Brief Summary: Impact Of Carbon Tax On The Australian Economy
Executive Summary
Climate change is a threatening issue in the global. Thus, carbon tax is used as a tool to reduce greenhouse. The Australian Government announced initially the price of carbon tax is $23 per tone and has become a concerned issue with policy proposal makers and its significant effects on all society and economy. The report will outline some features that related to the issues and impacts of carbon tax as well as the responds of business and consumers.
The carbon tax will create the big gap between the poor and the rich because of increased price of all goods, especially the reduction of employment in coal, mining, manufacturing industries. Also, the Australian industries will be suffers the international competition because …show more content…
of higher manufactured cost. Therefore, the Australian Government should consider some polices, such as reduction of VAT, a lower carbon tax rate to decrease the regressive impacts
Introduction and background
Today most of countries in the world are facing up the urgent challenges are climate change, for example, the increasing of emissions of greenhouse gases that impact on human and environment. Therefore, The Australian Government proposed a policy on climate change is carbon tax that the polluters will pay $23 per tonne of carbon releasing into the air from July 1st 2012. The purpose of carbon tax is to reduce greenhouse gas emissions by producing a cost charged for pollution permit and stimulating to use surroundings resources more efficiently. However, any policy to reduce emissions such as carbon tax will raise the price. Indeed, the tax will have wide impacts affecting to trade, industrial sectors via the increased prices of goods and services.The report will focus on carbon tax issues and preliminary effects upon businesses via competitiveness, investment and the responses address the adverse impacts of carbon tax.
The effectiveness of tax on supply and demand in microeconomic
According to The Economist 's Dictionary of Economics (http://economics.about.com/cs/studentresources/f/microeconomics.htm), microeconomics is an analysis of economics that created by individual’s consumers, groups consumers and motivated by cost and benefit factors. Also, microeconomics involves making the most efficient price to maximize useful consumers as well as profit of companies. Indeed, tax will have a significant affect to reduce demand and supply. For example, if a new product raises price because of increasing tax, the buyers tend to buy other goods with acceptable price. Thus, to adapt the demand of consumers, the sellers have to manufacture other products with a price that the buyers accept easily.
The impact of a Carbon Tax on Australian economy
The Australian Government proposed carbon tax to reduce the pollution that created some large impacts on the coal; electricity sector; accommodation, agricultural and manufacturing industries, etc, for instance, the risk of long droughts, food costs, climate change in the long terms are the impacts on agricultural area.
On the other hand, the increasing shortages of skills labours caused to the business confronting in finding employees. According to Siriwardana, Meng and McNeill (2011), the employment impact of the carbon tax on different sectors of employment in the Australian economy (Table 1). Other impact is to decline the profit and revenues in the retail sectors because of weak consumer, increasing interest rates. Indeed, consumers will experience the price change of goods when firms extra carbon tax in manufacturing costs. The accurate impact of carbon tax on prices related to many components such as renewable energy …show more content…
sources.
* Impacts on income
The Australian Government announced some supports to the low-income earners, pensioners and unemployed persons to decrease the impact of the carbon tax on income via some measures. However, the poor will be affected more as the price than the rich because they spent all incomes for food and clothing. In different Australian regions, electricity price is not also similar because of the carbon tax. For example, the people who lived in rural areas already pay higher prices for food, fuel, energy, and other necessary goods.
According to Garnaut (2008), the people who are renting private and housing have no opportunities to pay for the cost of low-emissions technologies or hot water systems, etc. Also, ABS (2007) said that there is around 29 percent of Australian households rent housing is mainly low-income consumers.
* Impacts on employment
There is an ambiguity related to carbon tax on employment. Zhang and Baranzini (2004) defined that carbon tax can reduce overall employment and investment. Indeed, the Australian carbon tax makers revealed some negative impacts on employment such as the loss of jobs of coal, mining, accommodation and other industries. However, the president of the Economic Society of Australia, Professor Bruce Chapman, said that the impact of carbon tax on mining job is footling, and most of the workers leaving mining will be engaged in other areas. Thus, Beder (1996) argues that “the carbon tax would lead to a reallocation of resources away from carbon producing and using industries to other industries”.
