Carbon Price Announcement

OK, so I was surprised on the upside and the starting price is $23/t. The Greens have indeed exerted their influence through the negotiation and what has emerged is a surprisingly strong package, which when implemented will perhaps be the most comprehensive carbon scheme in the world. You can see the influence of the Garnaut Review and the Productivity Commission report here; countries around the world have shown that there are a multitude of policies you can use to reduce emissions, but the most effective one is a broad based carbon pricing mechanism.

Other details of the package:

  • starting price of $23/t, escalating at 2.5% nominal, commencing 1 July 2012
  • transition to floating price (cap-and-trade) from 1 July 2015
  • targeting 5% reductions (below 2000 levels) by 2020 and a new target 80% reduction (was 60%) by 2050.
  • compensation for households in the form of tax cuts and payment increases, using 50%+ of the revenue. tax-free threshold top be tripled (linked to Henry Tax Review recommendations)
  • EITE assistance: Most trade exposed emission intensive industries get 94.5%. LNG gets 50%. Certain industries get special focus for jobs and abatement solution: steel ($300m over 4 years) and at-risk (gassy) coal mining ($1.3b over 4 years).
  • Energy sector: Negotiated closure of 2,000 MW of capacity (probably Hazelwood and Playford), and assistance to financially at-risk generators to refinance debt. Energy Supply Council to monitor security of supply issues.
  • $3.2b Australian Renewable Energy Agency (ARENA)
  • $10b Clean Energy Finance Corporation (CEFC)

Economic impact:

  • 0.7% once of increase in inflation
  • 0.1% reduction in GDP relative to what it would otherwise have been
  • expected average food price increase per week:  $0.80/week
  • expected electricity price increase per week: $3.30/week
  • total average household increase: $9.90/week
  • average household compensation: $10.10/week
  • reduction of emissions by 160MT relative to Business As Usual by 2020.

One interesting departure from the Garnaut recommendation is the 2.5% nominal year on year increase, rather than 4% real.  However, starting at $23/t and rising at 2.3% gets you to the same point as starting at $20/t and rising at 7% (around $24.50-24.70 for 1 July 2015 year)

Next step is of course getting this through Parliament. What’s changed relative to the CPRS legislation is that we have a negotiated package that was arrived at with the key parties (Greens & Independents) that are critical to package through both houses.

Comments

  1. Bubblelicious

    So, if there’s a guaranteed hit to inflation does that mean an RBA rate hike is around the corner?

    • Doubt it. Like the 9-10% one off increase with the GST implementation, the RBA will ‘look through it’ I would imagine as a one off level increase.

      • Got to give it to the Govt, how they have spun this “Like the GST” comments, and people are feeding off it. This is nothing like the hit to CPI “Like the GST”. Eg. One day, No GST, the next GST. The hit was overnight and measurable.

        The Carbon Tax festers inside costs for months/years and is trickle released when the business realize they need to be charging more to cover the increased costs. And when it is released its hidden inside other things. Modelling is 0.7% which is the visible increase, the invisible increase is where people will feel it. And this part, the RBA will not look through, and will increase rates higher than if there was no C.T. Guaranteed.

      • Agreed. The challenge is that when a cost gets passed on to a business, they don’t simply add that amount to the find price of the product, they calculate the final price based on a margin they want, need, or can justify to a market. This is there the hidden cost will be felt as the government can pay out every red cent in carbon tax on compensations, but so long as businesses are free to charge what they want, and conditions permit, increases will always be greater than the sum of the cost increase.

        But I wouldn’t expect a lawyer or a tafe teacher to get that…

      • Sorry, typo, third line should read “final price”.

        +1 for an edit button and email notifcations for replies!

      • +1 for an edit button too. 🙂 or +50 – to move to a new discussion system like Discus. 🙂

      • Well the key phrase there is “if conditions permit”. Businesses are alreaydy free to charge whatever they want for their products, and people are free to say “take a hike, that’s too expensive”. The carbon price/tax/ETS won’t change any of that.

    • All I know is the electrical companies will have a higher out lay and they will pass it on as will the manufactures and the shops and everybody that is in between, insurance companies, doctors. We are at the end of that long rope with no where else to go. I am starting to feel a like a little boy holding a dustbin lid up against tsunami, I run a very small business already struggling.

  2. Thanks for the summary. It’s been a little difficult to find a collection of all the details and potential impacts in one place.

    One thing which strikes me about today’s announcement is that unlike Keating’s famous “Recession we had to have” statement which essentially had the effect of killing off inflationary expectations, Gillard’s Carbon Tax policy looks like doing the exact opposite.

    Everyone now knows that we all are all going to have to start paying more for fuel, electricity etc as the prices are passed down from companies to consumers.

    It’s a fait accompli that prices will go up, and it could take effect immediately as companies would know that they’d be able to take some extra profit now with the expectation that once the legislation is passed people will expect to pay more.

    • Whether firms can pass on cost increases depends on the state of demand for the products they offer. Production costs are always in flux for most enterprises and the management issue is to find ways to maximize margins notwithstanding ever-changing input cost equations. The most significant factor in this is the intensity of competition. If these factors are mild, prices can be (and often are) increased even if costs are static or falling. Some iron ore producers have been in this fortunate position in recent years. Their marginal selling prices and profits have risen completely independently of their production costs.

      If competitive pressures are strong, it may not be possible to increase prices at all even if costs are rising. The experience of the local steel industry is a good example of this – even though input prices have been soaring, final product prices have been compressed by the high AUD, and margins have been squeezed out of existence.

      The same dynamics will apply to carbon emission rights. These will come to be treated as a variable production cost, like any other. Firms will try to find ways to minimize them, in the same way as they have found ways to minimize the labour and raw material inputs in the past and are permanently engaged in achieving optimal resource and capital allocations.

      Pricing pollution will induce firms to find ways to reduce the pollution they create. This is assured by the competitive nature of market economies and by the constant imperative that firms maximize returns on their capital.

      Firms will argue they have few choices when it comes to energy inputs. But if this was once true, it is no longer really the case. There are many alternative energy sources available. The challenge is to fully commercialize and replicate their use across the economy.

