Greenhouse - Carbon Tax and Emissions Trading

The climate change issue has finally hit the mainstream consciousness. It is going to be a massive task to reduce emissions by what scientists say is necessary (50 - 60%) by 2050 just to stabilise CO2, which will anyway apparently still mean average temperature increases of up to 3 degrees by 2100.

This Carbon Tax and Emissions Trading Discussion Paper is not meant to be comprehensive, or to determine a final Democrats position. From my portfolio perspective covering tax and economic policy, this paper is meant to assist at a fairly fundamental economic policy level, not covering the environmental aspects, to help us engage in the debate and to make a contribution to a wider public understanding of the issues.

The Democrats do not have a preferred design or formula for an Australian carbon tax, and/or emissions trading, although they have been actively engaged in highlighting matters of climate change and environmental threat for two decades - long before the federal Howard Coalition Government finally woke up to the climate change crisis. I should note that not everyone in that Government has been asleep - it must be said that the Australian Greenhouse Office's preparation of emissions trading protocols were unceremoniously shelved as a result of pressure by hardliners.

It was the Democrats who initiated the groundbreaking November 2000 Report of the Senate Environment, Communications, Information Technology and the Arts References Committee 'The Heat Is On: Australia's Greenhouse Future'. Although six years old, this Report is still very relevant and has a whole chapter on emissions trading, including a Democrat Senator's recommendations on a carbon tax and joint ALP/Democrats recommendationss on emissions trading.

Climate change can not be viewed from just an economic or tax policy perspective, but neither can it be viewed from a purely environmerntal perspective. However, there is a real need for urgency. Scientific satements outlining a serious present problem, and predictions of a looming environmental crisis, do mean economic and tax levers must be brought into play to change human behaviour.

I have not tried to cover all the greenhouse gas policies that can be introduced. Carbon taxes and emissions trading are two of a suite of many and varied policies that together can mitigate greenhouse gas emissions substantially.

While it would have been useful to initiate a discussion in the paper on what $/tonne CO2 should apply in a carbon tax in Australia, we are not at that stage of determination. Much more detailed work needs to be done on the cost of abatement and of low emissions power generation. There is the question too, of whether a carbon tax should initially be confined to key targets, such as electricity generation, where among the biggest increase in emissions (43% since 1999) has taken place.

The United Kingdom already applies a small carbon tax to big business which is rebateable if the money is spent on abatement and energy efficiency. This delivers on reductions in emissions with no real cost to business because the payback period is very short with the savings that come with energy efficiency. This sort of approach, while relatively easy, has a low effect overall. Its great virtue is raising consciousness and getting the broader community engaged with bigger solutions.

Read the full Carbon Tax and Emissions Trading Discussion Paper here

I would also point interested readers to some of the material available on the Democrats website such as these items:

From the Democrats 'Global Climate Policy' (Official Democrat Policy, balloted 1 July 2001):
18. The use of taxes, levies and 'polluter-pays' instruments designed to reduce and limit greenhouse gas emissions, as well as encourage business innovation in environmental efficiency

From the Democrats 'Election 2004 Greenhouse and Energy Issue Sheet':
8. A carbon levy, and an emissions trading marketplace framework;

From the 'Climate Change Campaign - Action Agenda' on the Democrats website:
6. Introduce a carbon levy, and an emissions trading marketplace framework;

From the Democrats 'Energy Policy' (Official Democrat Policy, balloted 1 July 2001)
5. The judicious, creative and fair use of taxes, levies, and other fiscal instruments to reduce consumption and encourage the transition to a sustainable energy economy;

6. The use of revenue from energy taxes and the like to reduce or abolish regressive taxes and subsidise renewable energy research and development;