* Impacts on competitiveness
A carbon tax has a potential impact on global competitiveness of an economy. The change of carbon tax related to manufacture costs, and caused to the firm’s competition. Particularly, the Australian industries will face up the reduction of the international competitiveness because of the carbon tax
However, Gillard - The Prime Minister, with the carbon tax proposal has made a reinforcement to support jobs and competition via the assistance program. The government hopes that this program will assist local jobs, prevent carbon escape offshore and advance industries to invest in cleaner technologies.
Evaluation of business or Consumer Response
* Accommodation Industry
According to Australian Government (2011), “For the first three years, the carbon price will be fixed like a tax, before moving to an emissions trading scheme in 2015”. However, the price of goods that related to carbon tax will go up because of the increasing costs. The increasing costs related carbon tax which is impacting significantly on accommodation business (hotels, motels, resorts, and serviced apartments), such as the reduction of profit up to 12% as well as carbon tax costs up to $114.9 million in the first year (Tourist Accommodation Australia). The economic impacts are rather different between small businesses and large businesses because the Australian biggest emitters will pay directly the tax. Accommodation industry will not apply directly, but electricity costs, laundry and repair costs are the major costs that caused to pricing rises. The estimation of Australian accommodation industry showed the total increased costs at 0.5% to 0.9%. (AECGroup Resource).
* The wine sector
The purpose of the carbon tax is concerned to encourage businesses to use efficient activities, and alternative energy sources. In terms of incentives the carbon tax in the wine sector, vineyards and wineries are mainly depend on other firms in the product chain to find the best solutions. Nevertheless, the government supported some polices to increase the efficiency of wine sector, particular wineries and vineyards. The carbon tax increase the opportunities for exporting wine companies to attempt in-market bottling of, leading to job losses in Australia. This process discharges the emissions volume and hence reveal to a carbon tax, of activities in Australia. Reckoning upon the various policies, the carbon tax will significantly increase the incentive for offshore shipping firms to purchase fuel.
* The manufacture industry
Some manufacturing industries had a smaller gap between input price rises and selling price rises, including multifaceted manufacturers and transport equipment. Demand for these items may be not elastic because of the limitation of substitutes and greater households. With the wood products and furniture, more firms pay intention to increase selling prices than input prices. It is simple to reflect the very small sample sizes in these sub-sectors or to indicate a better ability for these firms.
Following to responses suggested actual and anticipated carbon price impacts have had a limited and mixed impact on investment decisions relate to other pressures, such as the high Australian dollar and increasing global competitiveness. While there is over 32 per cent had increased investment in energy efficiency to discharge carbon price impacts, just over 20 per cent fell specific investments due to the carbon price had either reduced the amount.
Conclusion
While a carbon tax is studied a cost effective tool to discharge pollution from the air, it has increased a argument among the policy makers about its various impacts on the economy and society, as the tax is generally regressive.The Australian Government should have more detailed information to look into the benefits as well as the risks of carbon tax via incentives and penalties to secure that the industry and economy is growth well and creates the best ways to discharge greenhouse gases. Moreover, an effective policy should be adapted to reduce the desired greenhouse emissions and gain the international economy, environment and society are better for future generation.
References
ABS. (2007). “ABS household income and income distribution”, Austarlian Bureau of Statistics. Retrieved from http://www.abs.gov.au/ausstats/abs@.nsf/mf/6523.0
AEC Group. (2013). “Carbon Tax Impacts on the Australian Accommodation Industry”, Tourism Accommodation Australia.Retrived from http://www.tourismaccommodation.com.au/wp-content/uploads/2012/08/AEC-Report-TAA-Year-One-Carbon-Tax-Impacts-Final-14-Mar1.pdf
Australian Government .
