The Impact of Carbon Tax on Carbon Emissions in Australia - Lab Report Example

? Should the Australian Government Introduce a Carbon Tax Aimed at Reducing Carbon Emissions? of the of the Concerned Professor 29 April 2011 Executive Summary The objective of giving way to an environment friendly and sustainable future is an awesome task that requires the devotion and commitment of each and every nation (UNEP 2011: Online). The stakeholders and opinion makers around the world are today really concerned about the human contribution to the environmental problems. Human interference in the environment has given way to many daunting and serious problems like the greenhouse effect, global warming, soil erosion and acid rain (UNEP 2011: Online). In that context, Australia has a great stake in the goal and objective of opting for a sustainable economic growth and development. At the minimum, Australia needs to play a proportionate role in the achievement of the environmental objectives set by the world community (Garnaut 2011, p. 12). If Australia does not cooperate and collaborate in the achievement of these objectives, it stands more to lose as compared to any other developed nation (Garnaut 2011, p.15). The objective of this report is to ponder on the viability of the Australian government imposing a carbon tax so as to reduce the carbon emissions. The report analysis this proposal in a holistic context while taking into consideration the possible pros and cons of imposing this tax. The report came to the conclusion that imposing such a tax tends to benefit Australia in the long run. Table of Contents 1.0 Introduction ........................................................................................ 4 2.0 Discussion ........................................................................................... 5 2.1 The Impact of Carbon Tax on Carbon Emissions ...................... 5 2.2 Advantages of Carbon Tax ........................................................... 6 2.3 Disadvantages of Carbon Tax .................................................... 6 3.0 Conclusions ...................................................................................... 8 4.0 Recommendations ........................................................................ 9 Reference List ....................................................................................... 10 1.0 Introduction To put it simply, carbon tax is a type of environmental tax that is imposed with context to the carbon content of fuels (Burney 2010, p. 4). It is a way of placing a price on the carbon emissions produced by individuals and corporations. Fossils fuels do tend to have very high carbon content, which on combustion release carbon dioxide into the atmosphere. On the contrary there exist many cleaner sources of energy like the nuclear energy, solar energy and hydropower which do not contribute any carbon emissions to the environment. The purpose of a carbon tax is to place a price on the carbon emissions, thereby motivating the individuals and corporations to opt for cleaner sources of energy (Anderson & Ekins 2010, p. 12). It goes without saying that the Australian economy is today dependent on many emission intensive industries (Garnaut 2011, p. 22). In the contemporary context, Australia has far higher carbon emissions per capita as compared to any other developed nation (Garnaut 2011, p. 24). So, reasonably speaking, the international community has very high expectations with regards to Australia’s ability to check carbon emissions (Ayers 2006, p. 38). Besides, by achieving tolerable carbon emission rates, Australia stands to benefit tremendously as far as the objective of safeguarding its natural environment and ecology is concerned (Garnaut 2011, p. 11). Yes, it is possible to avoid change by citing varied excuses for the nation’s inability to opt for an environment friendly future. However, such an approach could have an unwarranted impact on the Australian economy in the form of facilitating a reason for the introduction of discriminatory trade interventions by other nations (Harris 1996, p. 157). 2.0 Discussion It would be quiet informative to analyze the possible outcomes of imposing a carbon tax and to ponder on the pros and cons of a carbon tax. 2.1 The Impact of Carbon Tax on Carbon Emissions As goes by its name, a carbon tax intends to impose a price on the contribution of carbon emissions to the environment by a company. This tax will thus automatically motivate the businesses to cut down on their carbon emissions. Imposition of a prohibitive tax on carbon emissions will make the businesses mathematically and realistically calculate as to how much it would cost to them to stick to their existing carbon emissions and to what extent can the save by shifting to cleaner energy options (Anderson & Ekins 2010, p. 34). This would naturally and automatically lead to a fall in the carbon emissions as many companies will prefer to shift to cleaner options rather than paying a high carbon tax. In fact, the higher the value of the carbon tax under consideration, the better it will serve as an incentive to the businesses to cut down on their carbon emissions by shifting to cleaner production procedures. The carbon tax will make the government identify the sectors which contribute high carbon emissions and will give way to a formal regulatory mechanism in the country to place a check on carbon emissions (Burney 2010, p. 34). The liable sectors would be required to keep an eye on their carbon emissions and to report them to the government. Such a tax will initially lead to higher production costs and their shifting by the companies to the individual consumers. So the government will have to come out with some kind of transitory assistance options for the businesses and individual consumers (Anderson & Ekins 2010, p. 57). The Australian government can use the revenue generated through the carbon tax to purchase carbon units from the international markets so as to meet its national objectives. 