THOUGHTS ON THE CARBON TAX PACKAGE –

The-EYE-BALL-Opinion-Header-2
Title:
THOUGHTS ON THE CARBON TAX PACKAGE
The data presented below came from the comments section of Blog titled – “Labor sets new record in Unpopularity – worst result since World War II”  posted on a Blog Site called – “JoNova”.The comments are brilliant and this is a shared experience – please read and enjoy and link back to the real post linked above to add comments if you wish.

THOUGHTS ON THE CARBON TAX PACKAGE – comments posted by Peter Lang #47 …

1. The package is based on a double breach of faith, first Gillard’s pre-election promise that “no government I lead will introduce a C tax”, then the promise of a Citizen’s Assembly to build a consensus before taking action. What trust can we have that the admittedly laudable aims of this package will be respected?

2. On the subject of trust, with this governments record of botched programs (price watch, pink batts, BER, health reform, green cars, mining tax, livestock export ban) is it reasonable to trust them with one of the biggest reforms in Australian history? Nor will trust be restored by the government spending $12 million of our money on advertising to sell their package.

3. There can be no doubt that this package is primarily a political response to a political problem. To stay in power, Gillard had to promise the Greens these “reforms”. We must then ask, can a package born of such dubious circumstances be good for Australia?

4. Notwithstanding the circumstances of conception, this package is seriously flawed on many fronts. First and foremost, it must be remembered that our standard of living, along with that of most developed countries, is utterly dependent on the cheap energy available from fossil fuels over the past century. There is currently no cheap replacement. Measures to reduce C emissions – such as wind, solar, nuclear, biomass or CCS – are very expensive. Even shifting from coal to gas requires a price of $60 a tonne or more to be economic. Large emission reductions mean substantially increased cost of living and decreased business competitiveness.

5. Australia is blessed with vast mineral resources, and there is no doubt much of our recent wealth comes from this industry. A carbon tax fundamentally changes the economics of mining and disadvantages Australia vis a vis our competitors, none of whom (e.g., Canada, Russia, Brazil, South Africa) envisage a C tax. Thus industry will gradually move to these countries, taking their jobs, profits and emissions with them, but without any reduction in global emissions.

6. The tendency to move mineral industries overseas will be exacerbated by sovereign risk. Unfortunately, this government has created serious doubts among international investors because existing investments are being devalued, first by the Super Profits mining tax and now by a C price and loss of diesel rebate. All these measures increase their costs of production relative to competitors.

7. The global economy is dangerously fragile, with the Eurozone in danger of falling apart, several European countries in credit crisis, the US drowning in debt and the shift of economic power to developing countries placing huge stresses on global finance. While this global crisis continues, it seems like madness to deliberately introduce a major shock to the Australian economy.

8. The C package pretends the costs are very low. But if this is true, there is no inducement for change. It may be that compensation payments keep the costs low initially for consumers and exposed business. But these costs, and thus inducements, rise with time. Consequently, this becomes a tax by stealth; sneak it in with low impact, then let it rise until enough time has passed that the political cost doesn’t have to be taken.

9. The package was meant to be revenue neutral, but after its release on C Sunday we find that compensation and costs are even greater than the revenue from the tax. Thus the budget will be impacted, by a not-insignificant $4 billion. The government dances around this, but the fact remains that $4 billion spent on the C tax package is $4 billion less available for schools, hospitals and so forth.

10. This is a fundamental change to the Australian economy and tax system, possibly more fundamental than the GST. Yet as noted earlier, it was not put to the electors at the last election, it has been rushed through a political process to appease fringe political interests (Greens and Independents), and once introduced will be impossible to wind back. More important, it is doubtful that it will be effective in its the objective, making a major reduction in C emissions.

11. In fact, according to the Governments own modelling, the scheme will not be very effective. Even to obtain the modest 5% reductions by 2020, we will have to buy permits internationally for 94 of the 152 million tons C reduction required.
12. The Treasury modelling anticipates a global C trading system will be in place by 2016. Given recent events (failure of Copenhagen and Cancun, Canada and US dumping ETS legislation, China and India refusing to introduce any C trading) this is a heroic assumption.

13. Even if an international C market became reality by 2016, it beggars belief that there will be an excess of “emissions reductions” to be sold. Like Australia, most countries suffer from increasing population and consumption and will have great difficulty meeting their own reduction targets let alone having any spare permits to sell.
14. Even if we stretch our credulity to allow for permits being available, is it a good idea to spend billions on buying permits? Is sending this money overseas a good idea? What is the effect on our balance of payments? What is the effect on exchange rates? Interest rates?

15. The proposed C price and its reach into the economy is more than any other country, e.g., the NZ C price is half ours, the current EU price is much lower (about $16 per tonne), and the EU has given so many free permits and exempted so many industries that it raises only $1 per citizen.

16. The package is clearly an exercise in wealth redistribution. The well-off pay through lack of compensation and adjusted tax tables while the less well-off are overcompensated. But, wealth redistribution is not a stated objective of the package, i.e., the package is fundamentally dishonest.

17. It is also dishonest when Gillard and Swan claim that the tax free threshold triples, because they neglects to mention the phase out of the Low Income Tax Offset (LITO). Taking LITO into account, the effective tax-free threshold only increases from $16,000 to $18,200, a very modest change.