(2011). “Securing a clean energy future”, The Australian Government’s climate change plan. Retrieved from http://www.cleanenergyfuture.gov.au/wp-content/uploads/2011/07/Consolidated-Final.pdf
Australian Industry Group. (2013). “Ai Group Survey: business pricing responses to Australia’s carbon tax, the first six months”. Retrieved from http://www.aigroup.com.au/portal/binary/com.epicentric.contentmanagement.servlet.ContentDeliveryServlet/LIVE_CONTENT/Publications/Reports/2013/Carbon_price_impacts_Jan_2013.pdf
Garnaut, R .(2008”. “The Garnaut climate change review”, Report, Chapter 16, Cambridge University Press. Retrieved from http://www.garnautreview.org.au/
Lewis, S and Jacob, P. (2013). “Carbon tax hurts, say ailing firms”, New Limited Network. Retrieved from http://www.news.com.au/tablet/carbon-tax-hurts-say-ailing-firms/story-fnejlrpu-1226599232391
Rahman, M. M. (2011). “ The proposed carbon tax in Australia: impacts on income distribution, employment and competitiveness”, School of Accounting, Economics and Finance. Retrieved from
http://eprints.usq.edu.au/20809/
Siriwardana. M, Meng. S and McNeill. J. (2011). “The impact of carbon tax on the Australian Economy: Results from a CGE Model”, School of Business, Economics and Public Policy. Retrieved from http://www.une.edu.au/business-school/working-papers/economics/econwp11-2.pdf
Spash, C. L and Lo, A. Y. (2011).“Australia’s Carbon Tax: A Sheep in Wolf’s Clothing?”,The Economic and Labour Relations, Vol. 23, No. 1, pp. 67 – 86.
Zhang, Z. X. and Baranzini, A. (2004). “What do we know about carbon taxes? An inquiry into their impacts on competitiveness and distribution of income”, Energy Policy, 32: 507-518.
Appendices
Table 1: Effect of Carbon Tax on Employment by Sectors (percentage change)
Industry
$15 tax
$23 tax
$30 tax
1. Agriculture, forestry and fishing
-0.29
-0.63
-0.75
2. Black coal
-0.52
-0.88
-1.11
3. Brown coal
-14.98
-26.42
-35.9
4. Oil
-0.58
-0.98
-1.32
5. Gas
-1.80
-2.71
-3.60
6. Other mining
-0.87
-1.43
-1.97
7. Food, beverages and tobacco
-0.94
-2.71
-2.30
8. Textile, clothing and footwear
-0.88
-1.56
-2.21
9. Wood, paper and printing
-0.64
-1.21
-1.62
10. Automotive petrol
-0.13
0.02
0.05
11. Kerosene
-0.61
-0.89
-1.17
12. Liquefied petrol
-0.91
-1.23
-1.81
13. Other petroleum and coal products
0.24
0.47
0.66
14. Chemical products
-2.52
-4.25
-5.74
15. Plastic and rubber products
-1.13
-2.05
-2.73
16. Cement
-1.02
-1.60
-2.05
17. Iron and steel
-3.99
-6.51
-8.67
18. Other metal products
-2.33
-3.79
-5.04
19. Other Manufacturing
-0.85
-1.57
-2.19
20. Electricity – Black coal
0.82
3.87
5.65
21. Electricity – Brown coal
-2.51
-7.84
-13.23
22. Electricity – oil
12.73
22.97
32.54
23. Electricity - gas
14.98
24.47
32.54
24. Electricity – renewable
43.04
67.41
87.48
25. Commercial electricity
-11.6
-17.37
-22.78
26. Gas distribution
-5.94
-10.05
-13.03
27. Water and sewerage services
-0.67
-1.20
-1.53
28. Construction services
0.04
0.06
0.10
29. Trade services
-0.35
-0.67
-0.90
30. Accommodation and restaurants
-1.12
-1.97
-2.55
31. Road transport services
-0.69
-1.33
-1.76
32. Other transport services
Other transport services
Other transport services
-1.22
-1.97
-2.55
33. Communication services
-0.41
-0.76
-1.02
34. Public services
-0.32
-0.57
-0.76
35. Other services
-0.22
-0.40
-0.53
Source: Projections from the model.
Table 2: Summary of Accommodation Services Estimated Carbon Tax Impacts (2012-13)
Expense Item
Average Expenditure Per Room Available (2012)
Low Range Carbon Tax Impact
High Range Carbon Tax Impact
Total Costs Per Available Room
$55,425
$284
$506
Carbon Tax % Cost Increase
0.5%
0.9%
Total Cost 200 Room Operation
$56,818
$101,207
Total Cost to Industry*($m)
$64.5
$114.9
Note:* Industry cost based on ABS (2012e) room counts of 227,015 for hotels, motels, and serviced apartments with 15 or more rooms.
