May 23, 2012 - 8:00am
An abridged version of this opinion piece was originally published in The Daily Telegraph on 23 May 2012.
By John Connor, CEO, The Climate Institute
As we watched our boys stumble and strive at the footy one Saturday, a Dad said to me of the ‘carbon tax’ - “I don’t mind paying a bit so long as I know why we are paying it and what we get.”
One of the ironies in this debate is that families like his are likely to be better off with household payments, which started to be made by the Government yesterday. That is lost in the political ugliness surrounding the debate.
You could field a whole football competition, not just a team, with the ironies, absurdities and lies in this carbon debate that has so divided Australians.
The first of these is that it is actually not a tax. From July 1 some Australian businesses, after two decades of warning, will need to buy permits for their pollution of greenhouse gases, including carbon dioxide.
Paying for this pollution does two things. It gives business greater incentive to invest in cleaner technologies or face growing competition from cleaner alternatives. The payments for those pollution permits also provide a pool of revenue for Governments.
After three years, available permits will steadily decline, reducing pollution impacts by at least 12 million tonnes per year. The ‘carbon tax’ is also a carbon tap.
It is true that there will be cost increases for goods and services that cause particularly high levels of pollution, like electricity from coal fired power stations. How much these costs will flow through is the big question.
Some political and business voices claim it will cost entire cities and industries.
The Climate Institute teamed up with Choice and the Australian Council of Social Service (ACOSS) and commissioned CSIRO and AECOM to have an independent look. They projected an inflation increase of about 0.6 per cent. Key parts of their work have been backed up by state independent pricing regulators.
The research compared this with other inflation events and found that the GST had a more than four times bigger impact. Past mining booms, oil price shocks and interest rate changes had greater impacts. The impacts of Cyclones Yasi and Larry had similar or even greater impacts.
The latter impacts are important as to why we are pursuing carbon reforms. Recent bushfires, floods and cyclones have provided a window into the human and economic costs predicted to grow in a world without action on climate change. Extreme weather events are estimated to have 20 times the impact on food prices by 2050.
We can try to minimize these impacts if we do our bit and work with others around the world in a ‘can do spirit’ with a keen eye for economic opportunities.
Another big lie in the debate is that Australia is acting alone. In fact, countries like China and South Korea are not only pouring massive public investments into clean energy, but also starting emissions trading schemes. Old hands in this arena – like the UK which has had carbon trading for more than a decade, are putting in a price floor. Their price next year will be similar to Australia’s, steadily rising to the future securing private and public investments in clean technology and clean energy.
Those countries are acting with an eye for opportunities in the reality of a carbon-constrained future, just as global businesses like GE, Unilever and KPMG have done. This is why it is important that Australia, with our high carbon economy, gets on with it.
What is lost in this debate, and in the Government’s recently started advertising campaign, is that the revenue from the ‘carbon tax’ is being put to work. It is supporting households and business, funding land-care, environmental protection and energy efficiency. It is also backing the $10 billion Clean Energy Finance Corporation which, along with other policies like the renewable energy target, can help unlock Australia’s natural competitive advantages in solar and other renewable energies as well as help redesign and rebuild our wasteful energy systems.
Our research with Choice and ACOSS showed that there are simple steps that Australians can take to save hundreds of dollars each year, such as modifying water and energy use, or insulating their homes. Practical advice should accompany the household assistance, to help Australians manage energy bills that are rising for reasons other than the new laws and will continue to rise, even if they are repealed.
All the bruises, abuse and absurdities suffered over the last few years have just been the training run before the starting whistle – a whistle that blew yesterday with the flow of the first household payments.
As our children stumble and strive into the future they should know these reforms came from clear warnings from our best scientists and they are driving investments in support, pollution reduction and low carbon economic opportunities.
The Choice and ACOSS work can be found at www.yourcarbonprice.com.au
John Connor is CEO of The Climate Institute. Whilst qualified as a lawyer, John has spent over twenty years working in a variety of policy and advocacy roles with organisations including World Vision, Make Poverty History, the Australian Conservation Foundation and the NSW Nature Conservation Council. Since joining The Climate Institute in 2007 John has been a leading analyst and commentator on the rollercoaster that has been Australia’s domestic and international carbon policy and overseen the Institute’s additional focus on institutional investors and climate risk. John has also worked on numerous government and business advisory panels.