The Greens’ carbon tax plans

Yesterday, at their annual conference, the Green Party announced their intention to axe the Emissions Trading Scheme (ETS) and replace it with a tax on carbon pollution. It’s a policy that, in general, I support.

The ETS has been a miserable failure. It’s essentially nothing more than a money-go-round, with heavy polluters receiving vast subsidies through free allocations of emission units. With no cap on emissions and an ongoing stream of free units being issued, the ETS provides almost no incentive for emitters to actually limit carbon emissions. The ETS simply does not reduce carbon pollution.

I’ve long been a fan on the principle of capping and trading pollution in order to reduce it, which is what the ETS should have been. There’s an elegance to the concept of auctioning off the right to pollute. Firstly, it creates a cap on pollution. Secondly, it provides an incentive for those who paying for the right to pollute to dob in free-riding polluters who aren’t paying for the right. And thirdly, it incentivises the investment in non- or lesser-polluting technology – pollute less, pay less.

In terms of the Greens’ proposed carbon tax, they’re simply going for a fixed price on carbon emissions. All industries except agriculture will be charged $25 per tonne of CO2 equivalent emissions. Farmers will be charged $12.50 per tonne, while forestry will receive credits of $12.50 per tonne. Sheep and lamb farming would initially be exempt.

I’m no economist, so I can’t provide figures regarding how what it would cost the average farmer or other specified industries. Given that the Greens have provided a precise rate per tonne, one would hope that they’ve got such figures handy. After all, there’s a difference between incentivising lower pollution by taxing emissions, and killing off entire industries due to high tax rates destroying profitability.

An additional element to the Greens’ policy is that the revenue from a carbon tax would be used to cut taxes in other areas. The first $2,000 of personal income would be tax-free, and companies would get a 1% tax cut. Although a carbon tax would increase the costs of petrol, food and electricity, the Greens estimate that the tax cuts would mean that the average household would be better off each year by $319.

National believes the sky will fall if a carbon tax is implemented, which is hardly surprising given their support for our emasculated ETS. Labour doesn’t quite seem to know what it thinks, which should be surprising but isn’t.

Perhaps the most amusing response though has been from Cameron Slater at Whaleoil. As a full-blown climate change denier, Mr Slater hates the Greens with a deep and passionate loathing, but the worst he could come up with today was that making each household better off by $319 is minuscule. Which somewhat misses the point. The Greens are proposing making polluters pay the costs of their pollution. The party accepts that such a policy will increase prices, and therefore proposes using the tax revenue gained to offset that cost for households. The Greens aren’t really into bribing the populace with tax cuts – but they are concerned that households won’t vote for them if they’re facing increased household bills everywhere they look, with no increase in disposable income.

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