      • You are correct in respect to pricing David. If the market supports higher pricing (structurally or competitively) then that’s what we’ll get, otherwise it is likely to be a little above the forecast. I would however point out that a large portion of the top 500 companies in Australia are in structural oligopolies, which increases the likelihood that some amount of market leading behaviour, or price signalling will move the norms higher than the target range for inflation…I’d like to be proven wrong, however I doubt many would want to take that challenge at this early stage or proceedings.

        The point that I can’t agree on however is the notion that alternatives exist for all areas of production…please point to one steel mill powered by solar, or for that matter, any other heavy, and energy intensive industry.

        Additionally, unless the cost associated with CO2 emissions exceeds the relative amortized cost of capital investment in reducing same, then the CO2 cost (tax or market method) will simply be adopted as a variable cost of production with savings required to compete against non-CO2 costed producers (imports or smaller companies) being driven through other reduction initiatives such as redundancies, job-sharing, out-sourcing, off-shoring and less investment in R&D and non-critical infrastructure as companies seek to maximise returns on capital in the short term…It’ll work until it doesn’t, then we export the remaining jobs. We already know that capital has no conscience.

        You also suggest that this is a price on pollution, however this is a price on one singular output of production (allowing for the very real possibility that the science is substantially wrong, though this is largely irrelevant.) Will this not simply induce many businesses to offset this cost against other initiatives (water reduction, waste material reduction and recycling, community environmental programs, social benefit programs etc?)

        Singularly dimensioned policies like this never quite work as planned…it’s that law of unintended consequences again, and it’s back with a vengeance.

      • There are lots of Aluminium plants linked to hydro power …. being so energy dependent lead to thinking about this much earlier for the industry …

  3. LOL Guillard’s workchoice

    Is there any further legislative steps where this moronic stuff could be stopped ( moronic as every gram of coal extracted we do not use is going to be burned in china and we extract more coal by the minute, effect ZERO)

    How the next government can scrap it ?

    Cannot believe they dare talking of the 5% target as we already above 2000 that would be 40% less per capita, people are that gullible ?

    Bye bye guillard ( and I vote green, but this stuff makes no sense)

    • How the next government can scrap it ?

      No, because the legislation to repeal it won’t get through the Senate. The people elected some “extreme Greens” who will make that difficult.

      While I sympathise with your point about coal exports, the answer is not to stop pricing carbon domestically, the answer is to price carbon everywhere.

      • No the answer is to stop extracting carbon faster and faster

        Since it is not going to happen, why borther ??

        There plenty of other positive way to attack the problem and to produce more energy, not less.

        I cannot imagine this stuff being implemented or not repealed.

        Unlike most countries who have implemented a scheme, we are producing/extracting carbon based energy. This scheme is moronic in our very particular situation.

        Aussie politicians are hopeless

      • you understand that humans breath out carbon right?? and plants breath it in?? its a tax on breathing, nothing more.

      • Actually breathing is sustainable and nothing to do with fossil fuels … and also not taxed.

      • Exactly – the answer IS to price carbon everywhere. Instead we have priced it only in Australia and essentially exported our emissions to China (because we continue to export coal). No net gain for the planet.

        This is not an environmental policy. It is wealth distribution disguised as saving the world.

      • The carbon tax will not tax coal production as such. It will not prevent the export of coal. What is does is tax the production of CO2 emissions. That is, it taxes pollution. The Chinese will still be buying Australian coal and using it to make steel.

        However, in the same way as China is now trying to reduce the carbon intensity of its industries, we will now be trying to do the same thing.

        By arguing that Australia should do nothing to arrest its carbon pollution, you are really asserting that Australia should be a free rider – that we should let others incur the costs of reducing pollution while we also take the benefits of a less-polluted atmosphere.

        This is a strategy that surely will induce all other players to sit on their hands. It is a call to failure.

      • Where did I argue we do nothing? I simply argued that the world needs to collectively agree on a emissions reduction scheme or it is pointless.

        Gillard has stated that she sees a bright future for coal in this country! How is this consistent with a reduction in emissions?

      • Carbon E Coyote

        Also, once it’s through, business will be making investment decisions on it and locking in capital. Regardless of the make-up of parliament, once it’s in, there will be many many voices urging it to stay.

      • Yes, the same voices who will take their capital and invest in other economies who are promising greater returns…

        Market leading behaviour is something best left to the market leaders, not a pissy little Pacific nation like us.

        Anybody who thinks we punch above our weight in all things global is deluded and need only look at our emphatic compliance with the desires of the WTO, IMF and US Govt on all matters related to taxation and economic reform over the past 30 years. We heel like the good lap dog we are.

        Sure, if the rules for sitting at the big table required us to tax CO2 then fine, but to do it this early, before our economic big brothers? That’s just insane.

        This will reduce investment in our economy as it is a policy of disincentive rather than incentive. We’re not encouraging capital to invest here because they can make more money than elsewhere, we are simply saying it’s going to cost you more, but at least you know that before you mistakenly open your cheque book!

        The only people who will want it repealed will be those who actually want to see capital investment back in Australia in any sector not protected from this tax (namely manufacturing.)

        It’s madness on top of incompetence – a stellar combination!

        Like I’ve said before, at least the financial markets will be happy – our next bubble is about to be born. That is the point of this whole charade isn’t it?

      • Dont price carbon at all. Create incentives to go to cleaner and energy effcient technologies. All this carbon tax and ETS is going to do is put more money in the pockets of the govt and the idiots who came up with this. The sad thing is even if the world did this it would not reduce carbon.

      • 1) Incentives cost money. How do you plan on creating such incentives? You gonna re-direct funding from the Health sector? Defence?

        Or would you just raise taxes to fund the incentives?

        2) Who picks the companies that get the money? And what criteria do they operate on? Do they need to show a history of low-emissions (if so, how do these companies fund this?) or do you just give them the money if they promise to reduce emissions?

        Sorry but your plan is not logical and plain interventionism. And the government has been running incentives programs for years (both Labour and Liberal) to little effect.

      • Well Jason explain to me how taxing carbon is any better. The worse idea and good way to kill an economy. Isnt the whole idea to get people to move away from carbon producing technologies to more energy efficienct technology. Taxing them certainly isnt the best way to do it.

