May 2011

Unpacking the carbon tax

Prime Minister Julia Gillard announced in February that her government would implement a carbon tax sometime between now and July 2012. Since the announcement there has been a frenzy of debate in the public arena. We have heard the arguments for and against the tax, but do we actually know anything about it? Frances Egan explains how the proposed tax might work and what it will mean for average Australians.

BY Frances Egan

The science of climate change overwhelmingly shows that human-caused emissions of carbon dioxide and other greenhouse gases have had a warming effect on our planet. This global warming has led to climate change. Changes in climate have damaged many eco-systems and are responsible for an increase in the severity of natural disasters, which claim many human lives.

Acknowledging the responsibility of humanity to address this problem, nations all over the world have committed to reducing their carbon dioxide and greenhouse emissions.

So it is clear that Australia, like all other nations, needs to reduce its emissions, and it has made legally-binding commitments to do so. But you may be wondering why it has to be done through a tax mechanism. Unfortunately the industries that have historically contributed most to our prosperity are also those that produce the most greenhouse gas emissions.

A tax on carbon dioxide emissions gives our economy a means by which to slowly transition from being one that relies on emissions-intensive activities to one that is sustainable. Rather than seeing a healthy economy and a healthy environment as being mutually exclusive, a carbon tax balances the needs of both.

Many details of the tax are yet to be announced, as it is still in the planning process. The basics, however, are clear. The government will create a tax that places a set price per tonne on carbon dioxide emissions. Those industries liable will need to pay the government this set price for every tonne they emit.

Forcing industries to pay for their pollution will provide an incentive for them to increase efficiency, reduce reliance on emissions-intensive activities, and transition to energy created from renewable sources.

The revenue generated by putting a price on pollution will be used by the government to fund renewable energy projects.

Money will also be directed towards rebates for everyday consumers and small business owners who will inevitably take-up some of the costs passed on by big business.

Creating a carbon tax and establishing a market-based “cap and trade” system are two different strategies used by governments to lower emissions. A tax fixes a price on emissions but does not restrict the number of emissions created, while a cap and trade system sets a cap on how many emissions can be produced but lets the market trade to determine the price of those emissions.

Both are valid ways of reducing emissions, and both will be implemented in Australia in the next decade. The proposed carbon tax will operate for three to five years, allowing industries to adjust to paying for their pollution, before a more complex cap and trade emissions trading scheme replaces it.

It may sound complicated, but the bigger picture is that Australian industries will finally be paying a financial price for their pollution.

For those who have already experienced the physical price of pollution and climate change – through droughts, storms and floods – this is a welcome step.

One of the big arguments that has been made against a carbon tax is that it will raise living costs for everyday Australians, who may already be doing it tough.

This is true, living costs will inevitably rise as industries pass some of their costs on to consumers.

Given the fear surrounding these rising costs, many are wondering “why should I support this tax?”

We need not look beyond our daily lives for the answer. It is the same reason we work long hours or put our hard-earned cash into the mortgage or school fees – for the good of our loved ones.

We carry out selfless acts each day in order to secure a happy future for those we care about most. By reducing our carbon emissions, we are not only working towards a better future for our children, but for people all over the world.

Rather than seeing a carbon tax as an added burden to daily life, we must approach it in the same way as we approach a charity collection or a spontaneous donation – with a giving spirit.

A financial sacrifice from us now amounts to an extraordinary gift for future generations. If there is a change to be made to our weekly budgets, then what better reason to make it?

This article, written by Frances Egan, was first published by the Social Justice Committee of the Conference of Leaders of Religious Institutes in NSW, otherwise known as CLRI (NSW).

The Good Oil

‘The Good Oil’, the free, monthly e-journal of the Good Samaritan Sisters, publishes news, feature and opinion articles and reflective content which aims to nourish the spirit, stimulate thinking and encourage reflection and dialogue about contemporary issues from a Good Samaritan perspective.

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