Carbon Tax Evaluation

A REPORT ON CARBON TAX

TABLE OF CONTENTS

EXECUTIVE SUMMARY………………………………..…. 5-5

INTRODUCTION……………………………………….…….6-6

BACKGROUND INFORMATION…………………………...7-7

ISSUES AND PROBLEMS……………………………….…..8-8

DISSCUSSION (CRITICAL ANALYZIS)…………………...9-11

RECCOMENDATIONS……………………………………..11-12

IMPLIMENTATIONS………………………………………..12-13

REFERENCES……………………………………………......14-14

EXECUTIVE SUMMARY

People have started to think about the ever growing Environmental issues regarding the industrial growth. Due to the negligence of the governments and the unawareness of the common public it has developed into a global crisis. Now with the introduction of the Carbon tax law and its strict implementation most of the industries around the world have to find suitable adjustments to make sure they find adequate energy sources and at the same time survive in the competitive environment.

This report explains what carbon tax is all about, why it is enforced and what are the main changes caused due to it. I have also discussed the problems and issues related to Carbon tax and conducted an analysis about the positive and negative impacts of the carbon tax on businesses both small and large as well as the common people. I have also included details about certain industries in which carbon tax is going to create a renovated approach in the near future. Possible substitutes for the energy crisis situation is also been mentioned, in form of renewable energy sources such as sunlight, windmills, hydroelectric power plants etc.

I have also done some research into the topic and have provided some hopeful recommendations and suggestions for the implementation of my recommendations. By completing the report I understood that it is a very relevant topic in the modern world scenario and even though a sudden change is impossible a gradual change has been initiated and the reaction from the businesses and public is imminent. Hopefully businesses and the public will understand the importance of a healthy living environment for the generations to come.

INTRODUCTION

What is Carbon tax?

Carbon tax is the tax imposed on the carbon content of fuel. We can say that it is an environmental tax imposed by the government to reduce or discourage the production of greenhouse emissions and also even the vehicles on the roads. It is also a step towards promoting green energy or natural gas for substituting fossil fuels. Carbon content is there in every fossil fuel. So there is always a considerable emission of Carbon dioxide released into the atmosphere when the fuel is burned. In order for the betterment of the environment the governments have decided to impose Carbon tax.

Why a Carbon tax?

When we hear about the term Carbon tax the initial question is why does it need to be there? The answer is that by imposing a Carbon tax the government is trying to reduce the emission of carbon dioxide into the atmosphere for conserving the environment. By imposing this tax people and companies have started to think about the environment and have started to find more cost efficient methods and environment friendly substitutes instead of carbon emitting fossil fuels.

What changes have been brought about?

The imposing of Carbon tax has almost made an immediate impact. Many Countries around the world do support the idea of imposing a carbon tax and the positive affects it can bring on the environment. Amongst all this certain industries especially the mining industries have strongly rejected the idea. In contrast the amount of carbon tax is set by the political or legal structures. In the current scenario those producing greenhouse gases can produce without any limit, but they will be charged with the amount they are emitting. By the tax imposing people are thinking about more renewable resources such as wind or solar energy instead of paying high taxes.

BACKGROUND INFORMATION

The first Carbon tax was introduced in Finland in 1990. After that many countries started following their footsteps imposing tax on Carbon and the Government stated the fact that putting a price tag on pollution is the best way to discourage industries from emitting pollution causing substances.

The Carbon in Australia began on July 1, 2012.it is priced in such a way that the price will be same for the first 3 years. From July 1 2015, the price will be set by the market. Currently it is AUD 23 per tonne and it will be increased by AUD 1.15 for the next year and increased by AUD 1.25 for the third year.

Need of carbon tax

The carbon taxes were imposed for a number of reasons. The main reason is the economic impact of the tax which may depend on the size and structure and that causes an energy production shift. Also by imposing the tax Government are hoping that the companies will be finding alternative sources of energy in order to substitute fossil fuels and thereby reducing the emission of Carbon dioxide in the atmosphere. In the modern scenario there are many climatic changes occurring due to the carbon emissions and the imposing of the tax has become fatally important to the human race itself. The tax will make companies take the initiative in working towards a more environment friendly solution. The Government will also be making profit from the taxes and will be converting those profits to invest in better and useful ends for the society an environment.

Comparison with emissions trading system

The carbon tax is different from an emissions trading system. In emissions trading the Governments sets the limit of pollution emission for each company. They were giving emissions permit to the companies which gave them the right to emit a certain amount of the pollutant. The firms usually had to hold a number of permits equivalent to their emissions. There is a set emission cap and the total number of permits issued cannot cross the cap. In this system the companies which required more permit or emission gap needed to buy permits from other companies. In this system the company which uses fewer caps will sell their cap to other companies. So that the company which produces less pollution will make profit and be rewarded from their cap whereas the other high emitting companies will have to pay more for their extra cap.