      • If you look at the tax itself independently then that is a more valid question. I’m sure we can both agree if it was just a carbon tax being applied then obviously businesses without capital reserves will not be able to change very quickly because change requires investment. If banks are unwillingly to lend them this money then that company is in trouble.

        The government, as a part of their policy, have allowed for this in the Clean Energy Financing Corporation. While I’m not across the specifics of how it’s exactly going to work, through this the government will offer $10bn in competitive loans to companies to move to more efficient technologies. The idea I guess is to jump-start investment in cleaner technologies since Australian banks seem to be so averse to investing in anything except mining and housing.

      • The Greens holding the senate after next election is irrelevant. Abbott will have an absolute mandate to remove the tax.

        The Greens can block the legislation, but that will disolve both houses and they risk losing every seat they have. A smart party would just repeal the tax, but I don’t think the Greens are very smart so I suspect we will have 2 elections in 2013.

  4. …I still don’t understand why this wasn’t phased in incrementally over the next 5 years or so…

    A big slug like this all at once is so…well, don’t know….simplistic??

  5. That’s a pretty good rendition of the Government spiel!
    Excuse my cynicism. is ther enothing this govt and the greens do about this damned thing that is ever even slightly wrong?
    I could throw a whole heap of things wrong with this no matter which side of the fence I sat on!

  6. ok I have tried to review the package and this is my thoughts.
    the biggest winner is the public sector – particularly the law makers and enforcers. there will have to be more public administration added to the implementation and collection and redistribution.
    the next biggest winner will be the media, as they will be advertising (useing tax payers money) the changes, and also lobbying for those who will be squeezed out of business.
    the next group will be the smart business traders – think the energy traders (macq et al) who will set a trading program to make a squillien
    the poor punter will be the looser
    the rich will be tempted to leave australia or particularly the aust business world.
    I really think the biggest loosers will be the labour govt (and even the greens) as this package has little to do with getting enviromental outcomes and more of a taxation redistribution of wealth from wealthy to ?? the govt ??

    let the political lobby begin

    • bang on the money! Emission’s Trading is an elective subjective in almost every post grad business degree now!

      Funny how there is no mention of the implementation cost here?? How many more public servants, government departments, external ‘advisers’.

      We are talking about a government that could not even manage the construction of school halls without north of a billion dollars in estimate wastage??

      gotta love it.

    • Detail, detail, detail…

      But in a positive sign, the Greens have managed to line up a whole swag load of jobs to export to their Comrades in China! That’s gotta be a good social outcome doesn’t it?

  7. Well, what a waste of time the whole exercise is and will continue to be. Policy by the misguided, influenced by the inept and imposed on the unfortunate.

    Heard Julia several times say that the major cost will be borne by the ‘heavy polluters’. This is probably going to be part of the sell from now on. Not satisfied with ‘high emitters’ the spin doctors have decided to disparage a range of industries – industries providing worthwhile services to the economy, in terms of necessity of product and employment, as evil ‘heavy polluters’. These industries must unite and commence an immediate campaign in opposition to the carbon tax. I would recommend they have the Minerals Council advise and coordinate all action.

    Secondly, heard Bob Brown today, to paraphrase “a great initiative that will save the Koalas, who are threatened with extinction brought about by climate change and habitat destruction”. WTF. Climate change has nothing to do with koala decline. Habitat destruction and chlamydia do. Another example of the untruths presented as fact to a non-discerning press and public.

    • Substituting ’emissions’ for ‘pollution’ has been around for a long time. What do you think the ‘P’ stood for in CPRS?

      I would recommend they have the Minerals Council advise and coordinate all action.

      Why stop there mate? Lets just have the Minerals Council run the country! Oh hand on, we did that already…

      This package is more courageous than I thought it would be. Its not of Julia’s choosing of course — the minority government forced her hand — but IMO this is a fantastic outcome. If not for the Greens and independents holding the balance of power in the Reps and Senate, Julia would probably be holding “Citizen’s Assemblies” right now, followed by more reports by eminent economists, a white paper or seven, and an awful lot of solar panels on schools.

      Realistically, this was the only way we’d get a price on carbon in this country. And the fact the Greens will hold the balance of power for another six years (at least!) just makes Abbott’s predicament even more delicious.

      Prediction: The carbon tax will be a total non-event for most households, and Abbott’s calls to repeal the tax will look as silly as Beazley’s “GST rollback” a decade ago.

      • Today’s repeated use of ‘heavy polluters’ definitely signals a change of terminology in Julia’s media discussion.

        Courageous? No. Ridiculous, ineffective and unnecessarily complex. Yes.

        Households will receive reimbursement – thereby nullifying any change of behaviour that it is was argued the tax would encourage.

        Some businesses will be strongly impacted, exclusions, exemptions and assistance packages in the current proposal will be diluted or removed over time. Australia is actively penalising its own economy, at the very time businesses may be experiencing challenging conditions in the global market.

        The Greens are the new economic assassins. Labor their accomplices.

      • Households will receive reimbursement – thereby nullifying any change of behaviour that it is was argued the tax would encourage.

        Jesus you are thick. CEC has explained this a dozen times, as have I. I won’t bother again because you’re obviously too stupid to comprehend it.

      • You really are tense today.

        Comprehend it or not, I don’t buy the modelling. If your electricity bill goes up $100 because of the carbon tax, the government reimburses you $120 – most households will not change behaviour at all – why – you can continue to use electrivity as previous and furthermore are paid a bonus for doing so. Granted, some households may view this as an opportunity to ‘gain’ by reducing electricity consumption and still receive the compensation. But I guarantee you, human nature being what it is, there will be very little (if any) net reduction in electricity usage by households.

        I’m surprised the package didn’t just include an arrangement whereby the utilities send household accounts straight to government for payment!

        Lorax, relax a little, all this angst is affecting you.

      • I think you need to come to a decision – do you want families to be helped or hurt by this tax?

        On one hand, you argue that this is a great new big tax on families. On the other, you argue that families won’t change their behavior because they aren’t taxed enough.

        Contradiction much?

      • No contradiction at all Mav. I did not argue above that it is a great big tax on families.

        It is a great big tax, primarily going to impact certain business and some families.