Source: AECgroup
Climate change is a threatening issue in the global. Thus, carbon tax is used as a tool to reduce greenhouse. The Australian Government announced initially the price of carbon tax is $23 per tone and has become a concerned issue with policy proposal makers and its significant effects on all society and economy. The report will outline some features that related to the issues and impacts of carbon tax as well as the responds of business and consumers.
The carbon tax will create the big gap between the poor and the rich because of increased price of all goods, especially the reduction of employment in coal, mining, manufacturing industries. Also, the Australian industries will be suffers the international competition because …show more content…
of higher manufactured cost. Therefore, the Australian Government should consider some polices, such as reduction of VAT, a lower carbon tax rate to decrease the regressive impacts
Introduction and background
Today most of countries in the world are facing up the urgent challenges are climate change, for example, the increasing of emissions of greenhouse gases that impact on human and environment. Therefore, The Australian Government proposed a policy on climate change is carbon tax that the polluters will pay $23 per tonne of carbon releasing into the air from July 1st 2012. The purpose of carbon tax is to reduce greenhouse gas emissions by producing a cost charged for pollution permit and stimulating to use surroundings resources more efficiently. However, any policy to reduce emissions such as carbon tax will raise the price. Indeed, the tax will have wide impacts affecting to trade, industrial sectors via the increased prices of goods and services.The report will focus on carbon tax issues and preliminary effects upon businesses via competitiveness, investment and the responses address the adverse impacts of carbon tax.
The effectiveness of tax on supply and demand in microeconomic
According to The Economist 's Dictionary of Economics (http://economics.about.com/cs/studentresources/f/microeconomics.htm), microeconomics is an analysis of economics that created by individual’s consumers, groups consumers and motivated by cost and benefit factors. Also, microeconomics involves making the most efficient price to maximize useful consumers as well as profit of companies. Indeed, tax will have a significant affect to reduce demand and supply. For example, if a new product raises price because of increasing tax, the buyers tend to buy other goods with acceptable price. Thus, to adapt the demand of consumers, the sellers have to manufacture other products with a price that the buyers accept easily.
The impact of a Carbon Tax on Australian economy
The Australian Government proposed carbon tax to reduce the pollution that created some large impacts on the coal; electricity sector; accommodation, agricultural and manufacturing industries, etc, for instance, the risk of long droughts, food costs, climate change in the long terms are the impacts on agricultural area.
On the other hand, the increasing shortages of skills labours caused to the business confronting in finding employees. According to Siriwardana, Meng and McNeill (2011), the employment impact of the carbon tax on different sectors of employment in the Australian economy (Table 1). Other impact is to decline the profit and revenues in the retail sectors because of weak consumer, increasing interest rates. Indeed, consumers will experience the price change of goods when firms extra carbon tax in manufacturing costs. The accurate impact of carbon tax on prices related to many components such as renewable energy …show more content…
sources.
* Impacts on income
The Australian Government announced some supports to the low-income earners, pensioners and unemployed persons to decrease the impact of the carbon tax on income via some measures. However, the poor will be affected more as the price than the rich because they spent all incomes for food and clothing. In different Australian regions, electricity price is not also similar because of the carbon tax. For example, the people who lived in rural areas already pay higher prices for food, fuel, energy, and other necessary goods.
According to Garnaut (2008), the people who are renting private and housing have no opportunities to pay for the cost of low-emissions technologies or hot water systems, etc. Also, ABS (2007) said that there is around 29 percent of Australian households rent housing is mainly low-income consumers.
* Impacts on employment
There is an ambiguity related to carbon tax on employment. Zhang and Baranzini (2004) defined that carbon tax can reduce overall employment and investment. Indeed, the Australian carbon tax makers revealed some negative impacts on employment such as the loss of jobs of coal, mining, accommodation and other industries. However, the president of the Economic Society of Australia, Professor Bruce Chapman, said that the impact of carbon tax on mining job is footling, and most of the workers leaving mining will be engaged in other areas. Thus, Beder (1996) argues that “the carbon tax would lead to a reallocation of resources away from carbon producing and using industries to other industries”.
