
It has perhaps come at a bad time for Prime Minister Julia Gillard, with all the recent debate in regards to the Flood Tax Levey, and the need to reduce or close certain Government Subsidies to try to make the cost for people cheaper.
It is obvious for all those with bills that the cost of living is increasing, and taxes- just make it harder, but then taxes also pay for the maintenance of the road that we drive on, the parks we sleep in, and implement other strategies to aide Australians both domestic and abroad.
What is Carbon Tax?
This information was provided by http://climatelab.org/Carbon_tax
Carbon Tax is a tax that is placed on CO2 emissions, and is mostly focused on the CO2 emissions related to the burning of fossil fuels- the same burning that creates the majority of electricity in Australia, and currently China- thanks again for buying our minerals :)
(Australia Post-http://www.theaustralianpost.com/2010/03/andrew-forrest-again-number-one/)

By placing this on to emissions the Government is planning for the company to start to find alternative measures for bringing us energy- mainly green energy. There is at first a fundamental flaw to this at the moment;
A company wishes to make money and at the moment they have not been given an incentive- or better yet legislation to absorb the increased cost that this tax will bring, hence they will more than likely 'pass' the cost onto the consumer, ie you. So the cost of electricity and gas will go up as it has for the past few years, but then you just add some more.
The plan of the Government is also to increase the cost of this tax over the years, thus ensuring greater incentive for the company to change to green or sustainable energy production- but there is likely to be a barrier for a while, because the company can pass a fair portion of the tax onto the consumer.
Here is a diagram
OK lets assume that at the beginning we were in a situation at PE, QE, where the demand for the company's energy is in an equilibrium to the supply given by the company (this is of course simplified and ignoring those with solar energy buybacks, and the lost kilowatts), this means that the cost that we the consumer is willing to pay is being equaled out by the quantity of energy that the company gives us.
Now the Government implements the Carbon Tax, this thus increases the cost of production to the company, and they want to make back this money, moving the price to the consumer to Pc, while the price for the producer falls to PP, hence the consumer will pay the cost of production which is PP, and the added tax, thus Pc. At this point in time a consumer is likely to use less when cost is high, but a producer is likely to produce less when the consumer is paying a low price, hence the quantity will shift from Qe to Qt.
Because of the necessary use of energy in today's society this situation will need to create a new equilibrium, because at the moment at Pc, Qt, there will be a surplus, and that means wasted energy.
Expressed another way;
Shown by an increase in the price that consumers will pay. If we follow this on the y axis (the vertical axis) to Pc, then draw a line horizontally so it crosses both the dotted Demand line and the solid Supply line, we can easily observe that both demand and supply do not overlap here. Hence at the point in time the market will either have a decrease in quantity to Qt on the x axis (horizontal axis). Demand is still high, but if the company wishes to make the money back they might be enticed to reduce the supply, thus bringing a shortage to the market and hence people will pay more for the privilege to use it. This would then eventually create a different equilibrium

At the beginning we are at the Equilibrium of PO, QO. Then the Company is now under the influence of the carbon tax, so they will have an increase in their costs, and the easiest way for the company to deal with this increase in cost is to pass it on to the consumer. Hence the new cost of P1 is formed,
1. The increase in cost is likely to turn people off from using the product and this will hence create a decrease in demand for the product, shown by moving left on the demand scale to its new position on P1, and the company will in turn create less of it, hence shifting the supply scale to the new scale of S1, which then creates a new market equilibrium of P1, Q1.

2. Then as the population grows and the lack of fossil fuels starts to occur there will be an increase in demand which will then increase the price to consumers again, and increase the quantity. Shown in the movement from the equilibrium of P1, Q1 to P2, Q2, which requires the shift in the demand curve to the right.
3. Perhaps the Government will show leniency and give low income earners a subsidy to aid with the supply of power, here is a graph showing the effect of a subsidy using the example or meals.