        The tax itself is the contradicion.

      • “…..Households will receive reimbursement – thereby nullifying any change of behaviour that it is was argued the tax would encourage…..”

        Pricing carbon is intended to induce technological change among those that pay the tax. That is the simple, quick, cheap route to reducing pollution. It will work in the energy sector. There is no reason at all why it will not. Even the energy producers are in favour of it.

        Are there technological fixes in other sectors? For some, certainly. In transport, yes. In chemicals, cement, steel and other metals? Not so easy, but their energy inputs can be greened.

      • We live in a paradigm of reporting cycles and their subsequent impact on business decisions but nobody sees this as being an issue. The short term financial priorities clashing with long term environmental considerations – who wants to be the first CEO to preside over a decline in sales, EBITDA or EPS growth, or even worse, a real decline?

        But of course the energy producers are happy about this package – they got pretty much everything they wanted.

        In most cases, these companies have purchased out-of-date, end-of-life public assets for a song, squeezed the snot out of them for another 10+ years whilst maximising profits and avoiding capital investment, and now, faced with the prospect of a sizable downgrade in the value of these community critical assets, are being incentivised to reinvest. Nice work for some.

        It puts them back in the good company of our banks, being considered too bit to fail.

        My concern however is that combination of disincentive costs and positive incentives to invest, in many industries, will still be unfavourable, as will the impact on projected returns on equity.

        If it all gets too hard, capital will head O/S pronto, taking the jobs with it as it leaves.

        You can’t argue that this is not going to happen as we’ve had 30 solid years of it in manufacturing so far.

  8. I am so dissapointed about this whole thing. Dont know where to start. Its just continued wealth redistribution. I love Australia but it is getting to the stage where I am almost convinced I should spend my next 10 years (pre family building) over in Hong Kong or Singapore. Any other young ambitious professionals thinking the same thing?

    • Bill - Canberra

      Not a young starter – I’m on the tail end of my Career… but I’m seriously considering if I should take my 7 figure cash pile to another country where capital is appreciated and Carbon nonsense is relegated behind economic out.

      This country bears no resemblance to the one I grew up in – I think its time to leave, Sadly.

      • If we all left, then that would certainly reduce Australia’s carbon emissions. It would also hasten the popping of our property bubble.

      • The global market doesn’t care – it’s only concern is for exploiting every capital growth opportunity available within a given environment, then moving on to the next to do the same…what’s left behind is irrelevant…not that the textbooks ever articulate this.

        If we’re silly enough to allow an exodus of talent as well as industry then we deserve what we get.

        Capital is not the only thing that is highly mobile – young, smart or high wealth individuals are also able to seek out greater returns (maybe just not the same criteria as capital I guess!)

        Our government is just assuming this won’t ever happen.

    • Well, you would remove youself from six very long years of The Greens exerting influence over a range of issues dear to their heart (oxymoron, I know). An influence which far exceeds their vote. Which is a travesty for Australia.

      • It doesn’t exceed their vote dumbass. The Greens got 12% of the vote in the House of Reps, and they won one seat. One. Out of 150. How the f*ck is that an over representation?

        What is a travesty for Australia is the hollowing out of our economy, and total dominance of the mining industry over the economic and political debate.

      • Lorax, you misunderstand.

        I was referring the the influence The Greens have holding the balance of power in the Senate, perhaps you were not aware of that.

      • And your second paragraph – in light of your revelations last week, I think it best to simply disregard it.

      • I didn’t notice the same level of outrage from you (or any liberal) when the minuscule and ridiculously named Shooters and Fishers party and the liberal government in NSW overturned Marine park protection.

    • I have thought the exact same thing, as have many others. Australia is really hurting itself with all this socialist nonsense.

      You can get paid more after tax, in Singapore and Hong Kong, than you get paid here before tax. It’s a joke really.

  9. Don’t worry China Fanboy, the Minerals Council and other industry bodies have been planning an advertising campaign for a while. I’m sure it will be as big, though probably bigger, than the anti-RSPT. However, I also expect the govt to do likewise.

    In any case, the govt has the numbers in both houses, so it seems like a forgone conclusion to me. The only thing that can derail this thing is one rogue ALP member.

  10. Why are we doing this when there is no other country in the world doing anything to reduce Co2 emissions? I have overseas colleagues and clients baffled as to why Australia is doing this while it is not on the agenda in a meaningful way anywhere else in the world. This government continues to destory wealth, and incentives for innovation and hard work.

    • Why are we doing this when there is no other country in the world doing anything to reduce Co2 emissions?

      Ummmm … Europe?

      • Ummmmm…. Europe? Our scheme will raise more in 3mths than theirs has in 5 years, despite Europe being a monumentally larger economy. Need I mention widespread fraud where permits have been stolen. Should I mention we are one of the largest exporters of energy to the world while Europe imports energy?

      • Nonsense.

        While the European ETS is far from perfect, it has achieved significant reductions in stationary energy sector.

        Unfortunately the German and Italian decisions to wind back nukes will inevitably mean more coal and gas, but then, that’s the result of people ignoring environmental concerns decades ago. i.e. Building nuclear reactors in tsunami prone areas.

      • Far from perfect! Has been suspended on a number of occasions, as Mining Man pointed out, due to corruption, fraud and manipulation.

      • upstream from the herd

        “it has achieved significant reductions in stationary energy sector.”

        Was that not due to the GFC

        Upstream

      • Actually one small part of it was suspended due to theft, the majority of it carried on very sucessfully …

      • The carbon price does not tax exports per se. It taxes pollution emitted during production. If the pollution is reduced, the tax will diminish too. It is not a hard concept to grasp.

      • David – How is taxing fugitive emissions on our coal export industry not taxing exports?

      • Europe imports energy, any reduction of carbon based enegy is a gain for their economy !!!

        See the difference with us ?

      • Yeah look at the mess Europe is in…. Look at Spain they implemented something and now their economy is the pits.

      • Read a bit deeper it is causing problems. It isnt the whole problem but is some of the problem. There were some articles several months ago that were talking about this.

      • Actually, a bit to do with the ETS.

        It’s a lot to do with Green ideology though, of which carbon ‘prices’ (taxes) are a major result.

