Carbon Tax of Australia - Report Example

Carbon Tax of AU Name Course Name and Code Instructor’s Name Date Globally, there has been a rising concern in the management and protection of environmental resources. One of the most significant implications of environmental pollution is climate change, which has been attributed to the increasing levels of greenhouse gas emissions such as carbon. Many international conferences such as the United Nations Conference on the Human Environment held in Stockholm in 1972 and the Earth Summit held in Rio de Janeiro, Brazil, in 1992, have been held and the issue of environmental sustainability has been on the agenda of these conferences. Generally, environmental sustainability refers to the protection and conservation of environmental resources such as water, forest resources, minerals and wildlife among others (Sutton, 2004). However, environmentalists define environmental sustainability as the use of environmental resources to cater for the needs of the present generation without comprising the ability of future generations to do so (N.C. Environmental Stewardship Initiative, 2002). In addressing the issue of climate change, environmental sustainability programs have been adopted by nations worldwide. These programs include adopting the 3R approach (recycle, re-use, reduce) to the use of environmental resources, use of renewable resources such as green energy (e.g. solar and wind power), adoption of policy approaches such as pollution taxation, re-designing of production processes and products to eliminate pollution and the protection and restoration of natural environments (Humphreys, 2007). Australia has not been left behind in adopting the above environmental sustainability programs with the most significant being the adoption of the carbon tax. This emissions trading scheme was adopted after the discovery “Australia’s economy and environment are significantly exposed to the impacts of climate change and rising global mean temperatures” (CPA Australia Ltd, 2009). Environmental issues like greenhouse gas emissions, water consumption and the decline of Australia’s natural resources (e.g. forests and wildlife) prompted the Australian government to consider the incorporation of the carbon tax in its revenue system to check the above environmental issues. Hamilton, Hundloe & Quiggin (1997) state that there is international evidence that an “appropriately designed environmental taxing and spending package can yield a ‘double dividend’ in that it can both reduce environmental destruction and increase economic well-being. According to Hamilton, Hundloe & Quiggin (1997), the emissions trading scheme (ETS) package contains “policy measures in the areas of atmospheric emissions, water use, solid and industrial wastes, natural amenities and forests”. In the area of atmospheric emissions, the policies are aimed at reducing greenhouse gas emissions especially in the electricity, industrial and transportation sectors. They also reduce urban air pollution and result in significant net job creation. In the area of water use, the measures are aimed at reducing urban and agricultural water consumption with the aim of protecting Australia’s riverine ecosystems. The policy measures implemented in the area of solid and industrial wastes are aimed at reducing resource use and waste streams at both industry and household levels. The measures in this sector according to Hamilton, Hundloe & Quiggin (1997), include adoption of cleaner production technologies and adoption of a system of load-based licensing for industrial polluters. Others include full cost-recovery charges for landfill; investment of $140 million over 5 years in renovating tips; extension of best-practice kerb-side recycling to all local government areas; and abolition of sales taxes on recycled materials and requirement that all government agencies use recycled paper. Lastly, in the natural amenities sector the measures are aimed at raising funds for the protection and repair of natural resources. One of the measures includes banning of logging in high conservation value native forests (Hamilton, Hundloe & Quiggin, 1997). The adoption of the carbon tax in Australia has several economic impacts both positive and negative. All commonwealth countries follow the Commonwealth Treasury modelling on carbon tax when implementing the carbon in their revenue systems. However, this economic modelling faces some key assumptions and predictions. Firstly, there is a high level of uncertainty on the timing and commitment of countries to the carbon trade. Lack of commitment of countries to carbon taxation will weaken the global market, something that will hinder the ability of Australian businesses to purchase international permits to offset their emissions meaning that local cost of emissions will be higher than those of the Commonwealth estimates (government of Western Australia, 2011). Secondly, since Australia can only trade with countries whose market schemes are linked to Australia’s market, abatement might be more expensive. In addition, before implementing the carbon tax, it was predicted that the tax might require periodic adjustments hence posing long-term price risk for businesses (government of Western Australia, 2011). Despite the positive impacts of carbon tax on environmental sustainability, economists and entrepreneurs argue that the implementation of this tax has negative implications on the economy. To begin with, carbon tax implementation has caused a competitive disadvantage to companies that get their revenue from export of goods as well as those that produce goods that compete with import (government of Western Australia, 2011). Therefore, investment levels in the country will go down due to high initial resource investment. Additionally, high electricity and fuel prices will impose an indirect cost impacts on industries, which will further increase the cost of resource investment in Australia. At the household level, there would be severe hardships since it is estimated that companies will lay off some o its employees due to the increased costs of running the businesses (McDougall, 