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CO2 Emissions Taxing
electricitylikesme
Registered User regular
Registered User regular
So a crazy thing happened all of a sudden in Australia.
Our prime minister announced that starting 2012, we would have a CO2 emissions tax - inclusively covering stationary energy and transportation and industry, but excluding agriculture.
The initial intent is a fixed carbon price. Origin Energy - a major regional supplier who don't own any coal-fired power stations - is on the record as saying they believe a price of $25 per tonne of CO2 would be the minimum needed to accomplish anything, and all debate is centering on that number.
This works out at a surcharge of 4 cents per kWh (AUD$0.04) of electricity, and 6c per liter of petrol (AUD$0.06).
Judging by my electricity bill's distribution this would result in a price rise of about 20%, varying depending on the specific layout of ones usage (less if you hammer your service in peak hour and nowhere else).
Currently in Australia, you can specify you want your electricity equivalently generated by renewable sources through the GreenPower scheme. Depending on the level of co-generation you want (i.e. % of renewable power) the tarriff on conventional rates for this can be 3.3 cents / kWh for 50% to 6.6 cents / kWh for 100%.
This scheme is a pretty bold move in my opinion, and a good one if the price is high enough. The price increases will not be unbearable, and it's likely that a developed version will aggressively compensate low socioeconomic groups for increased prices.
The critical factor is the $25 charge, and the effect on electricity prices. Our grid can probably quite safely accommodate 30-50% renewable electricity with no major changes or new technology (baseload solar - which is completely practical, but plant construction is not well developed). A tax at that rate hits the correct note IMO - power companies are suitably incentivized to invest in more renewable energy, or to find ways to reduce the CO2 output of their coal-fired stations, or build gas-fired stations (which are more efficient, arguably).
I thought it might be worthwhile to throw opinions on this scheme out to D&D: what do you think of it? What do you think the effects will be? Is it likely to promote further action internationally, since we love an example country to point to of something working out.
Our prime minister announced that starting 2012, we would have a CO2 emissions tax - inclusively covering stationary energy and transportation and industry, but excluding agriculture.
Crikey.com.au wrote:
- a carbon pricing scheme to start on July 1, 2012, based on an emissions trading scheme with a fixed price (as yet undecided) for permits;
- an initial fixed carbon permit price for 3-5 years — possibly out to 2017;
- fixed price period to be followed by a transition to a flexible price-based scheme with a price linked to international markets and a 2020 carbon reduction target;
- the length of initial period to be established in coming months;
- scheme “hard-wired” to move to a flexible price system but with a review of transition to cap-and-trade a year out from commencement, with the possibility the transition may be delayed depending on the outcome of the review;
- agriculture omitted from the scheme; it will cover the stationary energy sector, transport sector, the industrial processes sector, fugitive emissions (other than from decommissioned coal mines) and emissions from non-legacy waste. Climate Change Minister Greg Combet noted that a phased approach may be adopted in relation to different sectors;
- compensation yet to be determined but “the overall package should take appropriate account of impacts on the competitiveness of all Australian industries, and the principle of energy security recognised that the introduction of the carbon price should be accompanied by measures that are necessary for maintaining energy security.”
The initial intent is a fixed carbon price. Origin Energy - a major regional supplier who don't own any coal-fired power stations - is on the record as saying they believe a price of $25 per tonne of CO2 would be the minimum needed to accomplish anything, and all debate is centering on that number.
This works out at a surcharge of 4 cents per kWh (AUD$0.04) of electricity, and 6c per liter of petrol (AUD$0.06).
Judging by my electricity bill's distribution this would result in a price rise of about 20%, varying depending on the specific layout of ones usage (less if you hammer your service in peak hour and nowhere else).
Currently in Australia, you can specify you want your electricity equivalently generated by renewable sources through the GreenPower scheme. Depending on the level of co-generation you want (i.e. % of renewable power) the tarriff on conventional rates for this can be 3.3 cents / kWh for 50% to 6.6 cents / kWh for 100%.
This scheme is a pretty bold move in my opinion, and a good one if the price is high enough. The price increases will not be unbearable, and it's likely that a developed version will aggressively compensate low socioeconomic groups for increased prices.
The critical factor is the $25 charge, and the effect on electricity prices. Our grid can probably quite safely accommodate 30-50% renewable electricity with no major changes or new technology (baseload solar - which is completely practical, but plant construction is not well developed). A tax at that rate hits the correct note IMO - power companies are suitably incentivized to invest in more renewable energy, or to find ways to reduce the CO2 output of their coal-fired stations, or build gas-fired stations (which are more efficient, arguably).
I thought it might be worthwhile to throw opinions on this scheme out to D&D: what do you think of it? What do you think the effects will be? Is it likely to promote further action internationally, since we love an example country to point to of something working out.
electricitylikesme on
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All in all, it sounds damn near perfect. Is there a chance for the legislature to corrupt this? Or is this the final version?