* Impacts on competitiveness
A carbon tax has a potential impact on global competitiveness of an economy. The change of carbon tax related to manufacture costs, and caused to the firm’s competition. Particularly, the Australian industries will face up the reduction of the international competitiveness because of the carbon tax
However, Gillard - The Prime Minister, with the carbon tax proposal has made a reinforcement to support jobs and competition via the assistance program. The government hopes that this program will assist local jobs, prevent carbon escape offshore and advance industries to invest in cleaner technologies.
Evaluation of business or Consumer Response
* Accommodation Industry
According to Australian Government (2011), “For the first three years, the carbon price will be fixed like a tax, before moving to an emissions trading scheme in 2015”. However, the price of goods that related to carbon tax will go up because of the increasing costs. The increasing costs related carbon tax which is impacting significantly on accommodation business (hotels, motels, resorts, and serviced apartments), such as the reduction of profit up to 12% as well as carbon tax costs up to $114.9 million in the first year (Tourist Accommodation Australia). The economic impacts are rather different between small businesses and large businesses because the Australian biggest emitters will pay directly the tax. Accommodation industry will not apply directly, but electricity costs, laundry and repair costs are the major costs that caused to pricing rises. The estimation of Australian accommodation industry showed the total increased costs at 0.5% to 0.9%. (AECGroup Resource).
* The wine sector
The purpose of the carbon tax is concerned to encourage businesses to use efficient activities, and alternative energy sources. In terms of incentives the carbon tax in the wine sector, vineyards and wineries are mainly depend on other firms in the product chain to find the best solutions. Nevertheless, the government supported some polices to increase the efficiency of wine sector, particular wineries and vineyards. The carbon tax increase the opportunities for exporting wine companies to attempt in-market bottling of, leading to job losses in Australia. This process discharges the emissions volume and hence reveal to a carbon tax, of activities in Australia. Reckoning upon the various policies, the carbon tax will significantly increase the incentive for offshore shipping firms to purchase fuel.
* The manufacture industry
Some manufacturing industries had a smaller gap between input price rises and selling price rises, including multifaceted manufacturers and transport equipment. Demand for these items may be not elastic because of the limitation of substitutes and greater households. With the wood products and furniture, more firms pay intention to increase selling prices than input prices. It is simple to reflect the very small sample sizes in these sub-sectors or to indicate a better ability for these firms.
Following to responses suggested actual and anticipated carbon price impacts have had a limited and mixed impact on investment decisions relate to other pressures, such as the high Australian dollar and increasing global competitiveness. While there is over 32 per cent had increased investment in energy efficiency to discharge carbon price impacts, just over 20 per cent fell specific investments due to the carbon price had either reduced the amount.
Conclusion
While a carbon tax is studied a cost effective tool to discharge pollution from the air, it has increased a argument among the policy makers about its various impacts on the economy and society, as the tax is generally regressive.The Australian Government should have more detailed information to look into the benefits as well as the risks of carbon tax via incentives and penalties to secure that the industry and economy is growth well and creates the best ways to discharge greenhouse gases. Moreover, an effective policy should be adapted to reduce the desired greenhouse emissions and gain the international economy, environment and society are better for future generation.
References
ABS. (2007). “ABS household income and income distribution”, Austarlian Bureau of Statistics. Retrieved from http://www.abs.gov.au/ausstats/abs@.nsf/mf/6523.0
AEC Group. (2013). “Carbon Tax Impacts on the Australian Accommodation Industry”, Tourism Accommodation Australia.Retrived from http://www.tourismaccommodation.com.au/wp-content/uploads/2012/08/AEC-Report-TAA-Year-One-Carbon-Tax-Impacts-Final-14-Mar1.pdf
Australian Government .
