Carbon Tax Madness, Part One

Julia’s big bad new tax has been announced and plenty of debate has already ensued. The verdict seems to be already in: her popularity continues to plunge madly, as does her party’s rating, and the polls show overwhelming disapproval of this carbon tax madness.

With so much helpful commentary already penned on this woeful decision, it will be wisest for me simply to offer a digest of some of this thinking. A number of experts, ranging from economists to politicians will be cited here. Together their reflections should help those who still are unclear on this tax as to why it is something which should be soundly rejected.

I begin with economist Terry McCrann. He has already penned quite a few pieces on this. Let me offer a few snippets from some of his most recent columns on this. So why such a tax? “With the carbon tax – or to give it its honest title, carbon dioxide tax – the price increases are the specific intention – to make our coal-fired power, which provides 80 per cent of our electricity and much more reliably than any other source, more expensive. Indeed, to make anything that emits CO2 more expensive. Except the second-biggest emitter – petrol.

“And why not petrol? For purely – or more correctly, impurely – political reasons. Because making petrol more expensive would, ahem, drive home to voters just exactly what this tax is entirely designed to do. Something that can be made murky with electricity and propaganda about clean energy and so on.”

The problem is, the price will keep rising: “With the carbon dioxide tax, again, the specific purpose will be to increase it every year. By around 7 per cent – or 4 per cent plus inflation, which seems stuck around 3 per cent. That’s before we switch to the ETS. Then the government will keep forcing up the price each year by reducing the number of ETS permits issued.”

Let’s look at some details: “This is a policy that proudly boasts the average household will get $10.10 in compensation each week to cover the $9.90 in extra costs that households purportedly will face. You can all save the Barrier Reef if not indeed the entire planet and be a thumping 20c a week better off. Every five months or so the average household will be able to shout itself a single cafe latte in collective celebration.”

He continues, “The Government will set a floor price and a maximum price for the permits that will replace the carbon tax. The floor price is ‘easy’. It will be $15 a tonne. The cap will be ‘$20 above the expected international price for 2015-16’.

“Two problems with that. There isn’t now and almost certainly won’t be an ‘international price’. The two biggest emitters, China and the US, won’t be trading permits. Then there’s the ‘tax reform’. To deliver the offsetting compensation to lower income earners, the Government has pushed up the rates for the critical two brackets up to $80,000.

“So an average income earner will now pay a much higher marginal rate than BHP. All to achieve four-fifths of five-eighths of very little. All wrapped up in the commitment to cut emissions by 80 per cent by 2050. When our population will have almost doubled. Is that Julia’s ultimate promise? A windmill in every back yard?”

The closer you look at this the scarier it gets: “The carbon (dioxide) tax is forever. And going higher and higher. But the supposedly compensating tax cuts will quickly evaporate thanks to good old bracket creep. Before you even get to 2020 your tax cuts will have all-but disappeared in real terms. But the carbon (dioxide) tax will be plucking more and more dollars out of your wallet and purse. And it will be plucking the wallets and purses of people earning between $400 and $1500 a week most.”

“Yes lower income earners get the tax cut. And yes, it might – and I stress that word might – cover the higher costs from the carbon (dioxide) tax. But even if so, it will only cover them in the first year. After that the carbon (dioxide) tax keeps going up. But the tax cut benefit gets eroded by inflation and bracket creep. And who gets ripped off first and worst? People earning between $19,400 and $80,000. People earning between $400 a week and $1500 a week.”

Greg Sheridan also looks at the economic impact of this crazy idea: “If ever there were a single country in the entire world spectacularly unsuited to be the sole imposer of a vast, unprecedented carbon tax, which no other country in the world is remotely duplicating, it is Australia.

“Isolated from our strategic friends, far distant from our biggest markets, a member of no natural trading bloc or customs union, we have just one serious, competitive advantage in the global economy. That is the abundance of our fossil fuel endowments. If ever there were a nation well advised to move slowly and carefully on policies to cut greenhouse gas emissions, we are it.

“As Productivity Commission head Gary Banks commented: ‘It will not be efficient from a global perspective [let alone a domestic one] for a carbon-intensive economy, such as ours, to abate as much as countries that are less reliant on cheap, high emission, energy sources . . . Modelling aside, it’s common sense that achieving any given level of abatement is likely to be costlier in a country with a comparative advantage in fossil fuels’.”

He continues, “The whole enterprise is built on a falsehood, the supposition that nations around the world are taking comparable economy-distorting actions to that proposed by the Gillard government. There is no really polite way of putting this but it is simply, utterly and comprehensively untrue. This is critically important. Even if you accept that all the science about climate change is true, that does not indicate what the best response for Australia is.

“If the science is true, then the problem can only be tackled by global action. If global action is impossible, then nations should do their best to cut greenhouse gas emissions in ways that don’t hurt their economy too much, prepare for adaptation when it’s needed and work to produce technological breakthroughs that allow lower emissions technologies to work and become affordable. This is broadly what other nations are doing. None is doing anything remotely like our carbon tax.”

Much more can be said on this important topic, so please continue reading in Part Two.

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6 Replies to “Carbon Tax Madness, Part One”

  1. So the government finally got around to what we all used to joke about – taxing the very air we breathe..

    I’m not surprised that the government, instead of doing due diligence and finding out the facts of global warming, are simply using this junk science to allow themselves to tax us even further than they already do. It allows them a ‘legitimate’ reason to tax us to cover their less than wise overspending on foolish schemes.

    We are gong to pay a heavy price for allowing foolish politicians to implement foolish ideas.

    Morris Otte

  2. Question:
    If “The cap will be ‘$20 above the expected international price for 2015-16’.” then what will happen if the international price falls below $5/tonne – as it did in the USA, where the Chicago Carbon Exchange closed with a final untraded “price” of US10 cents?

    With such a tiny differential there will be no incentive to reduce carbon emissions.

    John Angelico

  3. Ever since the environmental movement became the home of hard leftists worldwide after the fall of the Soviet Union, it was inevitable how this would play out in the west.

    For decades the new green wearing communists slowly and persistently pushed schemes to advance statism under a green guise. Until now this had largely been achieved through increased ‘environmental’ regulation. Now a direct tax is proposed for these ends.

    I’m encouraged that people in large numbers are now beginning to wake up to what the real drivers are though. The madness has hopefully peaked.

    Mansel Rogerson

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