A carbon tax and trading scheme has been discussed, quashed and rehashed over several years and has been highly politicised. Rather than us seeing the positive impact that such policies could achieve, we’ve only been privy to miserable inaction, endless and ineffective negotiations and deep inconsistencies in how we approach climate change policy as a nation.
Carbon trading and tax schemes have been on the table since the late 1990s, and while they’re not new, each policy plan has had a different incarnation as our politicians battled it out without any real solution. In 2006 John Howard first announced an investigation into an economy-wide emission. Since then we’ve had at least a dozen other proposals, and even a law in Gillard’s Clean Energy Future package, none of which have stuck. By placing a cost on emissions, the underlying purpose of carbon tax is to encourage industry to reduce their emissions, thereby slowing global climate warming.
Rules and Sticks
The approach to reducing emissions through trading, tax or incentives is two fold but is based on establishing a market based approach to reducing emissions.
The government will allocate or sell permits that specify specific emission quantities for polluters. These polluters are limited to the figures specified in their permit, and must buy permits from others if the want to increase their emissions. This is referred to as a “cap and trade” model.
Put simply, this is a tax put on pollution emitting energy sources, where companies are charged a $ value per tonne of emissions they produce, with this fee acting as a stick rather than carrot in inducing reductions.
Delivering in Context
There are several criticisms of the cap and trade and tax approaches meaning that any policy would require support mechanisms around it. These could include:
Payment increases for pensioners and other people receiving payments from the government in light of the potential of increased energy costs being passed onto consumers from businesses and energy providers.
Support and plans for industries that are emissions-intensive to ensure their successful transitions.
Establishment of an independent authority to manage the cap and tax policies.
The short lived Clean Energy Act of 2011 successfully illustrated that a “carbon tax” system can work. By the second year after implementation, green house gas emissions had been reduced by 1.4% - the largest recorded decrease in the previous decade.
New approaches to the model have also included a recommended carbon dividend plan to go hand in hand with the tax and bridge the divide between the left and the right on climate policy. Carbon emissions would be taxed at $50 per ton, with the proceeds returned to ordinary Australians as carbon dividends. This approach has already seen success in British Columbia, Canada.
While there remain challenges in implementing any form of carbon trading or tax scheme in Australia due to its fraught and politicised history, Bill Shorten has recently said, climate change is no longer an emergency, but a disaster, and he’s not wrong. Our existence as humans on this planet in a sustainable way needs to come first before the financial demands of industry, and a carbon tax would be a impactful part of any holistic climate policy.
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