Should Australia Price Carbon?Yes I have read the Governments Multi Party Climate Change Committee Carbon Price Mechanism document and gone through and highlighted and reformatted the document so it is easier to read.

Once again as Australians we find ourselves at a turning point in history, do we or do we not Price Carbon? The Political Lines have been drawn and the Australian Labor Party and Greens and Independents, together released the above Linked Document.

The Liberal Party of Australia has clearly signalled its opposition to the Pricing of Carbon. Yet the question each Australian needs to ask and answer at this time is:

“Should Australia Price Carbon?”

Under the proposed scheme there will be a “Transition Period” where Carbon will be Priced and the Supply amount of Carbon Produced in the Economy will not be Limited or “Capped”, the released document from the Government goes on to say as time passes a move will be made to the more commonly known “Emissions Trading Scheme” or ETS. Where the Supply of Carbon will be “Restricted” or “Capped” and then “Market Forces” will determine the Price of Carbon.

GOALS OF PRICING CARBONBefore looking into the two different approaches of Pricing Carbon, first we must look at the reason or motivation behind the proposal and the Goals that are trying to be achieved by them.

Reduction in Carbon Emissions from Companies and Main polluters Minimise the effects of Carbon Footprint of the Nation Encourage Cleaner Energy Production from Energy Suppliers Reduce the Per Capita CO2 Emissions Assign a Monetary Value to CO2 Emissions

While this list is not exhaustive, it does outline the main goals that are trying to be achieved by introducing a Price on Carbon, it is worthy to take note of what the goals are as if we are to Price Carbon, and in the future we are not achieving these goals, should we not abandon the system?

Are these Goals measurable?

Yes. Some of these goals are easily measured and can be used as markers as to whether the goals of a Carbon Price Tax are being achieved. If a Price on Carbon is introduced, this list should be regularly evaluated and amended to reflect the goals trying to be achieved.

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Carbon Price TaxThe “Paper” from the Government states that at first Supply of Carbon Emissions will not be capped and a “Price Mechanism” will be used to assign a Price to Carbon and so the Companies will be taxed using this Price.

Who will set the Price Carbon? In these early stages who is going to set the Price of Carbon? The Government? An Independent Body? Self Valuation by Companies? When can the Price be changed? There are still many questions as to How the Price should be calculated and who should set this price.

Will the Carbon Price Tax achieve the Goals its sets out to do? With a new Tax or Price added to Production for many companies, will they absorb the costs and seek Cleaner Energy Production methods or will they absorb the costs and pass them onto Consumers?

Cleaner Energy. If in two or three years time, with the addition of a Carbon Price Tax, we see that Companies are not investing and looking into more Cleaner Energy Efficient methods of Production can we not agree that the Carbon Price Tax is not working and that it needs to be abandoned or changed.

Proceeds from Tax. It has been stated that Families and Business will be Subsidised or Compensated from the proceeds from the tax, how will this work? What are the set limits that allow you to be compensated, will it be in Cash or in Tax Benefits, or Reduced Power Bills. How much money will be used to Encourage Cleaner Energy Production Methods in Companies and the Main polluters?

Enforcement of Tax. With the new Carbon Price Tax, how easily can it be enforced. Will the Australian Tax Office enforce the new Tax? Or will a new Government Body dealing in CO2 Emissions and Carbon Pricing be created. Will money need to be set aside from the budget to deal with the increase in work from either Government Bodies or a new Independent board.

International Markets. In this early stage if there is only a Carbon Price Tax, this will increase the cost to Multi National Companies and may see them leave this country. Also unlike the ETS, if a company is moving towards are more energy efficient and cleaner ways of production, they are unable to “Transfer” or “Sell” the reduction in “Emissions” to other companies that are willing to “Buy” the Emissions as their company Produces too much CO2

Increase in Costs of Goods and Services. If a Carbon Price Tax is to be introduced, then the Factors of production are costing more, these costs, will then be passed on down the Supply Chain of goods and Services and in the end Customers will bear the cost increases. Sure there is going to be some “Subsidies” or Compensation from the government, but will it cover the general increases that will be seen across the board in Goods and Services in the Economy.

In General I see many problems with a “Carbon Price Tax” and believe that there are too many variables that have not been explained or factored for when this System is put in place in the future.

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Emissions Trading SchemeThe Alternative method and what the “Paper” says is the System that the government is heading towards is the Emissions Trading Scheme or ETS. With the ETS, the amount of CO2 Produced by the Australian Economy will be set at a Fixed Amount, then Companies who produce more CO2 can “Purchase” Emissions from Companies that have lower CO2 Emissions.

Who will set the Price Carbon? With the ETS, the Price will be set by the “Free Market” when Companies “Trade” CO2 Emissions amongst each other. However who will allocate to the companies their “Capped” amount of CO2 Emissions? How do you define a Company that has reduced their CO2 Footprint and therefore are able to “Trade” the saved CO2 Emissions on the “Free Market”?

Will the Carbon Price Tax achieve the Goals its sets out to do? With Companies having to “Purchase” extra Emissions “Certificates” or “Credits”, will this see Companies move to Cleaner methods of Production? Will it result in an “Aggregate” drop in CO2 Production for the Nation as a whole? What about Per Capita CO2 Production.

Cleaner Energy. As the “cost” of “Buying” extra “Credits” from the ETS may be too high, will companies begin to Research and Invest in more Cleaner forms of production, will there be any extra Benefits to Companies in forms of Tax Breaks ? What if companies fail to adopt newer cleaner forms of production and just “Buy” the “Credits” on the “Free Market” and then pass the cost on to the consumer?

Proceeds from ETS. How does the Government raise money from the “Trade “ of ETS “Credits”. Do they receive a Commission for each trade? Or can they “Sell” extra credits out onto the “Market”? Will the money raised be used to encourage cleaner forms of Energy production? How long will the Government “Subsidise” or “Compensate” families and small business?

Enforcement of ETS. Will the Australian Stock Exchange (ASX) be in charge of the “Trade” in Emissions “Credits” or “Certificates”? Will it be an Independent Body? Who will enforce companies are still producing the CO2 amounts that their “Credits” or “Certificates” allow? If in years time we notice Companies are misusing the system and the Goals are not being achieved, can we change the system, or leave it all together?

International Markets. When and How will Australian ETS “Credits” or “Certificates” be allowed to be exchanged on the World Market? How will Australian Valuation of the Price of ETS change according to how other Nations have set the Price? Will Australian Companies be “Short Changed” from other Nations setting their Price too Low? What Body will over see the World Exchange of ETS “Credits” or “Certificates” the International Monetary Fund (IMF)?

Increase in Costs of Goods and Services. As companies may still need to “Purchase” extra “Credits” for their CO2 emissions the questions still remains as to whether they pass that cost on to their Goods and Services. However with an ETS, this will see a more spread out allocation of costs going more towards the companies that have higher CO2 Emission than those companies that have less

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While an ETS may be a better way of allocation the Cost of CO2 Emissions to those that produce CO2 Emissions

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