Carbon Tax Advantages and Disadvantages in Australia

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Table of Contents

Introduction
Advantages of carbon tax in Australia
Disadvantages of the Carbon Tax
References

Introduction

Carbon tax is a type of tax levied on the amount of carbon emitted during the burning of fuel (hydrocarbon fuel). It an environmental tax that puts a price on the amount of carbon produced in order to reduce the impact it has on the environment. When fuel burns, the carbon in the fuel mixes with air and forms carbon dioxide that is released in the atmosphere as a waste product.

This type of greenhouse gas has the ability to trap heat within the atmosphere and cause climatic changes. Governments have thought it wise to put in place measures to try to reduce the negative effects of carbon by using the carbon tax (Prof and Skou, 2010). Australia also introduced this legislation and it has had both negative and positive effects.

Advantages of carbon tax in Australia

Reduction of the effects of global warming

The levying of tax on the amount of carbon dioxide produced is an important step towards the reduction of the effects of global warming. This is because carbon dioxide is a greenhouse gas that has been determined to cause global warming (Hansen et al., 2000). Carbon dioxide has a blanketing effect on the atmosphere and it traps and reflects heat back to the surface.

This translates to the increase in temperature of the oceans and atmosphere. This can generally cause climatic changes that may be unsuitable. One of the effects is the change in the precipitation patterns. This is due to the changes in sea temperatures. This might also have an effect on the level of the sea as it rises. There is also a possibility of the subtropical deserts expanding.

The Australian government decided to levy tax on the amount of carbon emitted through any process in order to combat climate change (BBC, 2011). This legislation mainly affected the biggest polluters of the environment and these were mostly the producers.

They were forced to pay for each ton of carbon dioxide emitted. However, the huge costs imposed on the producers also translated a substantial cost on the consumers. This is because the producers increased the prices of their commodities in order to subsidize the costs imposed on them.

In the long run, the costs imposed on both the producers and the consumers would work well to reduce the effects of global warming. This is because the producers would try their best to avoid coal as a form of energy and start to use other cleaner fuels that have less harmful effects on the environment.

This would make coal a less competitive fuel type and people would prefer other sources. This would translate into less carbon dioxide emissions and consequently, the protection of the environment from the harmful effects of greenhouse gases.

The consumer, on the other hand, would also help in the realization of the same goal of reducing the effects of global warming by making some changes in their everyday lives. For example, in order to reduce the costs incurred while driving fuel-guzzling vehicles, one might be forced to exchange it for one that is more fuel-efficient.

This would mean that the vehicle would go for more kilometers for the same amount of fuel. In effect, this means that the amount of fuel used is reduced and the total amount of carbon dioxide produced is also reduced. This is important while considering reducing the effects of global warming.

Compensation for low income earners

The low income earners would be able to be compensated due to the Carbon Tax (Lucas, 2012). This is because of the carbon-pricing scheme. Alison said that this is especially important because those individuals who earn a low income are usually the first ones to be affected by climate change. She also said that they are the ones who are worst hit. The pricing scheme would help to tap back the revenues from the tax to favor the low income earners.

In order for the government to ensure this happens, it must first impose carbon tax on producers. The high cost of production then translates to higher pricing of commodities. This means that the consumers need to go deeper in their pockets to pay for the commodities.

The government then returns some of the funds collected from the Carbon Tax to the most deserving consumers. Those deserving consumers are selected using a minimum income threshold. Therefore, they are not affected by the increase in prices.

Disadvantages of the Carbon Tax

Negatively affect the Queensland Tourism Industry

Queensland’s tourism industry was worried about the effects that the legislation would have on the tourism industry. The Council Chief executive argued that the legislation would cause an increase in the cost of doing business. This was due to the indirect and direct impacts that the legislation had on energy costs. The cost of traveling would increase since the cost of fuel would increase (Barlow, 2012).

The tourism companies would then be forced to hike their prices in order to meet the costs and make profits. To make things worse, the industry was already struggling to get back to its feet after it had been crippled by natural disasters. However, it was not possible to measure the exact cost or damage figure that was going to be incurred.

Gschwind argued that the Australian tourism and hospitality industry was going to be adversely affected. He also said that it was going to lose its international competitiveness. Since the holidays would be more expensive to spend locally, many travelers would opt to go abroad to spend their holidays elsewhere. This would mean that the revenue would be shifted and it would benefit the economy of other countries.

Increase in cost of living

The Carbon Tax has a rippling effect on the costs of goods and services (Martin, 2012). As the cost of producing commodities goes up, the cost of purchasing them also goes up. This means that individuals would need to pay more for the commodities that they paid less for initially.

The costs of running businesses also go up due to the costs incurred by the businesspersons during transportation and the purchase of raw materials. This might have negative effects on the profitability of businesses. Individuals would also need to pay more in order to use their vehicles. This increases the cost of living especially if one needs to travel to the place of work by car.

The chief executive of the Housing Industry Association (HIA) also proposed an increase in the cost of building a new home and this was due to the Carbon Tax. This was due to the increase in the cost of raw materials that need to be sourced from overseas. Those willing to buy a house would be required to make higher mortgage repayments and those interested in building would need to incur higher building costs.

References

Barlow, G 2012, ‘Carbon confusion’, Weekly Times Now, 23 May, p. 3.

Hansen, J., Sato, M., Ruedy, R., Lacis, A & Oinas, V 2000, ‘Global warming in the twenty-first century: An alternative scenario’, Proc. Natl. Acad. Sci. U.S.A., vol. 97, no. 18, pp. 9875-9880.

Lucas, C 2012, ‘Carbon rebate should not affect minimum wage’, National Times, 22 May, p. 12.

Martin, D 2012, ‘Australia adjusts to its new energy role’, Wall Street Journal, 20 May, p. 9.

Prof, A & Skou, M 2010, ‘Europe’s experience with carbon-energy taxation’, Sapiens, vol. 3, no. 2.

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