2.2 Advantages of Carbon Tax The imposition of a carbon tax will facilitate some kind of an investment certainty for the businesses, as they will be in the knowledge of the price of their carbon emissions for a specific fixed period (Garnaut 2011, p. 44). They will not remain uncertain as to what their carbon emissions will cost to them in the times to come. The government can add to this investment certainty by locking the rate of carbon tax as far into the future as it deems appropriate (Garnaut 2011, p. 44). Hence the government needs to follow a very flexible approach towards carbon tax while keeping in mind its local environment and energy policies and international obligations. Also the carbon tax will provide the government with immense revenues which it can use to devise some kind of transitory assistance mechanism for the local consumers and businesses (Anderson & Ekins, 2010, p.57). The pursuance of such an approach towards carbon emission reduction will ameliorate the grievances and objections of the local consumers and businesses and will solicit their sincere and whole hearted collaboration and cooperation. The government can also use this revenue to reshape the Australian energy and environment policy. These revenues will allow the government to be innovative and proactive in the achievement of the cherished energy goals and environmental policies. 2.3 Disadvantages of Carbon Tax It is utterly difficult to pragmatically calculate the possible outcomes of imposing a carbon tax. One simply cannot predict that the imposition of carbon tax will lead to a specific reduction in the carbon emissions by Australia (Garnaut 2011, p. 26). Still, it would be a right step in the direction towards controlling and restraining carbon emissions on the part of the Australian government. Besides the businesses may be required to make incremental investments from time to time to meet their carbon emission goals and objectives which will make the investment environment a bit uncertain (Burney 2010, p. 41). So the government needs to take care that the imposition of the proposed carbon tax does not lead to any unwarranted obstructions in the way of achieving a green and sustainable development policy. It is also difficult to say as to what should be the rate of the proposed carbon tax (Burney 2010, p. 33). If the tax is placed too low, the companies may not make the expected changes to their production methods. Thus the governments may be required to purchase carbon units from the international markets to meet Australia’s international obligations. This will lead to further wastage of the revenues accrued from the taxpayers and will rather be a counterproductive approach towards curtailing carbon emissions. 3.0 Conclusions This report arrived at the following conclusions: Australia is bound by certain national and international obligations to the goal of assuring a sustainable development. The nation can no more play a truant to the aspirations that are global in their scope and command ample local support. At present, the per capita carbon emission of Australia is much higher as compared to any other developed nation. The country needs to be proactive towards restricting the local businesses from being unconcerned about and irresponsible with their carbon emissions. The imposition of carbon tax will lead to the placement of a formal regulatory mechanism in Australia to watch over carbon emissions. This will pave way for a more organized and systematic approach towards the issue. Businesses do stand to gain from a carbon tax in the long run. The imposition of carbon tax may lead to certain undesirable effects, which needs to be looked into by the government. 4.0 Recommendations The report makes the following recommendations: The Australian government should impose a carbon tax to check the carbon emissions. Also the government needs to be flexible in fixing the value of this carbon tax. The rate of the proposed carbon tax may be kept time locked or floating as per the needs of the Australian economy. The government should use the revenue generated by the carbon tax to come out with a transitory assistance mechanism for the individual consumers and businesses. The government can also use the revenue generated through the carbon tax to favourably shape its environmental and energy policies. Reference List Anderson, Mikael Skow & Ekins, Paul 2010, Carbon Energy Taxation, Oxford University Press, New York. Ayers, Caroline 2006, ‘Australian Intergovernmental Relations and the National Emissions Trading Scheme’, Melbourne Journal of Politics, Vol. 31, pp. 36-42. Burney, Nelson 2010, Carbon Tax and Cape-and-Trade Tools, Nova Science Publications Inc, Sydney. Garnaut, Ross 2011, Carbon Pricing and Reducing Australia’s Emissions, Garnaut Climate Change Review, viewed 29 April 2011, Harris, Stuart 1996, ‘Economics of the Environment’ Economic Record, Vol. 72, no. 217, pp. 154-162. United Nations Environment Program (UNEP) 2011, Climate Change, United Nations Environment Program, viewed 29 April 2011, Read More