Carbon Tax and Direct Action Plan to Tackle Climate Change - Literature review Example

Carbon Tax and Direct Action Plan to Tackle Climate Change Name Institution Course Date Carbon Tax and Direct Action Plan to Tackle Climate Change Introduction The world is faced with climate change that has taken place for millions of years. It is evident that human efforts contribute significantly to climate change (Swart, Robinson and Cohen, 2003). The rapid warming in the recent years has raised fears and debate about the human induced emission of carbon dioxide. Climate change has brought about significant effects on natural and human system across the world. Climate change has been observed for many years now and is characterised by decrease in cold temperature, increase in incidence of heavy precipitation and increase in the sea levels (Swart, Robinson and Cohen, 2003). In order to control the amount of carbon dioxide released in the atmosphere, the Australian Government instituted a Carbon Tax to alleviate greenhouse gas emissions that contribute to climate change. However, recently, the government instituted a Direct Action Plan in place of Carbon Tax in achieving the same goal (IPCC, 2001). Building construction industry is among the most affected sectors by climate change and carbon constraints. Almost half of all non-renewable resources are utilized in building and construction industry which makes it one of the least sustainable sectors globally (Ling, Chan and Chong, 2004). This report will highlight climate change impacts on the building construction industry. It will also review Carbon Tax and Direct Action Plan and compare the two with regard to their effectiveness. In addition, the paper will detail out the risks and opportunities for construction companies in a carbon constrained world and will present strategies to be used by construction industries in order to survive climate change and carbon constraints. Impacts of Climate Change on Construction Industry The building construction industry contributes significantly to economic growth of every country globally (Ling, Chan and Chong, 2004). This industry is affected by climate change and extreme weather changes. The knowledge about climate conditions is important to appropriately design and manage construction projects. Climate change impacts like sea level rise, global warming and coastal erosion affects the choices of building materials, site construction as well as building methods. They also affect conduction project completion timelines globally (Ling, Chan and Chong, 2004). For instance, construction project involving laying foundations or road that requires dry conditions may be delayed due to climate change. In addition, flooding which may result from climate change affects the suitability of construction locations and design of the built facility (Hertin et al., 2003). Moreover, there are financial risks brought about by effects of climate change on construction industry. The environmental planning and building standards in many countries are being amended to accommodate climate change risks. This affects the value of construction project. With the building standards becoming stricter, additional engineering is needed which will incur some costs (Hertin et al., 2003). Buildings and roads should be constructed for future climate change conditions. Buildings are very susceptible to climate change. According to research done by Lenzen and Treloar (2002), in years to come, there will be high risks of collapse of buildings and significant loss of value due to storm, snow or subsidence damages. Climate change has the ability to deteriorate indoor climate while at the same time minimize building lifetime (Ries, Jenkins and Wise, 2009). Changes in precipitation in high temperature regions caused by climate change may lead to inadequate water supply which will impact the feasibility of construction projects. Carbon Tax Carbon Tax Policy involves a tax levied on the amount of carbon dioxide released in the atmosphere (IPCC, 2001). Carbon Tax Policy put a price on carbon dioxide emitted and ensures that a price signal is sent that causes a market response, developing incentives for emitters to change their means of production to less greenhouse gases which ultimately results to reduced emissions. More than fifteen nations have implemented a direct carbon tax in order to reduce climate change (IPCC, 2001). Carbon taxes are cost-effective and efficient way of minimizing greenhouse gas emissions. They assist in addressing the challenge of greenhouse gas emitters not facing any costs for their actions. Direct Action Plan Australian government has implemented Direct Action Plan in place of Carbon Tax in order to tackle the issue of climate change (IPCC, 2001). Direct action plan covers a number of initiatives meant to reduce carbon emissions in Australia. Direct Action Plan entails a $2.5 billion emissions reduction fund put aside to provide for direct actions of businesses to minimize emissions. It also comprises of an initiative to boost renewable energy use especially solar power and support for new technologies developed by renewable energy projects (IPCC, 2001). Under the Direct Action Plan, businesses have a number of obligations with regard to renewable energy use. Companies that increase their emissions above recommended levels will have to pay penalty. In addition, the emission reduction fund is obligated to reward companies that undertake meaningful actions in reducing greenhouse gas emissions (IPCC, 2001). Comparison of Carbon Tax and Direct Action Plan According to Carbon Tax Policy, huge emitters were told to pay about $23 a tonne for each tonne of greenhouse emissions above the predetermined amount of 25,000 tonnes (IPCC, 2001). This created financial pressure for many businesses which forced companies to take action to minimize their emissions. In 2014, the Australian Government replaced the Carbon Tax with Direct Action Plan. To date, the government has spent almost $1.7 billion in funding companies with emission reduction activities (Ries, Jenkins and Wise, 2009). Many researchers argue that the Direct Action is not as effective as Carbon Tax in reducing emissions in Australia. Carbon Tax created financial pressure as well as reputation threat to huge emitters. When Carbon Tax was removed, many companies shifted their focus from carbon emissions. A number of companies abandoned energy management projects as a result of carbon tax repeal (Kumarasiri, Jubb and Houghton, 2016). The financial pressure from carbon tax was a motivation for companies to take actions towards emission management. The use of Carbon Tax in Australia was able to raise money that was spent on environmental initiatives (Kumarasiri, Jubb and Houghton, 2016). However, although it was considered an effective means of reducing emissions, it was not enough to actualize the 2020 emission reduction plan of Australia. Carbon Tax has succeeded in rising revenue for the government but has had little noticeable effects on the environment. A carbon price is considered an imperfect incentive and can be weakened by both non-financial hurdles and market imperfections (Kumarasiri, Jubb and Houghton, 2016). Carbon tax undermines voluntary abatement by companies and businesses. Direct Action Plan applies to activities not included in the carbon trading schemes and encourages sequestration by rewarding sustainable