Finding Carbon Tax Facts

First of all let me clarify that although I am quite critical of the carbon tax, I am going to do my best to give the other side a fair go.  My point and purpose in this blog is to find, analyse and conclude what I can about the facts of the tax, and also to look at the predictions of the parties' and outsiders.  Hopefully, by the end of the blog, we can bring some sort of short, coherent and accurate statement about the Carbon taxes' chances.

Lets begin by looking at exactly what the policy includes.

The ALP has launched a website aimed at explaining and selling the policy. The following about the tax itself is available there, but I have also gathered some data from Crikey's coverage:

• The fixed price is $23 per tonne.
• For every tonne of carbon emitted, a business buys a 'permit' at the fixed price.  To my knowledge this is done annually.
• After the 'fixed price period' there is a limit to the amount of 'permits' the government releases per year, ostensibly capping the emissions.
• Thereby controlling supply, the government allows the market to determine price based on demand.  However, the Government will have a price ceiling ($20 greater than international price) & floor ($15) for the initial 3 years after the 'fixed price' period.

 In addition to and complimenting the Tax-to-ETS policy, there will be an 'Independent body' called the 'Climate Change Authority' established to monitor Australian pollution levels and provide 'independent advice'.

Because the Coalition has done such an outstanding job of opposing the plan since it was announced, or perhaps simply out of genuine concern, the Labor government has released two compensation packages, one for consumers and one for businesses to help cope with the tax.

For consumers:

• Income tax cuts, increasing the Tax-Free threshold to 18.2k per year, and 1 million people will no longer have to lodge tax returns alongside bracket adjustments.  All this means about $300 per year less from people under 80k income.
• Pensioners and retirees will get $338 per year from the government, $110 per child bonus for the family tax benefit.
• Allowance recipients will receive income bonuses based on whether single, single parent and couples.
• The government claims an average annual expense increase of $9.90 per week, and an average annual assistance package of $10.10 per week.

For industry:

• 9.2bn in total compensation.
• This includes a 1.2bn assistance package for clean energy alternative incentives.
• 1.26bn assistance for mining industry emissions cuts.
• 3.2bn in Renewable energy funding.
• 300mn for Steel industry support.

This also includes establishing an 'Energy Security council' which was initially a part of the deal between Rudd and Turnbull to help guarantee Electricity supply to Australians.

The expected revenue from the tax is between 7.7bn and 8.6bn which, interestingly, seems to be less than the compensation given to just industry let alone including households.

The total impact is summed, as Crikey puts it:

• 0.7% CPI rise in 2012-13
• GDP growth reduced by >0.1% pa
• 10% increase in electricity prices in 2012-13.

Now, lets look at some of the critical responses to this package.

Firstly, Tim Wilson notes that the floated price of Carbon permits will likely be strongly related to the EU prices.  This is a particularly interesting point in my view.  It means that our market will be tied strongly to demand in the EU market.

Andrew Bolt is, of course, a particularly cunning and apt critic of the ALP government.  He interviewed a climate scientist on his show.  Watch it on youtube here.  Professor Richard Lindzen argues that emissions reductions from the scheme will be undetectable, and suggests it could be outright revenue raising.  Given that the expenditure seems to outweigh the benefit, that may or may not be true in the short term, but it's a significant point in that if there is no actual impact, then what is this but a popularity tax?  Revive the ALP government, maybe, but help fight climate change, no?

Last week Tony Abbott & Barnaby Joyce held a press conference with a private air transportation service operating in regional Australia.  Tony mostly stuck to his party political line, but at the beginning and end of the presser, the businesses' operator pointed out that he will be affected by the tax, and that he already flies the most emission efficient aircraft he can, and that the only way he can emit less is to fly less.  How can alternate energy incentives benefit this business, if there are not alternate energy aircraft?  For people who use this service, it seems likely that the new cost of buying the absolutely necessary Carbon Permits is bound to go to the consumers of the service in regional Australia.

Editor of Menzies House John Humphries picked through the details as well.  Focusing on the compensation package, he points out Australians can witness effective marginal tax rate rises.  Arguing also through the Australian Libertarian Society that the tax cuts will be rendered irrelevant in about two years.

Tonight Julia Gillard is on QANDA which will be a big challenge in her campaign to sell the details and silence the critics.  I may update again after that to point out some of her arguments when inevitably faced with questions from the critics.

In the mean time, the lines are drawn and the fate of the Carbon Tax is in the balance.  What do you think about the details of the policy, and the critics?


EDITS:

Alright, it's after QANDA and first of all let me note that I was very impressed with Julia's ability to get her message across.  A top performance from a veteran politician.  Lets look at her key points to various question.  You can view the entire video on the QANDA website here.

In response to the suggestion she has no mandate, the prime minister responded that the 2010 election included a proposal for an emissions treading scheme.  She did not talk about or even mention her wildly unpopular 'community consensus' policy, but said that her decision to target a carbon tax was the right one for the country.  She mentioned several times that Kevin Rudd & Malcolm Turnbulls CPRS policy 'ran into a brick wall' and was never going to become law.

She avoided directly answering the accusation that she opposed the Rudd CPRS but said she always supported a price on Carbon.

She countered criticism that the scheme was doing the right thing the wrong way by saying that the Carbon Tax is about creating an incentive to change.  She used the term 'price signals' many many times throughout the night.  Discussing the nature of a business decision made by industries regarding taxed dirty emissions vs subsidised clean ones.

She said that the total reduced emissions by 2020 will be the equivalent of 45 million cars.

She said the compensation packages were about relief for lower and middle income families.  She avoided accusations of socialism, but insisted it was the right decision for the country.

She also said that not one more person will pay a dollar more in tax.

She affirmed a commitment to reduce emissions by 80% by 2050. 

When challenged about the relevance of our actions on the world stage, The Prime Minister noted that the entire world was taking action.  When pressed on China, she cited several policy moves by China to reduce emissions.

With regards to concerns about jobs.  She would not rule out job losses, basically implying that there would be job losses.  She did, however, predict a 500,000 jobs increase in the next two years, also talking about clean energy jobs and tidal power experiments in Western Australia.  Essentially, the message was that there will be work available elsewhere, even if other, already existing jobs may not be available.

She predicted the floated price of the carbon permits would be around $29.  The current price of EU carbon permits is around 13-16 Euro's, about 19 Australian dollars.  Meaning, it seems, that Tim Wilsons aforementioned predictions would actually be very good news for polluting companies.

She discussed a plan to 'tender' the closure of 2,000 Megawatts of dirty coal fired power stations, but stressed at all chances that closure of power stations is a state decision.

Lastly, that I can think of at least, that is worthy of note is that she implied that the time for debate is over.  She implied that Tony Abbott is more inclined to follow Alan Jones than the CSIRO and among other political jabs, said that the policy is about taking action, and the right action for Australia.