Sunday, October 30, 2011

Australia's Carbon Tax: A Sheep in Wolf's Clothing?
Australian Government has produced a CO2-equivalent tax proposal with a difference, it is a short prelude to an emission trading scheme that will allow the increasing rate of emissions to continue, while being a net cost to the Treasury. That cost extends to allowing major emitters to make guaranteed windfall profits from pollution permits. The emission trading scheme suffers numerous problems, but the issues raised show taxes can also be watered down and made ineffectual through concessions. Taxpayers will get no assets from the billions of dollars to be spent buying-off the coal generators or other polluters. The scheme hopes to stimulate private investors to create an additional 12 percent in renewable electricity generation by 2020. A serious emissions reducing alternative would be to create a nationalised electricity sector with 100 percent renewable energy within a decade. We explore the difficulties of implementing meaningful greenhouse gas taxes in Australia.
According to the Australian Government ... the proposed CEP scheme, combined with its Renewable Energy Target, will invest A$20 billion in renewable energy. In addition, the commercially oriented Clean Energy Finance Corporation will be allocated $10 billion to invest in renewable energy and innovative technologies to cut pollution. The Australian Renewable Energy Agency will administer A$3.2 billion. On the surface this appears like recognition of a need for substantial change, and a large investment, but is it really? The outcome of this A$33 billion allocation is expected to be that "the equivalent of 20 per cent of Australia’s electricity will come from renewable sources by 2020". As current renewable electricity production is 8 percent, this means just a 12 percent increase in renewable energy production. The Australian taxpayer will not gain any assets for this outlay because all monies are going to fund private enterprise, commercial interests, and corporations. In addition to this A$33 billion a further A$14 billion appears to be allocated to the worst polluters. The billions to be spent on paying the coal industry to close its most polluting plants will be reinvested by that industry. They will also be able to plead for money and cheap loans under the security fund. So the public sector will be financing and underwriting private profits.
Beyond Zero Emission (2010), a not-for-profit organisation associated with researchers from the University of Melbourne. Their research shows that Australia can achieve 100 percent renewable electricity generation within a decade using technology that is commercially available now. This would totally replace base load power currently sourced from fossil fuels. Wind power and solar thermal with molten salt storage have the capacity to supply 60 percent and 40 percent of Australia’s electricity respectively. They estimate this will require an investment of A$370 billion over ten years, stated to be equivalent to costing A$8 per household per week. They project that the investment will generate a stimulus to the Australian economy that is equivalent to 3 percent of GDP over ten years and create permanent jobs around four times higher than currently exist in the domestic fossil fuel sector (Beyond Zero Emissions, 2010). Converting the 92 percent of Australian electricity not generated from renewable energy is technically feasible with existing technology and could be funded by a real GHG tax. In return for their investment the public could have a nationally owned electricity generating sector with public benefits in perpetuity.
All regulatory and public policy instruments are subject to political negotiation and can be manipulated. Different instruments inherently favour different societal actors and vested interests. Clearly while taxes favour government they can also be watered down, counterproductive and ineffectual. Levels of compensation to polluting industries can exceed acceptable standards of both efficiency and fairness. Substantial concessions in the form of tax exemptions, reductions and rebates to maintain momentum for material growth may appear in design proposals and be justified as being necessary in hard economic times. Highly polluting industries may then be able to gain more concessions than the less polluting ones. Thus GHG taxes can become primarily targeted at securing votes and jobs, and not only fail to correspond to textbook recommendations but also fail to achieve the promised internalization of social and environmental costs.
Australia has invented the 'polluter gets paid' principle to replace the 'polluter pays' principle, and the worse you pollute the more you get rewarded. Less energy-intensive industries will be penalised by having to purchase non-tradable permits at a fixed value, whereas the more energy-intensive industries are bestowed permits for free and allowed to sell them. What Australia exemplifies is how the rich and powerful polluters have been able to take control of the debate on human induced climate change, and manipulate it to their considerable financial advantage, while pretending to be the victims of an environmental hoax. 

by Clive L. Spash and Alex Lo
WU Wirtschaftsuniversitiat Wien, Norwegian University of Life Sciences
Munich Personal Repec Archive MPRA Paper Number 33997; October 3, 2011 
via REPEC Research Papers in Economics

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