As for China, I'm not too worried about it. China's green energy production is growing rapidly, its just that their energy production capacity in general is growing extremely rapidly. There's plenty of pollution in China, I just think that pollution isn't the primary concern of developing countries. As China gets more developed, I think they'll focus more on greening up. I have no basis for this, I just think that's how it'll work.
GM: Rusty Chains (DH Ongoing)
Yeah we wouldn't want to inconvenience anyone while we destroy the planet
Well, it depends how the money is spent. if it just joins general spending, then yes it means nothing. If instead it is spent entirely on more investment and building of carbon free tech (nuclear, solar thermal etc) then this will really help as it will bring down the price of non carbon options while raising the price of carbon closer to reality.
I don't see anything in there about taxation on personal home emission. Its all industrial.
Not that taxing the C02 your house emits would amount to much.
Agriculture should be the easiest to tie carbon emission levels to goods produced and find a sweet spot where we can make things without damaging the environment.
2) Food is a low margin item, so close to all of the increased cost will be passed on to consumers.
3) Food isn't a luxury item. It's hard to tell people, especially poor people, to just eat 20% less food.
Which don't exist anymore lawls.
Meh, I don't see this as such a big deal. Howard said pretty much the same thing about a GST I think, but look at everyone reminisces on his 'glory days' :?.
As much as I hate the concept sometimes, but we probably are on the right side of the Laffer Curve, where reducing the company tax rate might bring in more revenue. I trust the analysis of the Henry Tax Review, as he seems like a fairly apolitical sort of person.
Also about time this has come through. I took a whole elective on Emissions Trade Law just as Abbott rolled over Turnbull and the CPRS died. Never forgave him for that (amongst his other failings).
Decreasing the company tax to compensate for the CO2 tax doesn't leave companies untouched--it shifts the tax burden away from those companies using less carbon and toward those companies using more. There may be a few companies for whom there's no net change, but that won't be the case in general.
Further, if companies do, as you said, have a clear path to reduce their taxes, then that's going to come out as reduced government revenue later on. The idea that "a net loss of government revenue is avoided" because the lower company tax will increase growth is silly. If that were the full story everyone would do it anyway without any consideration of carbon anything--it'd be win-win for everyone. Lower taxes probably do lead to more long-term growth (I'm open to the idea, anyway--no idea how big a factor it is, or how it plays out compared to government investment increasing growth) but, again, what you're proposing isn't "lower taxes" but rather "move the tax burden around". That's going to retard growth in some areas.
Ultimately what a tax like this will do is reshape the economy--some industries and technologies will fall and others will rise. That's the whole idea, of course, and it's a good one, but there will be a cost to someone--either polluting industries will bear a higher tax burden, or the government will suffer reduced revenues.
I suspect there'll be a net loss overall, as well--pushing the market around in any way creates some deadweight loss as previously profitable transactions no longer occur (same thing happens when you collect a tax of any kind). I also suspect that this is far outweighed by the long-term costs of doing nothing (i.e. allowing climate change, ocean acidification, etc. to proceed unhindered), but that cost isn't zero.
The laffer curve isn't quantifiable on such simple levels, as it is a dynamic curve based on relative taxes worldwide and ease of production/import etc. There are also factors such as enforcement efficiency and so on. It's effectively a 'Laffer multidimensional plane'
You said a lot of stuff here but I'm going to just address this. You're absolutely right, there is now a larger tax burden on companies that pollute more.
But the fact remains that these companies are pushing real monetary costs onto the rest of us in terms of higher healthcare costs (the US alone spends $200 billion a year on preventable diseases caused by just air pollution, not to mention other costs related to chemicals in groundwater, etc.), enormous costs to catastrophe insurance companies and regular people thanks to increased incidents of natural disasters, and how we will eventually have to spend trillions of dollars globally to respond to rising sea levels.
Even in entirely monetary terms there is a justification for a carbon tax, because these companies as they are now simply aren't paying their fair share.
http://www.mlive.com/business/west-michigan/index.ssf/2011/02/renewable_energy_costs_in_mich.html
Bear in mind that michigan is not a good place for solar energy.
That I disagree with one argument doesn't mean I disagree with the position that argument is supposed to support.
Really, though, the thing I'd be more worried about as an Australian (were I one) is how this would impact carbon production that can be easily outsourced. I don't know what the manufacturing situation looks like down there, but things like steel manufacture consume enormous amounts of electricity (hence generating CO2). Concrete production also emits a lot of CO2. You guys may not be able to buy electricity or transportation from outside Australia, but what about steel, concrete, and other industrial goods?
It seems like you'd have to apply the tax to imported goods in proportion to the CO2 emitted during their production as well or you'd end up hosing manufacturing in Australia and outsourcing the manufacture of those things (probably to regions where that manufacturing is less efficient, too).
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