 | The Bullroarer - Tuesday 8 July 2008 | TOD: Australia/New Zealand | Australian Senate: New Select Committee on Fuel and Energy |  |
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Doesn't work. Unless you abolish representative democracy, no government is going to give itself the responsibility of increasing a tax every year. It's the fundamental reason why the Reserve Bank is charged with independently setting interest rates. The politicians can avoid direct responsibility.
With carbon emissions it is a completely different dynamic. There is no social benefit dividend from less emissions. There is only a vague and somewhat faith based belief that lower emissions are necessary for the continuation of life on Planet Earth.
I don't believe that either a carbon tax or an ETS will do much to reduce emissions. But of the two options the ETS can at least be programmed to sell fewer permits each year. I presume that an emitter will need to purchase permits for an arbitrary amount of CO2 or other gases eg 1 tonne and once they have emitted that amoutn they will then have to buy another permit. It is the government presumably that will have control over the total amount of emissions permits available on the market each year and they will simply release them on the market.
The problem with this system is that it is open to fiddling by the government and the emittters. The coal fired power stations may simply run out of permits and test the system by deciding to shut down rather than buying overpriced marketabel CO2 permits. The state governments would be go apeshit if this situation occurred and then the feds would be pressured to release "special emergency carbon permits" over and above the allocation. I can just see a big mess happening within months of the start of an ETS.
The TERMOIL solution is to restrict the total amount of coal gas and oil that is available for any use. Let the market decide what the value of a restricted supply is and don't let speculators corner any futures/options etc. The only people making money from FF will be those who produce it. And the governemtn can tax the shit out of them and redirect that into renewables. The market will also have bigger incentives to bring renewables on line knowing that cheap FF are a thing of the past. The government can then legisltate once and decide now the total volumes of FF in each of the next 50 years which gives the market certainty, will increase the value of our remaining FF, and will reduce emissions to achieve the targets. After that we just get on with it and make the adjustments happen.
I think a carbon tax would be more politically acceptable than most as it's indirect in terms of everyday life. Few people buy bulk amounts of crude oil, raw coal, and natural gas. All of them are processed in some way before everyday consumers use them.
So that raising the tax on them would have an effect on prices, but it'd be indirect and the government would be a step removed from it, like payroll taxes, import tariffs and so on.
You're right that it's not easy to raise any tax, but it'd be easier to raise a carbon tax than an income tax or GST. It's all in how you present the thing. For example, when Canada introduced a GST, you'd buy something and there'd be the price - and only at the counter would they calculate the state and federal sales tax on it. So every time you bought something you were aware of just how many dollars of tax you were paying, which really pissed people off. Thus their federal government went from something like 157 seats to 3 in the next election. Our own federal government in Australia learned from that, and made it law that all prices must include GST.
I'm sure there would be similar lessons to be learned with a carbon tax, that there'd be ways to present it that annoy people, and ways that they don't really notice it.
The annoyance would also be balanced out if they made sure there were sufficient options for people. For example, currently the rate for coal is something like 15.5c/kWh, and for wind it's 21.0c/kWh. If there were a carbon tax of 10c/kWh, then people would say, "oh well, I can change to wind and it'll be cheaper." Likewise if there's substantial investment in public transport. "Hmmm, petrol is $3/lt, but the bus is only 400m away and there's one every five minutes."
A carbon tax though would raise the price sure, but would it raise it enough for people to really change their behaviour significantly enough to actually reduce emissions. Did the GST stop people from buying stuff? No. And the way pricing was deliberatley designed to conceal the tax was a bit sneaky but the GST was never designed to act as a brake on people consuming. Thats why they didn't call it a consumption tax.
Carbon taxes have an entirely differnet purpose. Their primary goal should be to get the market to change its behaviour, not necessarily raise revenue. In order to do that you have to take the revenue raised by the carbon tax and effectively destroy it. You can't pump it back into the economy as compensation to the poor consumers and industry who paid it in the first place. The same goes for any money raised by an ETS. Compensation to the miscreants that are the beneficiaries of the pollution is not going to encourage them to change their ways.
Turning off the power or gas after 28 days in the month becasue they have used up their ration, would get their attention a lot faster. But alas we are not the elected PTB so the Termoil plan must remain consigned to an internet footnote here on TOD.
(BTW I think that your personal plan of reducing your own carbon footprint, driven primarily on the morality rather than the economics is is where the greatest impact is to be had.)
The GST wasn't designed to reduce consumption, nonetheless it had that effect for the first several months. This is the pattern with all taxes whatever the ostensible purpose: when you introduce or raise the tax, people drop their spending, when you remove or lower the tax, people raise their spending.
Logically, then, you'd have to bring a carbon tax in and increase it year by year until you'd reached your overall carbon emissions target.
With the revenue you should invest in options to the things which emit carbon. Obviously it's no use making petrol or coal more expensive if people have no public transport and can't change to renewables. Not only is this reasonable and logical, it would also make raising the tax more politically palatable. "Yes, you have to pay another 5 cents a litre now, but the extra $500 million we expect to raise from this is going to be invested in railways - so you don't have to drive. And yes, coal-sourced electricity now costs 22c/kWh, but wind is 21c/kWh, you can always change to that just call up your retailer, and whatever you buy they have to invest in more turbines." Etc.
A ration has the appeal of firmness, but simply isn't going to happen. We Aussies already have a sense of entitlement matched only by Americans, turning the tap off would just make it worse.
As well as reducing my carbon footprint from a sense of morality - some things are right to do whether they do any good for the world or not - I do it to slowly spread the idea that (a) it's a good thing and (b) it's possible to do without living in a cave. Having such ideas spread makes it politically easier to bring in measures like carbon taxes at government level. Ideas are powerful things. Things seem impossible, but people just keep talking about them as though they're possible, then others decide they're possible, and then they happen.
Change is like a cup with a tap dripping into it in the dark. We never know when, but eventually a single drop will cause the cup to overflow. Things like this
are just single drops, utterly insignificant in themselves, but helping to contribute towards overflowing the cup of change.