The Carbon Tax is a good first step in addressing Australia's high carbon emissions but we really need to introduce the Emissions Trading Scheme (ETS) in 2015 for the carbon price to be an effective pollution deterrent according to one of Australia's most senior economists.
'Many economists agree that carbon pricing is the most efficient method of reducing greenhouse gases, and that the carbon tax is a sensible first step,' said Charles Sturt University (CSU) economist Kevin Parton.
'The Australian Treasury has estimated that the short-term impact for the average household is about $9.90 per week, and the average household will be more than fully compensated for this cost by reductions in income tax and transfer payments introduced by the government,' Parton said.
'The Treasury also estimated the impact of the carbon tax will be between one-quarter and one-third of the impact of the introduction of the Good and Services Tax (GST).'
Parton is certain that there will be issues around the complexity of the tax, especially as around 500 very different organisations will be taxed under the scheme. 'At the high end, a single firm accounts for more than 4% of carbon emissions, while the top six firms combined account for about 20% of total emissions, or an amount roughly equivalent to the whole of agriculture, which is excluded from the scheme,' he added.
'At the lower end, around 190 landfill sites together account for 2.5% of emissions. Establishing carbon pricing rules for these very different sized enterprises is complex, the legislation is not straightforward, and as time proceeds we can expect anomalies to arise.'
Parton believes the overall impact on emissions will probably be small at the start. 'The largest carbon emitters are the electricity generators, which may make little change in their generating operations at the outset. However, they may purchase offsets to avoid paying the carbon tax, and this will reduce net emissions,' he explained.
Carbon tax here for the medium term
The Australian National University's Centre for Climate Economics and Policy (CCEP) interviewed 76 carbon experts in June including 32 who work for big polluters liable to pay the government's $23-a-tonne tax. Just under 40% of all those surveyed believe the carbon tax will be axed by the end of 2015.
But that figure rises to more than 50% when liable entities only are quizzed. Nevertheless almost 80% of the experts believe there will be a carbon price in Australia in 2020.
'The survey indicates pervasive uncertainty about the future of Australia's carbon pricing policy but also a strong expectation that carbon pricing will be a feature of Australia's economic policy framework in the medium to long term,' the ANU's Frank Jotzo writes in the report.
The Opposition has vowed to axe the tax if it wins the next federal election due in late 2013. The coalition says it can be scrapped within 12 months even if Labor and the Greens try to block the move.
A separate Economist Intelligence Unit study released a week ago found three-quarters of 136 senior executives surveyed believed carbon pricing was here to stay - although almost half thought a better regime would eventually replace the current system.
See also Confusion reigns as movers start to shake down carbon tax costs (Australia) and Strong majority favours BC's carbon tax (Canada.)