Nothing merry about carbon tax money-go-round
Australia’s carbon market could barely have started in a more farcical manner, or with less certainty.
In an absurd money-go-round Australia’s government has now started handing over millions of dollars in subsidies ahead of issuing even larger carbon tax bills.
The Clean Energy Regulator’s provision last week of free carbon units to two companies signals the commencement of Australia’s carbon market. Alcoa and Queensland Nitrates have received 6.37 million free carbon units, worth nearly $150 million at the initial carbon tax rate of $23 per tonne.
Bizarrely, the Gillard Government itself has issued no media release either announcing or welcoming the start of this market or this particular expenditure of taxpayers’ money – not Prime Minister Julia Gillard, not Climate Change Minister Greg Combet, not even Climate Change Parliamentary Secretary Mark Dreyfus.
They left it to the new $256 million member of the carbon tax bureaucracy, the Clean Energy Regulator, to quietly issue a media release late on a Thursday afternoon before a long weekend.
Then again, $150 million is but a fraction of the $8.6 billion expected to be handed out to industry during the first three years of the carbon tax, let alone the total churn generated by the $9 billion a year tax.
Essentially, Labor is handing over a fistful of cash to a select few companies, only to later demand a wheel-barrowful of cash in return.
This churn of money almost makes sense when considered alongside the ongoing chaos and confusion surrounding the carbon tax.
The carbon tax has only been in operation since July and already Labor has scrapped the floor price they once said was necessary for business confidence. Certainty was also a victim when the Contract for Closure program to shut down power stations was abandoned, meaning the carbon tax will have to be even higher to achieve the same emissions targets or that there will have to be an even greater reliance on the purchase of overseas permits.
Labor’s ongoing rewriting of Australia’s carbon tax laws now also sees their effective outsourcing to Brussels. The looming linkage between the Australian and European schemes will mean that higher targets set by Europe or faster emissions growth in Europe will result in a higher carbon tax in Australia.
Even claims the carbon tax supports “lowest cost abatement” have been seriously undermined, with another change to the carbon tax laws set to impose a stringent new cap on the use of those international permits that are most likely to be cheapest.
Every change to the carbon tax simply seems to point to higher costs, more churn or more bureaucracy. Yet none of the changes point to better environmental outcomes or even a small reduction in Australia’s actual emissions in the foreseeable future.
Emissions in Australia and across the world will keep going up, even with the carbon tax in place, even under the government’s own modelling. The fundamental raison d’être for this tax is just not achieved.
Nonetheless, the giving of carbon permits by one hand of government has begun and will soon be followed by the taking of even more carbon tax by the other hand of government.
These costs will increasingly pass through the economy, with Australian households and businesses feeling it ever more in each and every electricity bill. Meanwhile, the long-term impacts to competitiveness will increasingly be felt in every investment decision made.
There’s no merriness in this carbon tax money-go-round, which is no doubt why the government has become so determined to stop talking about it.
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