      • Nothing to do with preventing climate change – just consider the multitude of exclusions, including petrol.

      • We’re doing this, correction Labor is doing this, to ensure it retains power.

        Oh that is fucking funny. Julia is doing this because she thinks the carbon tax is a vote winner eh? What are you smoking mate?

        Here’s climate change politics 101 for you:

        – To win votes (and achieve nothing) you give people handouts for solar panels, hybrid cars, tree planting.

        – To lose votes (and actually achieve something) you make burning fossil fuels hurt.

      • Lorax, again you misunderstand.

        Julia is reliant on support from the independents and the Greens to retain government. Simple.

        Never forget, she advised there would be no carbon tax. No Carbon Tax under her government. Simple.

        The current proposal does indeed attempt to win votes via the reimbursement mechanism, guaranteed to overcompensate low income households. In addition, petrol has been exempted, again a clear move to win votes. Simple.

        You seem a little tense today.

      • upstream from the herd

        “Julia is reliant on support from the independents and the Greens to retain government.”

        Thats how our system works. No Greens or Independents (and I use that latter term loosely) the votes, mostly flow to Labor.

        Geez and a polly that has been loose with the truth wow I’m shocked.

        Upstream

  11. Mining man – I’m with you, and I got sick and tired of housing costs, government wealth distribution, ridiculous waste in public services, bogan politicians, etc. I left 6 weeks ago and haven’t looked back. I can now be safe in the knowledge that my taxes are no longer supporting the system. In the meantime I get to live in an amazing place with lots of good friends, great food, friendly people, a cost of living which is overall significantly cheaper than in Australia, and with amazing prospects. And the overwhelming thing I have noticed on leaving Australia is a sudden realisation of how lazy, complacent and unthinking Australians have become – three or four people in my team here do the work of ten people back in Aus (working the same hours). I’m beginning to see the future – and Australia is a very small fish. If you have the mobility and you feel the same, then since voting with a ballot paper doesn’t work anymore, I would recommend voting with your feet instead.

  12. Alex Heyworth

    A few commenters here have noted that this package is wealth redistribution in disguise. The other notable feature is the government continuing its habit of throwing money around like water. A few billion here, a few billion there, soon it starts to add up to real money.

    I’m reminded of the quote “Need is now defined as wanting someone else’s money. Greed is wanting to keep your own money.”

    This government seems determined to get as many of us as possible on the public teat.

  13. At least now that the policy details have been released we can see this for what it is. If it’s not going to reduce global greenhouse emissions what is it other than wealth redistribution? (Everybody’s cost of living goes up, and some people get a tax break)

    • Garnaut’ report did emphasise the significant potential for raising revenue via this tax.

      And Julia, terrified of losing votes, is effectively redistributing wealth – no matter what fancy semantics the spin doctors come up with.

  14. This is wealth distribution exercise and I would like to see if anyone in the government can tell me how this will effect CO2 other than closing down a few coal powered electricity providers, and at thew same time we export coal to China who are commissioning new coal power on a regular basis. Regardless of this Nathan Rothchild’s Indonesian coal mine will provide coal to China before long, and our coal will be sidelined like our cattle exports.

    If we have the carbon tax I’m fine with it (and support it 100%) as long as we use ALL the money for R&D into green energy, and enabling green energy. Anything else is a fraud. No one wants dirty energy, but this will not do a thing for us or our CO2 emissions.

    Bob/Julia think they are buying votes, but I expect jobs to be lost, and eventually people will see this for what it is.

    They had a change to do something good, but wasted the opportunity.

    Disgraceful IMO.

    • A lot of people don’t realise that the majority of our coal that is exported is used for coking steel, not generating power. This is due to the quality of our coal which makes it good for more efficient steel production. Historically Japan has been the biggest recipient of our metallurgical coal, but now China is the largest of our buyers.

      China has it’s own coal mines, but the majority are brown coal and are used to power the countries power plants.

  15. Im a uni student and just wanted to mention that under this government myself and many of my peers are really considering moving overseas once we graduate.

    This government causes so much uncertainty that many graduates are finding it almost impossible to find jobs as business’s dont want to hire people without 5+ years of experience under their belt in many industries.

    I am a true believer of high taxation if ONLY the money is spent well on infrastructure that will create growth and wealth for future generations. This carbon tax will be used as a wealth redistribution. The only thing this Carbon Tax will truly create is more administrative jobs for the Labor gov.

    We need a government that needs to take care
    of Australia (rising cost of living, drought prevention, border control, new infrastructure development), not a government who wants to save the world from CO2 (something which is out of Australia’s control anyway). If a political party can follow this simple belief or idea be it the Libs, Labor, greens, blues whoever!! they would have my vote.

    • Carbon E Coyote

      To the threat of carbon leakage from the UK, David Cameron famously said, of companies threatening to leave because of the impost of a carbon price, that he would “wave them goodbye at the airport”.

      So, au revoir.

    • And where are you going to go ? It is the same case everywhere that employers want experience rather than just a degree.

      Where is this fabled land you have discovered where all graduates get jobs ? I can tell you now, it is easier to get a graduate job in Australia than it is in Europe or the US … ( however getting off you’re arse and travelling is a key selling point to employers )

  16. Keep up the good work Carbon E Coyote and Lorax. I would be interested to hear the others suggestions for substantially reducing carbon pollution?

    • Global agreement. Or if you just want to sleep better at night about Australia’s contribution apply the tax to the coal export industry properly, watch it shut down and then be genuinely satisfied that Australia’s coal is no longer contributing to CO2 emissions. Of course China will just buy the coal from somewhere else but at least it’s not Australia’s fault! Oh or global agreement so there is genuine progress on emissions.

      Worldwide collaboration on renewables R&D.

      By the way the $10 billion towards renewables is the one good thing out of this policy.

    • That’s like asking “well if a unicorn isn’t white, what colour is it?”

      The term ‘carbon pollution’ is nothing but government spin. They are referring to a harmless, odourless trace gas that plants use as food.

      The best thing to do is nothing.

  17. wayne from st albans

    We are all pissing into the wind here.

    After spending some time in northern Europe
    reporting/documenting on their transport infrastructure, not only do we lack political will here,
    our politicians are largely beholden
    by special interests groups. What I
    do realise now is that the level of decent governance is more prevalent in places like the Netherlands and Denmark
    than exist in Australia.
    The mining/extractive industries
    have corrupted our governments and the
    electorate.
    Why is that bogans/rednecks largely vote
    against there own best interests?
    They do in the US, and we starting to
    see that phenomena here.

    I find some of the comments here are
    akin to the kind of dialogue that
    would be expressed by US citizens.
    Will Steffen has made a similar
    comment in the Age recently regarding
    the climate change debate.

    I do believe that on the whole
    (this may sound wet) that politicians
    in Netherlands for example actually
    care about their citizens and
    their infrastructure policies
    for example reflect this.

    “The best lack all conviction, while the worst are full of passionate intensity.”

  18. Australia need a carbon tax for a simple reason. We have promised the world we’ll reduce our emissions by 5% in 2020. With a carbon tax scheme, we can now ‘buy’ our way to 5% from another country even if we don’t reduce our emissions!!

    In terms of electoral bribery, this is about as bad as it can gets. The deal is impossible to roll back because it pretty much gives away more than what it collects. It has the same effect as a massive tax cut for the poor and middle class. As for those earning over $200,000, they’re not going to vote Labor anyway.

    In the scheme of things, any country without a carbon tax is going to find itself facing a very steep price increase as resources run out. Sure, Australia have a vast amount of coal deposit, however the price you pay for it locally is the same as the price on the global market. If China pays $1000 a tonne for coal, we’ll also be paying $1000 a tonne. Like it or not, energy prices will be going up. The sooner we get used to it, the less painful it will be.

    • yeh fantastic, before we were paying market price, now we have to pay more than market price.

      10% will go to UN, and in the future we will have to buy carbon permit from other corrupted nations, all good.forgot to say that withou our popualtion growing at 2% pa we will have to buy enough permit oversee to reduce our “carbon footprint” by 40% per capita from the current one.all good.

      and ofcourse none of these will reduce the carbon emission since every grams of coal extracted will be burned in China/india.

      LOL, couldnt find stupider.

    • “…It has the same effect as a massive tax cut for the poor and middle class….”

      I don’t think a few hundred $ a year counts as “massive” when it comes to tax cuts.

      • It’s may not be massive in what people will receive, however it’s totally massive on the budget outcome. It will be very hard to reverse.

  19. another win for bureaucracy and charade of using the general interest of society for the goals of certain individuals self interest. Oh what a Brave New World!

  20. ok like it or not a few of us have to go to work in the morning … and while at work my mind will be thinking … how do i make the most of the proposed changes … then i start thinking winners and loosers …
    now i start thinking of shorting the loosers and going long a few winners (but mostly shorts) …

    ideas people …

    energy producers ?
    logistics
    what about the commercial property stocks … westfields etc.

    • Carbon E Coyote

      Be careful what you short…

      It might have already been shorted (eg BSL)

      It may not be exposed as you think (eg due to 94.5% free permits if it’s trade exposed and emission intensive, or due to abatement options)

      Some energy companies may be well-positioned for it while others may not. Low emission (eg gas and renewable) positions will become more profitable. Look at a short if it’s got unmitigatable exposure to high emission plant.

  21. “…..energy producers/miners don’t give a crap, they pass the cost…..”

    This is exactly what energy producers and miners cannot do. For the most part, they are pure price-takers. They accept the market price, end-of-story. They cannot pass on anything….royalties, labour costs, capital costs, taxes…..you name it. They take the market price and if they make a profit they will keep on doing it. If not, they close.

    • yes you re right but I also expect the market price to move up as they are all hit.

      would have been so much more interesting to have a NBN for Green Energy/Grid with a low cost of financing/Gov guaranties for investor/Super.

      What a waste.Such a negative approach of the problem.

      • Carbon E Coyote

        What you’re advocating is essentially what we’ve got with ARENA + CEFC.

        However, you’d be chasing your tail if you did all of that and at the same time continued on the same path of increasing emission because they cost zero. A whole heap of government-funded effort trying to clean things up and a whole market economy trying to do the opposite. Doesn’t work.

        It’s better to have everyone pulling in the same direction. A carbon price to encourage industry to move towards lower emissions, govt funding as you suggest. Also, where does the funding come from if it’s not from the carbon price revenue?

      • What s the cost of financing with ARENA ? couldnt find it.

        a plan should be seen as an infrastructure project with a cost of financing not more than 5% and a strong emphasis on stability of the scheme as we have seen that changing the scheme every 2-3 years damage the industry.

        I would expect energy generators to switch to green instead of investing on renewing their coal plant if the cost of financing green is lower ( 4-5% instead of 8-9%).

        Carbon emission dont matter at all as we are not going to reduce them for even one gram (every coal extracted not used in Australia is burned somewhere else) without shutting down quarries.

        We should focus on jobs/research/quality of life/technology.

    • Miners, yes. Energy producers, no. what are the alternatives for industry and consumers to purchasing energy from coal-fired plants? There is none. Additionally consumers can not quickly or cheaply reduce their demand for electricity, while industrial users of power have even less choice as their processes rely on certain electrical input.

      Industry-wide price increases in the energy sector (which is what this is, given that the large coal-fired plants are all subject to the tax and they supply the vast majority of power) can and do get passed on with little response in demand.

      Miners are different in that they are competing in a global market, and it is simple to by-pass miners that raise prices and buy from those who dont.

      • In the UK they found a GBP 57 increase in price lead to a reduction in use of 87 for residential ..
        .

  22. Thanks again Carbon E,
    Simple question, will the Carbon price amount actualy appear as a line item on a price tag or Bill?

    • Carbon E Coyote

      No, it will be embedded/internalised into the price of the good or service. eg milk goes up by 2c/litre, electricity by 2-3c/kWh. It won’t appear as a separate line item. Supermarkets won’t be able to itemise how much you paid in carbon price, as they currently do for GST.

      • That seems peculiar given that it already has a significant administration cost and it’s intended to be a price/behaviour signal.

    • It should. Then at least we would be able to work out exactly what its costed each time we buy anything.
      The biggest thing I am worried about in this tax, is electricity. I DO NOT trust the Govt figures are right when it comes to the flow on effects with power.
      C.E.C says milk up by 2c. They only way we can see what POWER costs per unit in Coles and Woolies is comparing 2 identical products. 1 cold, 1 hot. Coke Cola 600Mls Bottle fits the requirement.

      Hot Coke sells $1.00 for 600ml, Cold was $2.85 for 600mls. Therefore Coles adds $1.85 each for refrigeration to this single product. At $23/t or 20% increase in power, that $2.85 Coke, will now be $3.22. Or if you assume Coles adds 185% to the price of goods to cover power.( ie $1 product and $1.85 fridge costs) The price of ANYTHING cold or frozen go up by at least 14% just to cover the extra power.
      If U take the 14%, and most people spend say $200 pw on food, that’s an extra $28 pw,
      Personally, I cant see how the Govt can say food will increase by 80c per week.

      • you are mistaking marketing tricks for cost of refrigiaration …

        prices go up on POS or end of aisle items – either thru increased price to the customer or by the supplier paying higher listing fees …

      • This analysis is false in that you are assuming the profit margin (the difference between the sale price and the cost) added to each item in the shop is exactly the same.

        This is false. Coles price their items based on psychological factors and what they believe people are willing to pay for each particular item.

      • Yeh, I know there is a convenience or psychological factor. But I was trying to keep it simple. 1 product cold minus 1 product hot = cost of refrigeration. If U can come up with another realworld example, all all ears (and eyes)

      • Carbon E Coyote

        Let’s keep it simple.

        Electricity on average takes 1 tonne of CO2 to make 1 megawatt hour (MWh). So for a carbon price of $23/t CO2e, electricity wholesale price goes up by around $23/MWh; that’s 2-3c/kWh. You’re currently paying around 20c/kWh.

      • How exactly do they charge different price when hot and cold coke have the same barcode?

      • The tax is on carbon, not energy. The cost of electricity for the supermarket may increase, however as the coke will not emit any extra carbon, the carbon cost of hot coke and cold coke is the same.

  23. I have been told by psychologists and managers throughout my life that I’m a smart guy – from psychometric testing to problem solving and systemic repair. Whoopdedoo.

    I now face another $750 – $1000+ in a tax slug (I’m one of those ‘other’ households – f*cked due income). This atop my medicare levy extra (I have full health insurance).

    I want someone here to explain to me exactly how this will create a drop in pollution (I have a maths/physics undergrad degree so spiel away)?????

    Please explain how this is not another wealth redistribution con and how our environment wil benefit.

    I’m seriously thinking of going offshore again.

    • Rota, like you, numbers are my friend and I am also in the unfortunate position of looking down the barrel of being screwed by this tax by virtue of the fact that I have worked hard and made efforts to improve myself.

      I can’t give you a convincing answer to your challenge because not only don’t the numbers stack up, but I think it’s all crap too. What I can say at least, is that we’ll both have the flood levy this year of around 50-75% of the projected carbon tax impact to help get used to it….

      Isn’t that just like the government only putting it in half-way?

      It seems that being smart is not quite the virue I was once told it would be.

  24. WFC.

    In the roaring 1920’s preceding the great depression, everything was on the up.

    This time around, we are going for the double down. The roaring 40’s- 40% that is.

    40% MRRT.
    $40 tn carbon.
    40% down in the real estate mkts.
    40% down on the stock mkts.
    40% inflation in food, taxation etc.

    Can’t wait until a confluence of events brings it all together.

  25. I can’t believe some of the complete lack of insight by the supporters of this tax. It seems that we are completely following the US in our blind path towards ruining our country with massive bureaucracy and willingness to have our Government take control of everything.

    This also applies to you Carbon E. Coyote.
    “countries around the world have shown that there are a multitude of policies you can use to reduce emissions, but the most effective one is a broad based carbon pricing mechanism.”.

    Wow. So we are just going to turn off those dirty coal power plants, just stop using oil and gas? They will be more costly and so we can just switch to those low cost, reliable sources of solar and wind? Surely we don’t have to worry about base load power, reliability or sufficient supply?

    Have you considered that the markets are driving up costs of the traditional forms of energy regardless of this misguided tax/redistribution of income? The market forces are seeking to change our energy mix but this takes a long time! Renewables such as solar and wind do not have sufficient technology at this time. This is not a ‘choice’ that simply requires a tax as incentive.

    With the sudden onset of sovereign risk to this country, we will also have significantly less foreign investment to invest in our alternative energy sources as these are long term strategies.

    The callousness of our Government and those who support is is incredible. The ramifications are extremely uncertain (regardless of the claimed modelling) and the implications of this policy agenda is both inflationary and a drag to economic growth. This will likely lead to a reduction in employment, higher cost of living, higher interest rates and the reductions to emissions a result of lower economic output rather than efficiency gains.

    Throw out 2020 targets. Get rid of excessive Government. Get rid of this Government who wants to tax us instead of assisting in the solutions. Encourage transition to greater use of natural gas as a medium term solution. Support technologies such as thorium power. Less regulation and more support for market driven solutions.

    • Throw out 2020 targets. Get rid of excessive Government. Get rid of this Government who wants to tax us instead of assisting in the solutions. Encourage transition to greater use of natural gas as a medium term solution. Support technologies such as thorium power. Less regulation and more support for market driven solutions.

      Again, someone who wants the Government to fund cleaner technologies and yet doesn’t explain where the government should get the money from to fund it! Would you perhaps favour income tax increases instead?

      As for market driven solutions… surely a blanket tax will drive the market far better than selective funding imposed by the government to “pick the winners” so to speak.

  26. Does 10% go to the UN?
    If it does of course that is not money we actually have. We already spend way more than we earn and have massive foreign debts.
    We will have to borrow that 10% in order to hand it over….or alternately sell another major Aus institution every year to Foreign interests.
    Those foreign interests won’t have been subject to a Carbon Tax.
    Sounds like a well thought out policy to me!!!!!!!!!!!

  27. Carbon E Coyote
    July 10, 2011 at 9:52 pm

    To the threat of carbon leakage from the UK, David Cameron famously said, of companies threatening to leave because of the impost of a carbon price, that he would “wave them goodbye at the airport”.

