User:Unswcarbontax42012

Background

Nowadays, the problems of climate changing and global warming become more and more serious, numbers of countries have implemented carbon taxes or energy taxes that are related to carbon dioxide emission in order to reduce emissions of carbon dioxide and thereby reduce the speed of global warming. In Europe, numbers countries, Norway, Germany, Sweden, Italy, Switzerland, and the UK have imposed energy taxes based on carbon content. More surprisingly, in the most powerful manufacturers’ country, China Daily (2010) stated that the Chinese government has proposed to introduce a carbon tax from 2012 or 2013. According to Australian government (2011), Australia is one of the top carbon dioxide emission countries which produce 500million tones of carbon pollution each year. A carbon tax is also called as a price instrument, since it sets a price for carbon dioxide emissions. In economic aspect, the carbon dioxide pollution is considered as negative externality, a negative effect on a party not directly involved in a transaction, which results in a market failure. A tax on a negative externality is called a Pigovian tax which should be equal to marginal damage costs. Australian carbon tax is a tax on energy sources which charging based on the amount of emission level. It can be implemented by taxing the burning of fossil fuels. The carbon tax involved in producing a product would start to be factored into its final price. Moreover, Australia government plans to use the tax income to investing clean energy. In the future, the carbon tax will simulate the pollution-intensive companies to use other clean production processes in order to reduce their emission and lower their costs.

Impact on mining

While the Australian Government sees great benefit from the carbon tax, in the mining community, a very different view exists. Unsustainable increases in operating costs could lead to the closure of many mines and thus mass job losses, while businesses which rely on the mining of resources such as airlines could be forced to use cheaper alternatives, thus reducing the required output from these mines. The introduction of the tax would ‘hinder Australian mining’s ability to operate in the world market’ (Mineral council of Australia 2011). It is estimated that by 2020 the Australian mining industry will have paid between 18 - 25 billion dollars in tax, meaning that Australia’s industry will be at a disadvantage in the world market. This common concern amongst the Australian mining industry is highlighted by the fact that in Europe 73% of all mining exporters are subsidised by the government while only 16% would be in Australia under the carbon tax. The mining industry in Australia already has to compete with mining industries overseas, namely Indonesia, Columbia and China. These countries have significantly cheaper operating costs than Australia ($34 to lift one tone of coal opposed to $42 in Australia), mainly due to the substandard working conditions that exist in these countries.

The Australian Coal Association’s chairman, John Pegler, believes that 17% of all black coal mines in Australia will close putting ‘at risk more than 21000 jobs in the next ten years’ as a consequence of the carbon tax. The ‘economic deadweight cost’ (Marius Kloppers, BHP Billiton’s CEO 2011) will be too large for the smaller mining companies to absorb, forcing the closure of these mines. This ultimately could mean that a monopoly will begin to exist within the mining industry, with larger companies such as BHP Billiton and Rio Tinto becoming the only mining operators in Australia.

Political impact

The carbon tax has received heavy criticism from opposing parties. One of the major criticisms of the proposed plan is that it will increase inflation. Treasury modelling suggests that household cost will increase by an average of $9.90 per week as a result of the tax. This is because polluters are expected to pass on the cost to consumers. The demand for services such as electricity is said to be relatively inelastic. This means that there aren’t any good substitutes for this service which in turn allows firms to increases prices freely. Therefore, the tax could essentially become politically unsustainable. Since the tax is linked to the production of goods and services such as electricity, which the consumer cannot live without, there will be constant political pressure on the government to remove the tax.

The labour government is convinced that the carbon tax will work successfully in achieving its aims of lowering greenhouse gases and promoting green energy. The government believes in the concept of climate change, which was a contributing factor towards their decision of developing of this policy. Australian’s are the highest per capita polluters in the developed world, so it does make sense that Australia should join the ranks of other countries such as France and Denmark in introducing a carbon tax. However, the question remains as to weather such a tax will reduce pollution. There are no guarantees that emissions will decline if consumption of the goods and services that produce carbon emissions remains unresponsive to price increases.

The liberal government knows that climate change has not been proven, and that studies are still sketchy. Therefore, their approach has been to adopt the stance of not believing in climate change and going against the carbon tax policy. This could be a clever tactic if the policy is proven to be ineffective after its implementation. The carbon tax has without a doubt been a huge talking point within Australia and its potential success is crucial to the survival of the labor government.