Economics Online Tutoring on Carbon Trading

Australia has voted against Carbon Trading. Do a Cost-benefit analysis for this policy, i.e. compare the disadvantages for this to the Australian economy, against the advantages of reaching its CARBON reduction targets?

This essay will argue that carbon tax in Australia has a significant impact on the economy, household and agriculture.

Carbon Trading is an intricate mechanism that has a modest aim; to help the different firms and governments to reduce carbon emission and meet the desired target by making it cheap for them. Carbon trading is reduced in two kinds that are ‘cap and trade’ and ‘offsetting’ (Reyes & Gilbertson, 2010). According to the EDF’s (2013) report, the key target of the Australian government in 2010 was to reduce the carbon emissions by 5% below the 2000 levels by the year 2020 and to reduce 80% of the emissions below 2000 levels by 2050. Australia has been always against the general concept of Carbon Trading and have introduced many mechanisms that will tackle the issue of climate change. The famous Carbon Pollution Reduction Scheme (CPRS) that was introduced in 2011 by Rudd but it didn’t gain much support from the senate political leaders (as cited in Bailey, MacGill, Passey & Compston, 2012). Furthermore, it is indicated that if the above policy were to be implemented in 2011 the carbon emission would be 200 million tones less and the electricity charges would have been quite lower. It is also reported that the carbon emissions have reached to 540m tones in the current year and it will keep on increasing to 563 by 2030 (Australian Government, 2019a). The Australian government will charge twenty-three Australian dollars per carbon ton. The reason why the government didn’t vote for the Carbon Trading was the introduction of ‘carbon tax’ on July 1, 2012 (Meng, Sirwardana & McNeil, 2012). The Australian government thought this scheme as an effort to ratify the carbon emission issue of Australia in the long run. The scheme had political influence and enforcement of this tax has been through the powerful political leaders. Subsequently, there will be an increase in the tax by 2.5% for the following two years until a new scheme is introduced (Andersson & Karpestam, 2012).  However, it badly impacted the Australian economy, Households and Agricultural sector of the economy. This essay will argue how has carbon tax majorly effected three different sectors of the country and why was it a bad decision for Australia to go against Carbon Trading.

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As per the scientific research, it states that climate change is one of the global challenges that needs to be addressed as early as possible and to do so it requires a long-term global solution that would play its role to avoid various social, economic and environmental issues. Talking about tourism in relation to climate change, it won’t be wrong to say that climate change and tourism can be considered as a “two way” street, as tourism influencing the climate and climate having its influence on tourism (Hoque. S, Spurr. R, Forsyth. P and Dwyer . L, 2012). Looking at the overall carbon pollution, Australia represent 1.5% of global emissions in terms of greenhouse gases. With such percentage of carbon emission, Australia is considered to be among top 20 polluting countries in the world (World Resources Institute 2010). It is also important to note that with the introduction of Clean Energy bill in Australia, has raised many serious concerns in relation to tourism sector getting affected. Touring and Transport Forum (TTF), in 2011 clearly expressed its support for carbon tax but at the same time voiced many serious concerns related to carbon tax, that it may result in the form of job losses, increase costs in various tourism sectors. According to TTF, due to the carbon tax, it may result in a loss of tourism revenue of approximately 1.2%, along with job losses of between 4000 and 6000 (Meng. S and Pham. T, 2017).

The second area that is impacted by the implementation of carbon tax are the households of Australia. There have been multiple effects of carbon tax on the households like the increase in price of electricity as the government imposed the carbon tax on households also. Electricity in Australia is produced through coal and about one-third of the carbon emissions is through electricity (O’Gorman & Jotzo, 2014). The carbon taxation also increased the cost of living of every household in the country. Approximately there has been an increase of 9.90$ per week of an average household (Australian Government, 2019b). According to Robson (2014) the introduction of the tax has not decreased the carbon emissions rather than the emissions have increased gradually impacting the Australian economy badly. But the Australian government when introducing this scheme, they made it clear that through the carbon tax implementation will generate additional employment in the ‘green sector’ (Andersson & Karpestam, 2012). Nevertheless, by repealing the carbon taxes from the country, the households will have to pay 9% lower than the carbon taxed electricity price (Australian Government, 2019b). The households of Australia have been majorly impacted by the carbon pricing as electricity is a necessity for them in this era and they have to pay whatever the price the citizens are charged.

Lastly, agricultural sector has also been affected by the carbon taxation in Australia. When the carbon tax was imposed by the Australian government on different sectors, it exempted the agricultural sector because it was a burden on the farmers. However, the agricultural sector was affected, especially the farmers because energy is a vital part of many agricultural inputs. The price of these inputs was increased due to the carbon tax on energy. There is a direct relationship between price of energy and farm inputs; the increase in energy will automatically increase the price of agricultural inputs (Davison, 2011). However, the Australian government in 2012 has implemented a Carbon Farming Initiative to help the sector to reduce its carbon emission rather than imposing carbon taxation on the commodities (Verschuuren, 2017). Nevertheless, the carbon pricing is still burdening the farmers of Australia and now the farmers are reluctant to pay the indirect taxes incurred by the government. The reason for their hesitancy is due to the fact that in the international market the farmers have to set a same price as the rest of the countries so they have no say over it. The additional cost incurred due to carbon tax have to be borne by the farmers (Meng, Siriwardana & McNeil, 2012)

In a nut shell, Australia is considered to be one of the developed countries all around the world. The decision to go against Carbon Trading and opting for carbon tax can be seen as a critical issue in the country since carbon tax’s introduction. Carbon taxation have affected the economy by the loss of international competitiveness, the household by an increase in electricity and cost of living and lastly the agricultural sector by a rise in prices of the agricultural sector. However, there was a decrease in the carbon emissions but it wasn’t what was expected by the Australian government.

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Andersson, F. N., & Karpestam, P. (2012). The Australian carbon tax: a step in the right direction but not enough. Carbon Management, 3(3), 293-302.

Australian Government. (2019a), ‘Australia’s Emissions Projections 2019’, Australian Government: Department of the Environment and Energy, Report, Retrieved on 24 February 2020, Retrieved from https://www.environment.gov.au/system/files/resources/4aa038fc-b9ee-4694-99d0-c5346afb5bfb/files/australias-emissions-projections-2019-report.pdf

Australian Government. (2019b), ‘Repealing the Carbon Tax’, Australian Government: Department of Agriculture, Water and the Environment, Report, Retrieved on 24 February 2020, Retrieved from https://www.environment.gov.au/climate-change/government/repealing-carbon-tax

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