(2011). “Securing a clean energy future”, The Australian Government’s climate change plan. Retrieved from http://www.cleanenergyfuture.gov.au/wp-content/uploads/2011/07/Consolidated-Final.pdf
Australian Industry Group. (2013). “Ai Group Survey: business pricing responses to Australia’s carbon tax, the first six months”. Retrieved from http://www.aigroup.com.au/portal/binary/com.epicentric.contentmanagement.servlet.ContentDeliveryServlet/LIVE_CONTENT/Publications/Reports/2013/Carbon_price_impacts_Jan_2013.pdf
Garnaut, R .(2008”. “The Garnaut climate change review”, Report, Chapter 16, Cambridge University Press. Retrieved from http://www.garnautreview.org.au/
Lewis, S and Jacob, P. (2013). “Carbon tax hurts, say ailing firms”, New Limited Network. Retrieved from http://www.news.com.au/tablet/carbon-tax-hurts-say-ailing-firms/story-fnejlrpu-1226599232391
Rahman, M. M. (2011). “ The proposed carbon tax in Australia: impacts on income distribution, employment and competitiveness”, School of Accounting, Economics and Finance. Retrieved from
http://eprints.usq.edu.au/20809/
Siriwardana. M, Meng. S and McNeill. J. (2011). “The impact of carbon tax on the Australian Economy: Results from a CGE Model”, School of Business, Economics and Public Policy. Retrieved from http://www.une.edu.au/business-school/working-papers/economics/econwp11-2.pdf
Spash, C. L and Lo, A. Y. (2011).“Australia’s Carbon Tax: A Sheep in Wolf’s Clothing?”,The Economic and Labour Relations, Vol. 23, No. 1, pp. 67 – 86.
Zhang, Z. X. and Baranzini, A. (2004). “What do we know about carbon taxes? An inquiry into their impacts on competitiveness and distribution of income”, Energy Policy, 32: 507-518.
Appendices
Table 1: Effect of Carbon Tax on Employment by Sectors (percentage change)
Industry
$15 tax
$23 tax
$30 tax
1. Agriculture, forestry and fishing
-0.29
-0.63
-0.75
2. Black coal
-0.52
-0.88
-1.11
3. Brown coal
-14.98
-26.42
-35.9
4. Oil
-0.58
-0.98
-1.32
5. Gas
-1.80
-2.71
-3.60
6. Other mining
-0.87
-1.43
-1.97
7. Food, beverages and tobacco
-0.94
-2.71
-2.30
8. Textile, clothing and footwear
-0.88
-1.56
-2.21
9. Wood, paper and printing
-0.64
-1.21
-1.62
10. Automotive petrol
-0.13
0.02
0.05
11. Kerosene
-0.61
-0.89
-1.17
12. Liquefied petrol
-0.91
-1.23
-1.81
13. Other petroleum and coal products
0.24
0.47
0.66
14. Chemical products
-2.52
-4.25
-5.74
15. Plastic and rubber products
-1.13
-2.05
-2.73
16. Cement
-1.02
-1.60
-2.05
17. Iron and steel
-3.99
-6.51
-8.67
18. Other metal products
-2.33
-3.79
-5.04
19. Other Manufacturing
-0.85
-1.57
-2.19
20. Electricity – Black coal
0.82
3.87
5.65
21. Electricity – Brown coal
-2.51
-7.84
-13.23
22. Electricity – oil
12.73
22.97
32.54
23. Electricity - gas
14.98
24.47
32.54
24. Electricity – renewable
43.04
67.41
87.48
25. Commercial electricity
-11.6
-17.37
-22.78
26. Gas distribution
-5.94
-10.05
-13.03
27. Water and sewerage services
-0.67
-1.20
-1.53
28. Construction services
0.04
0.06
0.10
29. Trade services
-0.35
-0.67
-0.90
30. Accommodation and restaurants
-1.12
-1.97
-2.55
31. Road transport services
-0.69
-1.33
-1.76
32. Other transport services
Other transport services
Other transport services
-1.22
-1.97
-2.55
33. Communication services
-0.41
-0.76
-1.02
34. Public services
-0.32
-0.57
-0.76
35. Other services
-0.22
-0.40
-0.53
Source: Projections from the model.
Table 2: Summary of Accommodation Services Estimated Carbon Tax Impacts (2012-13)
Expense Item
Average Expenditure Per Room Available (2012)
Low Range Carbon Tax Impact
High Range Carbon Tax Impact
Total Costs Per Available Room
$55,425
$284
$506
Carbon Tax % Cost Increase
0.5%
0.9%
Total Cost 200 Room Operation
$56,818
$101,207
Total Cost to Industry*($m)
$64.5
$114.9
Note:* Industry cost based on ABS (2012e) room counts of 227,015 for hotels, motels, and serviced apartments with 15 or more rooms.
Source: AECgroup