18. The Government claims it is introducing a market-based mechanism because this is the least cost way of reducing emissions. In fact, this is a claim that has never been properly tested, is questionable because of the potential for rent-seeking and rorting, and is contradicted by the inventor of emissions trading systems who claims an ETS is not suitable for international C trading. It must be kept in mind that C emissions make for a very strange market. C emissions themselves are invisible, difficult to measure, and there is no buyer. What is to be traded are “emission-reductions”, which are illusory commitments relative to some imaginary baseline, a bonanza for shonky governments, traders and bankers.

19. If the Govt. truly believes in a market-based mechanism, why not scrap the 200 disparate programs already on the books? Why not wind back the market distorting RECs and mandatory renewable targets? Why invest $10 billion in selected renewable schemes?

20. Wind, solar and geothermal have been slated to receive $10 billion, yet other proven methods of reducing C emissions, e.g., biomass and CCS, receive no help from this package. This is either the government trying to pick winners or Gillard bowing to the preconceived notions of the Greens.

21. In any case, the $10 billion scheme, intended to finance the Clean Energy Finance Corporation, is a loser. The Corporation will essentially be a government bank, the lender of last resort for dodgy renewable projects that even with the existing subsidies would be seen as non-viable by normal commercial lenders.

22. If the Government was serious about C reduction, it must allow nuclear in the mix.

23. The Prime Ministers constant repetition of “C pollution” insults our intelligence because it is a transparent attempt to subliminally demonize carbon. In reality, C and CO2 are essential to life on earth.

24. Also insulting is the constant drone of “the 500 big polluters”. This demonizes big business in an attempt to shift responsibility from where it truly resides. In fact, the polluters are we, the consumers. Businesses, large or small, merely respond to our demand for goods and services.

25. As proposed the scheme is very inefficient. Over 3 years, about $24 billion will be raised with most being churned back to industry and consumers as compensation. When money is raised and spent by government, it is generally recognised that there is a 30% overhead. In other words, billions will be spent on administration. It is reasonable to ask, would such vast sums better be spent on hospitals, aged-care, roads, etc?

26. As a corollary, the big winners are the public servants and financial industry needed to regulate and administer this scheme. Do we really want a large expansion of govt. bureaucracy and the big end of town for such modest benefit?

27. As has often been pointed out, even if the 5% reduction is achieved, it will have no effect on global climate. The only justification for a small emitter like Australia to do this is to be a good global citizen. This is fair enough, but it is not a justification for leading the rest of the world, especially a world that is now back-pedalling fast. This is even more true when to do so would threaten Australia’s big competitive advantage.

28. The proposal is to introduce a C tax for 3 years, then replace it with an ETS. This is utterly wasteful. If an ETS is the right response, then we should plan to go directly there. Surely, the emissions reductions in the first three years due to a rapid-response C tax will be insignificant.

29. Business is already terribly encumbered by government regulation. It doesn’t need more from C taxes and an ETS.

30. The package has been conceived in haste, primarily by a political committee responding to the pressures of maintaining minority government as noted previously. As surely as the sun sets each day, there will be massive unintended consequences. A major reform such as this needs ultra-careful consideration and ample opportunity for review.

31. In conclusion, I fully support reducing C emissions. But let us do it at least cost and without the smoke and mirrors of this package. At this stage, we need more research into, first, the least cost method of reducing emissions, and second, reducing the cost of alternative technologies. Let us make these investments in research, while moving in concert with the rest of the world to develop the necessary consensus and regulatory frameworks. Let us not saddle the country for decades with a ill-conceived, poorly designed, expensive and probably ineffective package.

________________________________________

The EYE-BALL Opinion …

Advertisements
  1. Agripina Langholz
    January 30, 2012 at 2:07 pm

    Thanks for posting this info. I just want to let you know that I just check out your site and I find it very interesting and informative. I can’t wait to read lots of your posts. . . .

  2. Peter Lang
    September 29, 2012 at 1:09 pm

    Dear Author, thank you very much for re-posting this comment from Jo Nova’s web site. However, you have attributed the comment to the wrong author, the wrong ‘Peter Lang’. The link you provided to ‘Peter Lang’ is to a Swiss Publishing company called ‘Peter Lang’. However, the comment you re-posted was posted by me, a frequent commenter on energy, climate, policy and carbon tax issues in Australia. You can see many of my posts linked here: http://bravenewclimate.com/renewable-limits/

  3. Peter Lang
    September 29, 2012 at 1:14 pm

    Oh, by the way, I found your site by searching for articles written by ‘Peter Lang’ on this excellent web site: “The Carbon Capture Report” http://www.carboncapturereport.org/ (run by University of Illinois)

  4. October 2, 2012 at 9:24 am

    Sorry for the error – is was some time ago. If you can send be the correct link I will fix the error.

    Regards … EYE-BALL.

  5. October 2, 2012 at 10:13 am

    Thank you for responding. I don’t have a web site of my own, so I cannot give you a link. I’d suggest simply removing the hyperlink from ‘Peter Lang’ in the heading at the top of the blue box area:

    “THOUGHTS ON THE CARBON TAX PACKAGE – comments posted by Peter Lang #47 …”

  1. No trackbacks yet.
Comments are closed.
%d bloggers like this: