The price
The price is $23 per tonne of carbon dioxide (or equivalent other greenhouse gases). Around 500 of Australia's biggest companies (who are responsible for around 75% of Australia's emissions) will pay. No-one else will pay this tax directly. This makes sense, because while these big businesses already report how much greenhouse gas they emit, it is difficult for smaller businesses and certainly for individuals to measure their own emissions.
Putting a price on carbon pollution will make things that involve carbon emissions more expensive. The more carbon emissions, the more expensive. The effect:
- It will encourage people to choose less emissions 'intensive' products and services. So, for example, you can choose to buy the expensive fruit that has been shipped over from the other side of the country in a refrigerated truck (all of which involves high energy and therefore carbon emissions), or you can choose the local, low emissions fruit from the market garden outside Melbourne.
- It will encourage people to use less of the emissions intensive products and services. For example, you can choose to keep overheating every room in your home in winter while sitting around in shorts and a t-shirt, or you can use less heating, put on a jumper and pay a tradie to seal up the cracks and gaps around your doors and windows, making it easier to heat your home.
- It will increase competitiveness of products and services that involve less emissions. This follows from the first point. Services that involve lower emissions will be more competitive than those that involve high emissions. The best example is renewable energy. It will now become more competitive with dirty coal energy, because coal has high emissions, and renewables have zero emissions.
- It will encourage businesses to cut the emissions involved in their products and services. This also follows from the first point. If my business is competing with other businesses, and I reduce my emissions so I pay less tax, then I can sell my products cheaper and I will get more customers.
The package
Apart from creating this 'price signal', the carbon price will raise billions of dollars, which the Government plans to use to:
- Support renewable and low emissions energy
- Support energy efficiency
- Assist households with the cost of the scheme
- Support jobs that might be affected by the scheme
Renewable and low emissions energy
The package contains a big boost for renewable and low emissions energy. We're pretty happy with this!
In summary, the package includes:
- The Clean Energy Finance Corporation, with $10 billion in funding, to help commercialise renewable energy, low emissions energy and energy efficiency technologies.
- The Australian Renewable Energy Agency (or ARENA), which will manage $3.2 billion in existing funding for renewable energy. This will hopefully mean that all the different renewable energy programs will work properly together, rather than separately.
- The Clean Technology Innovation Program, with $200 million in funding, which will support research and development work on renewable energy and other low pollution measures.
- The closure of 2000 MW of dirty power stations. This will probably include Hazelwood power station, the dirtiest power station in Australia.
- A review by the Australian Energy Market Operator to prepare the electricity network for more renewable energy.
Energy efficiency
The package also contains new support for energy efficiency. We know that energy efficiency is the single most cost-effective way to cut emissions fast, so this is a definite step in the right direction.
The measures include:
- $200 million to help improve the energy efficiency of local councils and community facilities. This could include things like upgrading public street lighting and retrofitting public buildings.
- $100 million to run trials of programs that would help low income households improve their energy efficiency. Many low income households spend a large amount of their income on energy bills, so this is a welcome step.
- $30 million to help some of the most disadvantaged households get on top of their energy costs and improve their finances. This could include assessments and retrofits of old, inefficient homes.
- Expanding the Living Greener website, which has heaps of information about how you can save energy and cut emissions, and establishing a phone line for people to call for energy efficiency advice.
- Working to create a national energy efficiency scheme like the Energy Saver Incentive scheme we have in Victoria, to provide subsidies for energy efficient products and services.
Assisting households
Now, let's just get one thing straight. The scheme will have a minor impact on most households, less than $10 per week. This will be in the form of increased costs for products and services produced by those 500 companies who have to pay the tax.
Most of us can afford $10 a week. Most of us would say that $10 a week is a small price to pay for a scheme that gets Australia on track to play its part in reducing global emissions and avoiding dangerous climate change.
But there's more! Unlike other taxes, you can evade this one. You don't have to pay that $10 a week. As we explained above, if you reduce the amount of 'carbon intensive' products and services you consume, or switch to lower carbon products and services, you'll pay less!
And there's still more! Most people won't have to pay even this $10, because the Government will provide compensation in the form of income tax cuts and increases in welfare payments. For low income households, who really will suffer from a small increase in costs, the compensation is intended to be more than the expected cost impact. In other words, if this compensation works as intended, they will be better off!
So what's all the fuss about? Well, for the most part, the concern is misplaced. People are scared because they don't have good information about the scheme.
Supporting jobs
The carbon price may have an impact on some industries, particularly industries that have high greenhouse gas emissions. The Government has a range of measures to minimise the impact on jobs, and ensure that people whose jobs might be affected will be supported to transition to other jobs.
Unfortunately, some industries have lobbied hard for compensation above and beyond what is required to support jobs. The political compromise that has been reached is not ideal, and there appears to be a lot of money and compensation being given to some companies because they made a lot of noise. This, unfortunately, seems to be the nature of our current political system - you rarely get the perfect outcome.
Other measures
The Government has increased its long term emissions reduction target to 80% by 2050. This is very significant, and brings our long term target more into line with what the science demands.
Steps will also be taken to de-politicise carbon policy in the future. The Climate Change Authority will be set up as an independent body like the Reserve Bank of Australia. It will advise the Government on carbon policy, including what the emissions targets should be each year.
Hopefully, this will remove some of the politics from our climate change response, and ensure that we make policy on the basis of good, independent advice and analysis so that we actually achieve our emissions reduction targets.
Read on!
We'll have more information and analysis of the package on this blog over the next few weeks, so keep checking in. In the meantime, you might want to take a look at these resources explaining the carbon price package in more detail:
- Australian Youth Climate Coalition's South Park video summary
- CHOICE magazine's summary
- The Climate Institute's policy analysis
- The Government's Clean Energy Future website
Also see these previous MEFL blog posts on carbon pricing, and our video blog on why you should support putting a price on pollution.
