Carbon Tax Impact

A carbon tax would involve the government identifying which sources of carbon pollution will be included and who would be liable to pay tax on that carbon pollution. For example, a coal mines, mining industries, burning coal, vehicle industries, Transportation. The government of Australia has introduced the ???carbon tax??? on carbon producing sector from July 2012 to minimize carbon emissions in three to five years time from its introduction (Gillard, 2010). The government has also planned to reduce carbon emissions to 5% by 2020 as the voluntary target in the absence of a coherent international agreement on the level of carbon emission reduction. This cost will initially be set at $23 per tonne of Co2 equivalent, and increase gradually until 2015. However, the government will shift to a trading scheme that will let the market set the cost. This is widely thought of as the most effective and least costly mechanism to reduce carbon output and reduce the level of climate change. Though, the policy to cut emissions is regressive and the tax burden will be unequally distributed among different household groups with low-income households carrying a relatively higher burden.
If Australia does not make a global effort to fight climate change, there are significant risks to the Australian economy if not take steps towards pricing carbon (Birmingham, 2013). For example, the risks facing by Qantas, who paid carbon tax penalty of 15% on its carbon emissions for any flights it makes into or out of Europe. The reason for its imposition is specifically because Australia does not have carbon price in place.
There are further economic reasons behind acting to implement a price on carbon, aside from the risk of foreign sanctions. The fact is that renewable energy technology will be the next huge growth industry. The Chinese have been quick to recognise this and have the highest level of investment in this sector, accounting for almost 25% of worldwide investment in renewable last year for a total of $50 billion USD ( If Australia does not incentivise investment in the sector, Australia would simply be left behind. Therefore Australia has introduced a new energy sources which is called clean energy future. The minister of climate change and energy efficiency stated that, there are four component of clean energy future. Firstly, establishment of carbon price on carbon tax, secondly supports for renewable energy, thirdly to support improvements of energy efficiency and last one is storing carbon through changed land use practices. A price on carbon is the most environmentally effective and economically efficient way to reduce pollution. This means our economy can continue to prosper without our pollution continuing to grow.
Effect and impact of carbon tax in Australia:
The carbon tax induces production changes throughout the economy and all employment groups are bearing burden with negative effects. There are not only positive or benefit of this policy there are lot of negative aspects after the carbon tax implemented in Australian especially for big and medium industries as well as households. There are so many example of recently affected from the carbon tax. For instant, over the last 12 months, 10,632 Australian companies have gone belly up, a number that is ???more than 12 % higher than during the global financial crisis,??? (The New American News Reports). The tax has already hiked the cost of electricity to the average family by 10 percent. For businesses, which use much more energy, it??™s even worse.

Grant King, head of Origin Energy said that ???up to 30 % of small and medium sized enterprises would affect from the electricity bills goes up from carbon pricing and other green schemes???. The treasurer for the state of New South Wales (NSW), Mike Baird, told to News Limited that ???there is no doubt the carbon tax is driving higher electricity prices for businesses across the state???. NSW Treasury analysis for this financial year shows that NSW electricity customers including small businesses and households will be hit with a bill worth an estimated $580 million due to higher power prices as a direct result of this disastrous tax.
Furthermore, Australian Chamber of Commerce and Industry chief economist Greg Evans blamed ???intentional policy actions of government designed to increase the cost of doing business for the rash of insolvencies and rapidly rising energy prices caused by the carbon tax and other green programs are taking their toll on many Australian businesses???. He also added to News Limited. ???In energy-reliant industries it is already showing up in job losses, deferred investment and in the worst cases, business closure and it will lower our standard of living and be harmful to national productivity
Grain Products Australia (GPA), for example, was liquidated last year after being socked with additional costs of $500,000 a year owing to the carbon tax and other environmental levies. About half of the company??™s 68 employees will lose their jobs as a result. The firm??™s former managing director, Rob Lowndes, told News Limited that the carbon tax was not the ???primary factor??? in GPA??™s insolvency, but it was ??????certainly an added cost??™ which was making it hard for manufacturing in Australia???.
Manufacturing isn??™t the only sector that??™s suffering because of the tax; tourism is also taking a huge hit. Peter Macks, head of Macks Advisory, a consulting firm for insolvent companies, told News Limited that ???the carbon tax was ???quite debilitating??™ for a number of hotel operators who he said had been ???struggling for a long time. It is very tough operating at a profit,??? he added.

A study commissioned by Tourism Accommodation Australia found that the carbon tax will pile an additional $115 million a year onto the operating costs of hotels and motels, reducing their profits by 12 percent. The carbon tax is also discouraging foreign investment, Campbell Jaski, a partner at PPB Advisory, another insolvency consulting firm, told to the News.