actors. However, the direct action plan has been termed as inequitable, limited by budget, expensive and may encourage manipulation of emission reduction cost (Kumarasiri, Jubb and Houghton, 2016). Risks and Opportunities for Construction Firms in a Carbon Constrained World The building construction industry may be more vulnerable in a carbon constrained world than any other industry. In a carbon constrained world, construction companies will incur financial risks (Ries, Jenkins and Wise, 2009). A carbon constrained world will bring changes in environmental and building standards which will impact construction projects taking place globally. This will have direct financial risks since the environmental standards are become more stringent which will require the need for additional engineering. A carbon constrained world will influence the design, planning as well as the operational cost of construction and building projects (Ries, Jenkins and Wise, 2009). A carbon constrained world is characterized by strict environmental and carbon regulations that need to be adhered to (Hertin et al., 2003). Failure to do so will lead to negative consequences. As a result, construction industry will be faced with legal and regulatory risks. It is very difficult and costly for construction companies to fully adhere to strict carbon regulations due to the nature of their operations. Incorporating carbon emission in the management reporting and decision making is not an easy task (Hertin et al., 2003). Construction companies will be faced with rigorous monitoring and reporting requirements that may attract several legal lawsuits. Reputational risk is also a concern in a carbon constrained world. Companies can jeopardize their brand reputation if they do not act towards mitigating carbon emissions (Hertin et al., 2003). In addition, building construction industry will suffer from administrative burden. Compliance with carbon regulations can deplete time and resources (Lenzen and Treloar, 2002). In a carbon constrained world, Construction Companies will be required to know what is at risk organizationally. They will have to figure out their historic emissions and how their operations translate into emissions. Moreover, they should have to monitor their emissions constantly to ensure they adhere to the laws (Lenzen and Treloar, 2002). Construction companies will also need to develop effective carbon management strategy. Most companies may have inadequate knowledge in these issues which may influence their staff, training programs and legal activities (Lenzen and Treloar, 2002). Generally, construction companies will incur significant administrative costs in a carbon constrained world. Abatement measures brought about by carbon constraints means that when building construction companies invest in carbon abatement, they will have additional incentive. Carbon constrained world will offer an opportunity for construction companies to receive incentive as a result of their actions to manage and reduce emissions (Lenzen and Treloar, 2002). Building construction industry is affected by electricity prices. Therefore, a carbon constrained world will offer an opportunity for construction companies to reduce their energy costs. Energy costs make up about 30 per cent overall production costs. Reducing energy costs by reducing carbon emission will minimize operational costs associated with construction industry (Hertins et al., 2003). Implementing a low-carbon strategy does not necessarily result to negative impacts. A carbon constrained world may bring longer-term benefits to construction industry such as good reputation, new market opportunities, cost savings and increasing brand value (Hertins et al., 2003). Adaptation Strategies Climate change has led to amendment of environmental guidelines and construction regulations which makes it difficult for construction companies to follow (COM, 2009). In order to avoid the risks associated with climate change and carbon abatement, construction companies should implement training and development programs related to climate change and carbon regulations. Construction project managers should receive useful training about the impacts of climate change on construction projects in order for them to make guided judgements. In addition, environmental and construction regulation amendments should be communicated and educated to employees in order for them to adapt to new approach to construction planning that reduce carbon emissions (Ling, Chan and Chong, 2004). Also, construction companies should ensure that they implement realistic and effective construction techniques in order to adapt to climate change. In addition, construction companies should establish polices that enhances energy efficiency and reduces carbon emissions. These companies should aim at reducing the demand for energy by adapting renewable energy solutions (COM, 2009). Energy efficiency policies should ensure that companies avoid energy sources such as coal and other fossil-fuelled. These policies will increase mitigative capacity of construction companies to reduce carbon emission. The construction industry can try to mitigate climate change risks by exerting influence on its supply chain (COM, 2009). It is evident that more than half of construction company’s emissions come from its supply chain. It is therefore advisable to include supply chain in the carbon mitigation strategies. This can be done by minimizing demand for carbon-intensive purchases, reforming its services and products and working closely with suppliers to reduce emissions (COM, 2009). Conclusion Climate change has brought about significant effects on natural and human system across the world. Climate change has impacted the operations of the building construction industry. It impacts like sea level rise and coastal erosion influences the choices of building materials and construction designs. Climate change brings risks of collapse of buildings and significant loss of construction value. Australian government has replaced the Carbon Tax with Direct Action Plan in an attempt to reduce carbon emissions. However, researchers say that carbon tax was more effective due to its ability to put financial pressure on companies in order to take actions towards emission management. A carbon constrained world will bring about reputational, financial, regulatory and administration risks to construction companies. However, it will offer an opportunity to long-term benefits. In order to adapt to climate change, construction companies should train its employees and incorporate carbon emission management in its supply chain. References COM 2009, 147 final, Adapting to climate change: Towards a European framework for action: White Paper. COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 1.4.2009. Hertin, J., Berkhout, F., Gann, D. M and Barlow, J 2003, Climate change and the UK house building sector: perceptions, impacts and adaptive capacity. Building Research and Information, 31(3-4), pp. 278-290. IPCC (Intergovernmental Panel on Climate Change) 2001, Greenhouse gas emission mitigation scenarios and implications. Climate Change 2001 – Mitigation Report of Working Group III of the Intergovernmental Panel on Climate Change. Cambridge, Cambridge University Press. Kumarasiri, J., Jubb, C and Houghton, 2016, Direct action not as motivating as carbon tax, research finds. 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