Carbon Tax Hyperbolic Worries and Reality Part 3

Well it is the new year and the Carbon Tax passing into law still has not destroyed us yet...but what if it was. Find below part 3 of the hyperbolic worries that stem from the introduction of a Carbon Tax that is all tied into the world from the previous two entries in this series.


3. Livestock kept in bubbles.
The worry:
Australia has a large amount of livestock, with it being our main export after materials and minerals. However all these livestock release 11% of Australia’s greenhouses gases into the atmosphere. To combat this livestock will be placed into bubbles that will suck up the CO2 from their manure, and send it direct to the new super CO2 plants. By doing this we effectively reduce the environmental impact that livestock has. A possible downside of this situation would be the growing rift between the green movement between which is more important, the environment or animal rights.

An idealised version

How reality is almost there:
Australia has slowly been moving towards a more organic culture for their foods, however with the ever increasing cost of living, and the increasing population, things are just going to continue down the road of expensive living. Already we hear the public outcry about how normal Aussie families are unable to handle costs.

Due to environmental problems at farming sections of the country, levels of some livestock are lower than usual, and therefore following the supply and demand structure we see the price in meat increase. Which in effect prices out some of the social markets. With tariffs on important foods increasing their cost, some people within the lower socioeconomic sphere will be unable to afford meat, which will affect their possible nutrition (which many already claim is questionable in Australia), leading to a difficult question of how to make it cheaper for these people. The Government could set a maximum price, which in turn would effect already hurt farmers, or they could implement factory farming. It is space efficient (if less humane), and produces a large amount of product, which would effectively decrease the cost of meat for the population, by producing economies of scale- it is also cheaper for the farmer as well. When people are struggling, and costs are high they can do some things which are cruel, but coldly logical.

Scientists are currently looking into using microbes to convert cow manure into a renewable energy (biogas) which would reduce CO2, and provide a useful tool for society. In Australia the Department for Agriculture, Fisheries and Forestry have the Reducing Emissions from Livestock Research Program (RELRP) to develop methods to reduce emissions from livestock and their manure, and even increase the productivity of the farming industry. At the moment this research includes areas such as selective breeding, the use of microbes to reduce the natural greenhouses from livestock and manure, and a change in diet. You can find out more about this interesting research at the Departments for Agriculture, Fisheries and Forestry’s website.

Exactly like this....Wait that's the wrong kind of bubble isn't it

Dale Stam

If you want to see what came before this check out

Part 1 http://dalesnewsblog.blogspot.com/2011/11/carbon-tax-hyperbolic-worries-and.html

and Part 2 http://dalesnewsblog.blogspot.com/2011/11/carbon-tax-hyperbolic-worries-and_10.html

Or if you are looking for a little more serious about the Carbon Tax check this

http://dalesnewsblog.blogspot.com/2011/02/carbon-tax-and-what-it-means-for-you.html

Carbon Tax Hyperbolic worries and Reality Part Two

Well the Carbon Tax has been in for a few days now, and well not much has happened...yet. Here is part two of this series that examines the hyperbolic worries of the Carbon Tax, and how the world is actually heading towards these often weird scenarios;



2. Trees and Plants become reputable investments.

The worry:
To reduce the amount of Carbon we send up into the white moving beard of God, we can utilise Mother Nature’s great air filter; plants. Plants effectively eat CO2, or the evil carbon and burp our breathable oxygen, that all living creatures including us breathe. Makes you wonder why we killed them for allowing us to breath. Yeah, our bad.

With this magical ability identified, the big pollutants could use plants- especially trees to soak up loads of their CO2, reducing their output and their relative tax cost. However to accompany this change in business investments, would be the increased security to guard the plants. Plants will become such an investment of increasing importance to these companies, that there will be whole new companies crawling out of the woodwork, just so you can invest in plants. Consider it, they are a long term investment, which could theoretically save the company a nice chunk of money that does not need to be taxed. So it is safe to assume a stable investment that will keep growing in value. All of these characteristics point towards super funds. To accompany this will be an increase in research and development into genetically altered super CO2 eating plants. In short you heard it hear first- invest in plants.

How reality is almost there:
In the October 2010 issues of BioScience researchers from Lawrence Berkley National Laboratory and Oak Ridge National Laboratory outlined the various avenues for altering the CO2 conversion that plants undertake to pull the CO2 out of the air, release Oxygen back for us to breath, and place the Carbon into the soil, which will hopefully be left long enough to form a form that is more human useful.

Photosynthesis, or how plants turn CO2 into sugars that the plant used to feed itself and grow depends upon the plants ability to absorb light for growth and suck up CO2, so research is being undertaken to improve these processes, and therefore the associated soil carbon process explained previously. This research would also have the real world benefit of having crops which grow quicker, which could help with the starving populations of developing countries. By incremental improvements in these areas the scientists believe that a significant impact on the Global Carbon could be achievable within the next 50 years.