1993). Another economic implication is that carbon tax will increase the state’s expenses in that the state’s infrastructure program will be affected as carbon intensive building materials such as concrete, steel and asphalt, will become more expensive; and the public net debt will go up if the costs associated with the carbon tax are not passed through to consumers. However, implementation of carbon tax will be beneficial to the government in that it will be a source of revenue, which can be used to provide transitional assistance to households and businesses. Carbon tax also provides short-term business certainty because for a given period, a tax rate is known (Denniss & Richardson, 2010) Further, the implementation of carbon tax has had significant impacts on all economic sectors of Australia including the tourism and hospitality sector. These impacts are both positive and negative, short term and long term. According to Queensland Tourism Industry Council (2011), the implications of the carbon tax on the tourism sector are not yet clear but it seems like in the long run they will not be positive. The direct and indirect impact of high fuel costs will increase the cost of running the tourism industry hence the costs will be transferred to the tourists both local and international. Another impact is that, due to international competitiveness of Australian tourism and hospitality services, most local tourists are choosing the cheaper overseas holidays instead of the local services that are quite expensive (Queensland Tourism Industry Council, 2011). Queensland Tourism Industry Council (QTIC) chief executive Daniel Gschwind said that most domestic tourists will prefer holidaying outside Australia since international fares will not go up unlike domestic airfares that will go up due to the carbon tax.; it will be cheaper travelling internationally than locally. Furthermore, due to the increased household spending brought about by carbon tax, people will cut leisure activities such as holidaying from their household budgets. Conversely, the tourism and hospitality sector will yield some benefits due to the implementation of the carbon tax. One of them is that the tourism sector will be expanded since some of the tax will be used to restore the natural amenities such a native forests of Australia that serve as a great tourists’ attraction. The tax will also be used in restoring some of the extinct species of plants and animals that will also serve as a tourists’ attraction. Moreover, a reduction in greenhouse gas emissions will lead to environmental protection; the environment is the backbone of the tourism industry hence its protection will see a great positive change in the tourism sector. Environmental sustainability is a key factor in the development of any nation since all developments depend on the environment’s ability to provide resources. Climate change is a great impact of environmental destruction activities such as emissions of greenhouse gases, destruction of forests and over-use of environmental resources. The adoption of a carbon tax in Australia has been met with great acceptance by environmentalists but with opposition form economists. The environmentalists argue that this tax will help reduce the emissions of carbon into the atmosphere by industries, agricultural activities and the transport sector among others. This means that the polluters will be required to pay according to the extent of their pollution. Furthermore, the government will use some of the tax to restore Australia’s natural amenities like indigenous forests. On the contrary, investors and economists argue that carbon tax will increase the cost of running businesses due to the increased costs of fuel as well as raw materials. They further argue that at the household level, costs of consumer goods will be high since the manufacture will pass the increased production costs on to the consumers. In addition, carbon tax will increase the state’s expenses since the government has to use green technologies, which are quite expensive. However, despite all these negative implications, it can be argued that in the end the carbon tax will lead to economic and environmental sustainability since natural resources and the environment at large, which is the backbone of all economic activities. References CPA Australia Ltd. (2009). Climate change policy: carbon tax versus an emissions trading scheme- the debate between experts. Retrieved from http://www.cpaaustralia.com.au/cps/rde/xbcr/cpa-site/Climate-change-policy.pdf Denniss, R., & Richardson, D. (2010). Why a carbon tax is good for the hip pocket. Government of Western Australia (2011). Preliminary Assessment of the Impact of the Proposed Carbon Tax on Western Australia. Retrieved from http://www.treasury.wa.gov.au/cms/uploadedFiles/_Treasury/Publications/Preliminary_Assessment_Impact_Proposed_Carbon_Tax_on_WA_August2011.pdf Hamilton, C., Hundloe, T., & Quiggin, J. (1997). Ecological Tax Reform in Australia: Using taxes, charges and public spending to protect the environment without hurting the economy. Retrieved from https://www.tai.org.au/index.php?q=node%2F19&pubid=9&act=display John, H. (2007). Exploring a Carbon Tax for Australia. Retrieved from http://www.cis.org.au/publications/policy-monographs/article/919-exploring-a-carbon-tax-for-australia John, D. (1998). Implications of a carbon tax. Retrieved from http://www.apec.org.au/docs/daley.pdf McDougall R.A (1993). Short run effects of a carbon tax. Retrieved from http://www.monash.edu.au/policy/ftp/workpapr/g-100.pdf N.C. Environmental Stewardship Initiative (2002). Sustainability Definition. Retrieved from http://www.p2pays.org/ref/38/37967.pdf Philip, S. (2004). A Perspective on environmental sustainability? A paper for the Victorian Commissioner for Environmental Sustainability. Retrieved from http://www.ces.vic.gov.au/ces/wcmn301.nsf/obj/cesplan/$file/A+Perspective+on+environmental+sustainability.pdf Queensland Tourism Industry Council (2011). Peak Tourism Body Wary of Carbon Tax. Retrieved from http://digg.com/news/politics/queensland_tourism_news_peak_tourism_body_wary_of_carbon_tax Read More