At the original equilibrium of P1, Q1 we realise that there are still a large range of people who could be getting energy (food) and but cannot afford it (those on the demand scale below the equilibrium point), hence with the introduction of a subsidy, the company will be forced to decrease the cost of their product by increasing supply- shown in the shift in supply to the right, and the new equilibrium of P2, Q2. The downside with this situation is that there is still the variance between P1 and P2, and this loss in income might eventually cause financial trouble for our power companies, even though the new equilibrium of P2, Q2 should now be economical for both producer and consumer.
Conclusion;
Overall there will be an increase in the cost to the consumer, and the Government is unlikely to give everyone a subsidy for power. Hence will mean higher costs, and because the fossil fuels, and electricity are now such fundamentals of our civilisation, there will be run off costs from other businesses and industries thus increasing the cost in nearly everything- like the GST, another controversial tax.
Questions- Would it then be us or the companies that are really taxed?
The tax is meant to be a burden upon companies, so as to encourage them to improve environmentally, but there will be run off.
* Will all forms of carbon emission be taxed?
The focus will be upon business and industry that are involved with the burning or fossil fuels, though there is a possibility that in the future the plastics and other petroleum products could have a similar fate- though probably at a smaller rate.
This is also possibly true for the agriculture industry. There might also be a related push for cleaner motor vehicles or face the possibility of tax.
Taken to its logical extreme, all people breath out carbon dioxide which in some way would add to the global warming issue (If you believe that; that debate is not the purpose of this article), but it is highly unlikely, and would cause a large outcry from civilians.
* Will the carbon tax create jobs?
This is debatable, Julia Gillard states that it will, these will most likely be in the following areas;
- Those who are called in to license new businesses with carbon tax policies, and the policy makers, and legislation. This in turn will call for an increase in lobbyists from various groups.
- Those who are encountered with the administration and enforcing of the carbon tax. Perhaps a new office or department in public service, and the conflictory business associations.
- Those who will be tasked with counting and then taxing businesses, and industry.
So there is the possibility of creating jobs yes, but it should be noted that any loss in profit for a business (as seen in the GFC) that it would also create the possibility of loss of jobs- this is also a point that the opposition to the tax are pushing.
* This all sounds rather negative why would Gillard risk her governance over this?
The timing of the announcement is unfortunate, with Australia, New Zealand and its allies recently undergoing many natural disasters and thus the need to act and place money into situations that will aid these people have taken the forefront, and have lead to debate on the flood levy tax for example. Australians and all nationalities do not like tax, it is a cost, and items are getting more expensive, however without an efficient tax system a lot of the items mentioned previously, among others would not be available. Sometimes there is waste, and some projects do not work, however the idea that everybody is charged some money to aid in the assistance of all Australians is a noble one.
The Government is trying to implement a strategy which they believe will be a future benefit, probably generations from now- when companies are using energy production that is not based on fossil fuels, and thus the aiding in the environmental problems. The concept of the carbon tax or emission trading schemes is has been around for a while and is in debate around the world.
They are working for a future benefit, similar to the experiment that was conduct where children where given the option of having on piece of candy now, or getting 10 pieces if they were to wait 10 minutes. Unfortunately a majority take short term pleasure over the possibility of greater rewards- hence there will always be more people who would prefer to keep the system as it is or with a slight better off for them- increase the economy, then bargain it on the long term possibility of environmental success. Yes, you read that right- a bargain.
There is concern that if we pass this law the following will happen;
- Loss in jobs and a decrease in the economic ability of Australia- yes we survived the GFC relatively well, but this would be self imposed.
- The possible environmental benefits would not really make a dent globally- unless we were able to protect Australia's air from all the other air in the world- so why should we, 'shoot ourselves in the foot'. This could follow from the 'problem of the commons'; which can be described as follows;
The problem of the commons arises when a group of individuals each acting in an independent and logical fashion will consciously engage in actions that will act in their best interest in regards to a finite resource (our environment), even when it is clear that the the long term ramifications of such an action will be detrimental to the group, and thus each individual.
Each country/region/person wishes to benefit themselves first- and this usually means an increase in income and prosperity- hence using resources, which can then destroy the land. Thus although everyone is acting as an individual, they are in effect all working as a group to in this case endanger the environment.
There are problems when this comes about because if we wish self interest it is hard to actively do something that is not in your immediate interests- hence it usually takes a person or body in authority to take such action- hence usually the Government. But the effectiveness of the current Government and their 'authority', especially when related to the tied election is debatable- and why debate has been a rampant fixture of most decisions made by them.
So in conclusion they are trying to make a lasting impact for better or worse, and hope that other countries will follow, and hence the ideology of the commons will be changed.
* Is Australia the only country that would engage in the carbon tax?
Other countries around the world have similar programs in place such as;
- Finland were the first to adopt the concept of the carbon tax in 1990.
- Sweden followed suit in 1991, with the result of a large increase in biofuel use, and is often the country cited with for an example.
- Netherlands had a fuel tax and now have a Regulatory Energy tax in 1996.
- UK produced a 'climate change levy' in 2001 that was used to fund energy efficiency and renewable energy activities.
- New Zealand has had discussion of a carbon tax from 2005, and a more recent emission trading scheme from 2007 has been on the tables.
- A few states in America have enacted their own carbon taxes or similar programs.
So if Australia were to enact their own carbon tax, they would not be alone in the world, with various models to choose from, and use as guidance.
(All facts for this section were gained from http://climatelab.org/Carbon_tax)
* Closing
There are costs to be accounted for in our future- and this Government; timing bad as it is, perhaps are moving forward. Yes they are reneging on a promise made, but is the possibility for further benefit to Australia and the world in the long run worth it? Possibly? Maybe not?
This article is not meant to give a definitive answer- it is meant to enlighten those who happen by.
Also it helps to have the Greens around to take some of the blame.Leave what you think about the new tax, the Government, or even the article below.
Dale Stam
Carbon Tax worries perhaps you should look at the following;
Part One;
http://dalesnewsblog.blogspot.com/2011/11/carbon-tax-hyperbolic-worries-and.html
Part Two;
http://dalesnewsblog.blogspot.com/2011/11/carbon-tax-hyperbolic-worries-and_10.html
Are you Interested in Social Issues perhaps you will be interested in some of the following articles on this blog;
http://dalesnewsblog.blogspot.com/2010/11/obesity-article-1.html
http://dalesnewsblog.blogspot.com/2010/11/sociology-and-problems-group-report.html
http://dalesnewsblog.blogspot.com/2011/04/tripping-giant.html
http://dalesnewsblog.blogspot.com/2010/09/what-about-youth.html