have to suffer the consequences of our pollution, and can’t do much about it now.

With a Carbon tax, if you pollute, you pay. That’s fair. If you don’t pollute, you don’t pay. That’s also fair. Find ways to avoid polluting – there is plenty of information out there on how to do that.

Nonsense 2 : Wouldn’t it be better to take some kind of direct action? We could plant trees, use energy-saving construction techniques, encourage hybrid cars….

The price on Carbon, reflected in the price of energy and therefore everything else, tells us exactly what we need to know to reduce our CO2 footprint. Better still, even people who care not one whit for the environment will be making changes. These changes will cost $23 per tonne of CO2 or less. Think of the Carbon tax as some network of smart green anti-pollution robots, infiltrating the economy, and zapping away exactly those polluting activities that people least care about, and leaving alone polluting activities that (like making tea) provide such benefits that they are worth the cost of the pollution they cause.

Direct Action on Climate Change, by contrast, has no upper limit in cost, and relies on the wisdom and whim of governments to design, implement and maintain it, and always favours one industry unfairly over another. As an example, it is estimated that the solar panel rebate scheme reduced CO2 emissions, but at a cost of $300 per tonne. The money would have been better spent elsewhere. In the meantime, the wind energy sector didn’t get a cent of it.

The problem with Direct Action can be understood like this : there are many things we could do to reduce CO2 pollution. The problem is knowing which ones give the best bang for our buck. For example, if I buy a hybrid car, I spend an extra $10000. By how much will this reduce CO2 pollution? Should I have spent that $10000 on solar panels instead? The answers to these questions are difficult. Worse, there are a million tiny choices we make from day to day that also – whether to make hot tea or drink iced tea from an Aluminium can – whether to catch the bus or ride to work – whether to buy a gas barbecue or an electric one, and so forth. Any of these may turn out to be a far cheaper way to reduce CO2 emissions that some big government-operated scheme. The Carbon Tax, as it filters down into the prices of polluting goods and activities, can affect these minute decisions. Government Direct Action can not.

Nonsense 3 : Although I’ll be worse off under the plan, I’m happy to pay my part for a greener future

If you are worse off, you aren’t paying for a clean green future, you are paying for a dirty polluted one. Every extra $23 you pay corresponds to an extra tonne of CO2 you’ve caused to enter the atmosphere. If you are paying, you are polluting. Instead of being happy to pay, you should find ways to avoid paying – cut down on your power bills, use less steel or ride a bike to work.

Instead of being happy to pay, be happy that even people who don’t care about pollution do care about money, and will make clean green choices because of the tax.

Nonsense 4 : Australia produces so little CO2 that the tax will have no effect.

Australia produced, in 2008, 1.32% of the world’s CO2 pollution. If we reduce our CO2 emissions by 80%, we’ll have reduced world emissions by over 1%. Small, but not zero. However, Australia has only 0.32% of the world’s population – we rank 5th  in the world for CO2 emissions per person. If a typical Aussie changes their emissions by 80%, it will have over 4 times as much impact as an average world citizen might. This is an argument for Australians to lead the way, not lag behind.

Nonsense 5 : The tax will destroy the economy

Economists estimate the effect on the economy will be minimal. Even the Coal lobby estimates only 4700 coal mining jobs lost over 10 years. That’s such a small figure, it won’t even be noticed in employment statistics. Furthermore, the Carbon tax is likely to spur job creation in the natural gas industry over the same period, and at the same time, the tax cuts and family assistance will boost the retail sector – by all accounts, a sector in sore need of help right now.

You can’t destroy an economy by taking money out and putting the same money back in. At worst, you can hinder and boost particular sectors. The net effect will be very slightly negative in the short term, but hardly enough to notice.

Finally, if you take into account the effect of climate change on the economy, the long-term effects of this plan are overwhelmingly positive.



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