    So, au revoir

    Sounds like the sort of stupid unthinking ill-considered response you get from a bureaucracy and Government that doesn’t have a clue what is happening in the real world.

    Actually ‘au revoir’ literally means ‘to the seeing again’ I doubt we’ll ever be seeing those companies again. But it’s OK we can keep on borrowing more and more and selling off more and more of whatever industries are left. No problem!!

    So I watched the ABC ‘Special’ on it all last night. The experts at the ABC still don’t know the difference between steam and pollution coming out of a stack! Ahem! This is despite signs all over the place along the road at these places pointing out that what is being emitted is steam.

    • so steam is white and other pollutants aren’t – so what? if you are burning coal then the pollution is there, whether you can see it or not.

  28. One more thing in the interest of facts. The GST replaced a very inefficient and complex Sales Tax that was expensive to administer both from the Govt and payer sides. This is another tax altogether requiring a whole new set of administrative structures to calculate.
    So comparisons equating the GST and the Carbon Tax is just another lie.
    If you want to introduce a Carbon Tax, and people vote for it’ that’s fine. Just don’t tell me any more damned lies about it all!
    Maybe also just give people a say in all this. The process to bring this tax on has just been so destructive of the whole democratic process.
    It’s all been jackboot stuff!

    • Lots of people did vote for the Greens – lots of people did want something done. Funnily enough most of them are young and give a shit about the world they are going to grow up in – most of the whingers are rich middle aged men who want to squeeze what they can out of the world before they shuffle of this mortal coil ..

      • I don’t know if most of them are young. I do know many recent graduates, high school and university, in many mickey-mouse subjects, have had inferior educations, emphasising feelgood environmental issues at the expense of developing an understanding of the economic and corporate world.

        They embrace the latest technology, travelling the world, without a thought of the processes that enable them to live this modern existence.

        They are the children of the marketing age and slogans appeal – Green is Good.

  29. I like how Abbott and other fanboys have moved on from “Great Big Tax” to now the “Wealth Redistribution” catchphrase now that it is shown that the majority of Australians will be unaffected at the hip pocket.

    I bet they’d be whinging just as much if there was no compensation to households about how the Govt is crushing “working families”.

    What a joke.

    • Same way Julia is now spouting “Heavy Polluters” – just days ago is was pretty consistently “High Emitters”.

      Spin.

      • Of course, but how do people not see it for what it is and just rabidly repeat the same stupid catch phrases that are disseminated en mass without any real thinking?

      • Because the electorate is either stupid, ignorant, or in some special cases, both.

        When I was doing my MBA, I was told by one of my lecturers that the average intellectual age of the American population was just 13 years old. I was shocked until he told me that Australia’s was just 14 years old.

        This is not so unbelievable when you consider some research in the US showed that 56% of people never read another book after they leave school…

        It’s scary, but that’s what kills informed debate and the consensus building that occurs through reasoned and intelligent discourse. If we can’t even have a reasonable discussion, we’re never going to get understanding and gain consensus from the largest portion of the population.

        Such is the nature of representative democracy in a world that expends no effort to teach the skills of critical thinking.

      • Epic. Reminds me of this question.

        Q: What is worse? Ignorance or apathy?

        A: I don’t know, and I don’t care.

        14 years old seems about right, going by most papers and news websites.

        I can see why there is always a push for the voting age to be lowered. I would prefer it raised (say 25 for men, 21 for women) and maybe there should be a test before you go into a voting booth….. 😀

    • Not sure if I’d call myself a fanboy. I was behind the carbon tax until the details came out (over compensation for certain sections of the population, no plans to reduce the size of the coal industry etc)

      Now I think it’s dud policy.

  30. Letter from Ronald Reagan to the U.S. Senate:

    “THE WHITE HOUSE Office of the Press Secretary For Immediate Release December 21, 1987

    To the Senate of the United States:

    I transmit herewith, for the advice and consent of the Senate to ratification, the Montreal Protocol on Substances that Deplete the Ozone Layer, done at Montreal on September 16, 1987. The report of the Department of State is also enclosed for the information of the Senate.

    The Montreal Protocol provides for internationally coordinated control of ozone-depleting substances in order to protect public health and the environment from potential adverse effects of depletion of stratospheric ozone. The Protocol was negotiated under the auspices of the United Nations Environment Program, pursuant to the Vienna Convention for the Protection of the Ozone Layer, which was ratified by the United States in August 1986.

    In this historic agreement, the international community undertakes cooperative measures to protect a vital global resource. The United States played a leading role in the negotiation of the Protocol. United States ratification is necessary for entry into force and effective implementation of the Protocol. Early ratification by the United States will encourage similar action by other nations whose participation is also essential.

    I recommend that the Senate give early and favorable consideration to the Protocol and give its advice and consent to ratification.

    Ronald Reagan The White House December 21, 1987”

    http://en.wikipedia.org/wiki/Montreal_Protocol

    The 80’s. Politicians shot from the hip, porn stars had hair and the most likely end of the world (Cold war) got fixed.

  31. El Zorro Dorado

    What hubristic rubbish sprouts forth from the mouths of politicians and economists –not to mention the trifles from the modellers. It seems incomprehensible to me that policy and economic modellers in tax-payer-funded ivory towers around the land can identify precise levels of cost and compensation, and the expected carbon reduction. Economic flows and casual relationships in a closed economy are as in-exact and variable as one can get in nature…its no science despite the claims of fervent beleievers and fellow wheel-barrowers. What happens in an ever-more-open global economy? Can we really believe the extraordinary clarity and detail of the tooing and froing of dollars as robin is robbed to pay peter. The policy, the tax, the professed compensation measures, the huge bureaucracy to administer it, plus its underlying rationale, and the politics of cynicism which drive it, are all bereft if value and are disastrous for Australia.

    • And sadly, we’re apparently falling for it hook line and sinker!

      If nothing else, have forecasts been in recent times… Even Warwick McKibben (retiring RBA Board Member), argued strongly against Treasury modelling re the impact on unemployment with the introduction of the carbon tax, ie – he models higher unemployment – Adam Smith – a commenter above – alludes to the fact that Treasury modelling is seriously flawed.

      Spin, smoke and mirrors is all we get.