There are already companies where you can invest in trees and agriculture (or argribusiness) for instance the Macquarie (as in the Macquarie Bank) Forestry Investment, which gives investors the opportunity to invest in Australian plantation forests. True, its not quite the same thing, with the trees being cut down after reaching maturity (approximately 10years), with a minimum investment of $10,340 for 2011. Humans always need wood for paper and furniture, so there is usually an increase on initial capital invested and agribusiness has historically had little correlation with the stock market, a reassuring sign after the GFC. So yes, you can in fact invest in plants, sort of.


Missed Part One? You can catch up here;
http://dalesnewsblog.blogspot.com/2011/11/carbon-tax-hyperbolic-worries-and.html

Dale Stam

Carbon Tax Hyperbolic Worries and Reality

Carbon Tax Hyperbolic Worries and Reality

By Dale Stam 18/10/11

Part One


‘I don’t think we are in Kansas anymore’ Asked Dorothy, breathing rapidly after crashing her house through a giant bubble.
‘Well no little girl, you are in Oz, and I’m afraid you went and broke our bubble’ said a Munchkin quickly before taking a large breath.
‘Why do you have a bubble around the whole land?’ Inquired Dorothy.
‘Well Dorothy it seems the merry old Land of Oz has implemented a tax on Carbon to keep the technicolour bright.’

Whether you like it or not, it seems that we will be implementing a Carbon Tax, this article will focus upon 5 hyperbole worries leading from the introduction of this Tax and tie them into the reality that spanned them. Just keep in mind, it could always be worse.

1. Electricity only supplied during peak hours.
The worry:
Electricity prices are going to go up with this tax. Why? Because Australia has a lot of coal which is made up of Carbon. You can’t eat it, you can’t wear it, its surface area is minuscule so it can’t be used as shelter, you can however do two things.
A) You can draw with it. It is messy and expensive, but that is all irrelevant because it has artistic merit, or
B) You can burn it, and provide heat.
We have developed B so that it boils water, which produces steam, which turns a turbine that gives electricity.

Now during peak hours, the vast majority of people are home from work and demand electricity, so for your share during this busy period you pay a higher rate. This is the section of the bill that is the highest, because the system is under the most stress, however after this period then it will have a long rest where preparations can be undertaken. This is the most lucrative section for energy companies, they would be able to reduce the amount of coal needing to be burnt because they did not need to provide electricity during off peak, or the unimportant people hours. Also because energy companies would not need to burn our dinosaur pals to supply energy for the minority, then they would release less CO2 into the atmosphere, and thus get taxed less. At $25 per tonne companies would be looking at ways to decrease the upcoming tax debt, and if they do this they are not passing the costs onto you, the consumer. Its win-win right?

How reality is almost there:
Electricity in the form that we imagine travelling the wires, does not store all that well. It is impractical for energy companies to charge up car batteries and then distribute them to everyone for personal use, not to mention astoundingly expensive. Solution, build a giant battery, but remember when your favourite song is half way through and your MP3 player beeps off dead. Batteries do not last long, are expensive, and only return roughly 2/3rds of energy placed within. But this has not stopped Australia from researching; currently we have a few avenues;
* Super batteries - they have worked for us in the past so just keep going, but making them more efficient and cheaper.
* Superconducting Magnetic Energy Storage (SMES) devices, which would use the dual relationship of electricity and magnets to create a perpetual field. Downside, it requires energy input to keep the magnets at the required temperature (relative to the beyond freezing temperatures of liquid nitrogen) to create the high quality superconducting effects.
* Mechanical or energy conversion - such as the turning of a windmill or turbine which can then release electricity with a hypothetical flick of the switch.

All of these various avenues will eventually lead to a realistic system that can be implemented and sustained at a country wide level. Then if we can store electricity we can also choose when it is released. So what leads to more efficiency of the company to save the electricity that they will be taxed on producing because of the essential fuel to start the process, could lead to them passing on the costs to the consumer, or the more likely the increasing of costs all around that people can only afford to use electricity when they need it, which would fall usually within the peak hours. If they can release electricity whenever they want, and the eventual demand will be during peak hours, why pay to have it flowing out during off peak hours. Who uses electricity after 8pm anyway?

Stay tuned for the other parts in upcoming posts.

If you liked this article you might enjoy my other article on the Carbon Tax;
http://dalesnewsblog.blogspot.com/2011/02/carbon-tax-and-what-it-means-for-you.html

Or continue onto part two of the worry;
http://dalesnewsblog.blogspot.com/2011/11/carbon-tax-hyperbolic-worries-and_10.html

The Carbon Tax and what it means for you

(http://www.thepunch.com.au/articles/gillard-never-met-a-tax-she-didnt-like-and-hike/ )

As some of you will be witnessing today that Prime Minister- Julia Gillard is 'reneging' on an Election Promise to implement a Carbon Tax from July 1st. There of course will be allot of information in regards to this, and we will have differing points of view, this article will try to analyse these.

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/)

We are all smiling like this bloke, unless you don't live in WA

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

- Increase the cost to the company, and they will be likely to decrease supply so that they can then charge a higher price to the consumer- because there is now a higher demand for the product. We will now look at this situation with the following diagram;

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