Benefits of carbon tax:
Problems of Carbon tax:
Production may shift to countries with no or lower carbon taxes (so called pollution havens). The cost of administrating the tax may be quite expensive reducing its efficiency. It is difficult to know the level of external cost and how much the tax should be. There will be possibility of tax avoidance. Higher taxes may encourage firms to hide carbon emissions. In the short term, firms may not feel they have many alternatives. Though other time, demand will become more elastic as more alternatives are generated.

Consumers dislike new taxes and often don??™t believe that they will be revenue neutral, this is not an economic argument, but it is a political reality and explains why it is often difficult to implement. A global carbon tax may curtail economic activity in the poor developing world because they can??™t afford the small increase in energy costs, but the developed world may simply be able to pay there may be need for a carbon tax to reflect different abilities to pay.

Corporate example of affected industries in Australia:
One of the Australian leading world famous aluminium industries QUEENSLAND Alumina Ltd (QAL) has shed 200 jobs since the introduction of the carbon tax. The chief executive of Rusal group Mr. Oleg Deripaska said to The Australian news that the carbon tax would have a significant long term impact on operations at QAL, based in Gladstone.? The Rusal owns a 20% stake in QAL. He added, as a consequence of rising costs, including energy and a carbon tax of about $23 million a year and rising, coupled with a renewable energy charge.
Federal Member for Flynn Ken ODowd highlighted the comments as evidence the carbon tax was threatening the viability of one of Gladstones core industrial facilities. He added that the carbon tax has had, and will continue to have, a negative impact on our aluminium industry here in Gladstone, and these comments are simply more proof of that.
QAL is a facility that operates to a greater level of efficiency than many of its rivals all over the world. Despite that, the company is being punished, whilst the Gillard Government has rewarded other, less efficient facilities in the south with bailouts. As the construction phase of the LNG projects will wind down in the coming years and will rely very heavily on new and traditional core industries, including QAL, to maintain growth and prosperity in the wider Gladstone region. Mr? Deripaska said there had been a big decline in Australias competitive position since Rusal purchased 20% of QAL in 2005.
Further he added that the key issues have been the large increase in the exchange rate and the continuing erosion of Australias competitive advantages. The mining boom has pushed up the exchange rate and tightened the market for the skills necessary to maintain value-adding industries in regional Australia. The independent obligation of the carbon tax directly harms the manufacturing and processing industries in Australia. He also said the rapid expansion of the onshore liquefied natural gas industry had also been poorly managed. The price and availability of gas to domestic consumers and industry has been impacted because the owners of the LNG plants presently have an insufficient level of gas to meet the rate of exports approved by the government. His main concern about the carbon tax was that it was designed to shift facilities such as QAL to a higher-cost energy source such as gas, where there was no long-term certainty on supply. This could lead to local processing and jobs moving overseas.
The Rusals targets are going to increase the efficiency of operations and move further down the cost curve through replacing outdated capacities with new low-cost ones. As he mentioned the company could move overseas, their plan to reduce output by 300,000 tonnes of aluminium and keep it at this level for about three years and at the same time, they will also launch the first phase of energy efficient and economically efficient, Boguchansky smelter in Eastern Siberia.

Conclusion and recommendation
The Government of Australia required to be well informed about the possible effects of environmental policies such as carbon tax, which will have far reaching implications. In Australia through a carbon tax is achievable without major disruptions to the Australian economy. In particular, the government??™s target of reducing Australia??™s emissions to 5 % below 2000 levels by 2020 seems reasonable with a $23 tax with minimum adjustments.
The tax would result in an inflationary effect to the consumer prices. The research shows that the 26% increase in the price of electricity. This is not surprising as Australia??™s electricity generation is heavily dependent on carbon intensive black and brown coal, which attracts a large amount of carbon tax burden. Electricity generating sectors will be negatively affected, especially those which are heavy fossil fuel users. Due to substantial emissions by black and brown coal generators, these two sources of electricity will become fairly expensive with a carbon tax in place and will face a significant decrease in demand.
The Australian government should not subsidise its industries. However, it should support efforts to improve its competitive position. The government should encourage initiatives that improve national productivity such as more flexible labour laws and sound investments in infrastructure and training, while removing artificial energy costs such as the carbon tax, levies on renewable and red tape, which limits coal and gas developments. Without these changes Australia risks the type of processing that is conducted at QAL being forced offshore. This will result in an increased risk of losing a key competence of Australias technically sophisticated minerals processing industry.
It is my personal opinion that Australian government should aware and conduct the rule strictly for global warming and carbon emission. However, the government also need to think long term alternative sources in international competitive price to support and survive to the industries, which plays the significant role for Australian economy and international business.