ISSUES AND PROBLEMS

The main problem in the modern world is the ever-growing global warming threat. From our small scale household emissions into the environment to large scale highly impacting emissions from industries together are responsible for this situation. Nowadays most people in the society are aware about the consequences and Government are conducting awareness campaigns to make people understand the crucial impact of pollution. From deforestation and pollution of drinking water to the more recent high levels of carbon emission, all have contributed in draining the natural ecosystem.

The people have understood that it is not about the taxes they pay or the profits they make, it’s about the environment in which they live in a making the world a better place for the next generation that matters. Even after people being aware it is sad to say that even nowadays the level of pollution or Carbon emission is quite high. In the case of global warming Carbon dioxide is the major pollutant in the picture. When we look into the matter and do our research we will understand that even the smallest of companies across a wide range of activities will be having a significant carbon emission situation.

Even though Scientists and most governments have understood carbon emission as a serious threat to the environment some industries are still not considering this as a serious issue. They are worried about the tax and they are expressing their views into reducing the taxes rather than the safety and conservation of the environment. The industries should realize the fact that they are destroying the planets natural habitat. The government should also convince the companies that by imposing the carbon tax the companies don’t need to be shut down or run at a loss, they just need to find other environmental friendly sources of energy for their working.

Yet another important factor is the destruction of the ozone layer due to pollution. In these kind of particular cases the damage caused due to the pollution will be more in the particularly affected areas and will be resulting in varying climatic conditions resulting in harder habitat to live in. People should understand that the more increase in pollution, the harder it is to recover and thereby slowly moving into a situation without recovery for the human civilization. It is not just about the environmental pollution, it is also related with the health issues as well. When the oxygen water and other basic need gets polluted there will be a high probability of health issues for the living organisms.

DISSCUSSION (CRITICAL ANALYSIS)

How it is going to affect small businesses?

The small businesses in the society will also have to pay carbon tax, even though they might not be paying directly they are indirectly impacted. When they consider their costs involved and organise their pricing structure carbon tax will be influential. Businesses will need to have good communication with their clients and frequently inform them about the price rise due to the Carbon tax law. If this precaution is not taken, the business however small or large they might have to face problems with the Australian Consumer law.

Some of the impacts may include:
Considerable increase in the general operating costs of the business.
A possible increase in the workload and a need to follow legal policies whatever the consequences it will have on the business.
Small businesses which are operating in good coordination with larger businesses will have to adapt to the market trade policies.
The businesses will have to develop more flexible strategies and implement in order to survive in the competitive environment.
The more ecofriendly policies introduced by the government, the more the small businesses may have to invest and that is going to impact the financially.

The Government however is providing help to the small businesses to adjust with the changesoccurring due to the introduction of Carbon tax. They are providing financial assistance to companies who are having a budget below a set limit. This financial assistance is aimed at improving the business’s ecofriendly nature and develop newer technologies which may cause lesser or zero pollution. Most often the businesses will invest in more renewable energy sources in working towards a greener tomorrow. The introduction of National Carbon Offset Standard (NCOS) is aimed at helping the businesses promote their product using Carbon Neutral Certified logo.

As the Carbon tax is a relatively new concept, the extent of impact of it on small businesses are not yet known. Nevertheless businesses are taking considerable precautions. The precautions are the development of substitute plans and ensuring easy implementation of such plans to overcome sudden changes. The whole concept is that those businesses who are causing more pollution to the environment will have to pay more taxes and will be having reduced profits and these profits will be distributed back to the businesses to improve and implement more renewable energy sources.

How it is going to affect households?

When we compare with businesses the common households will have to pay very less or will be having very less to worry about in their daily activities. Even though there will be an increase in the tax paid by the common people, it will be distributed back to the households in the form of other services by the government. Although we will face a considerable rise in the energy prices for the coming years, that rise is understandable to the public considering the depletion of resources on planet earth.

General commodities such as electricity, petrol and diesel will be having a price hike with the implementation of carbon tax. The fact that there is going to be a considerable increase in the pricing, it is going to be placed over a long period of time make it unprecedented.

Positive effects

The carbon tax law is going to make most people think “why am I paying more taxes?” this particular thought will make people to gather more knowledge about the carbon pollution problem and will help in the better conservation of the environment and perishable resources. Overall it will have a positive environment by people becoming more and more conscious about the use of energy and how the use of renewable resources are going to play a vital role in the years to come. Moreover people who are coming up with new businesses will think about the issues and will start of their businesses with more environment friendly approaches and thereby cancelling carbon tax and ensuring more profit to their business.

Benefits for the government

The Government is going to receive a huge amount of money from the Carbon tax scheme. They are stating that they will be able to distribute it back to the public by using that money effectively to provide services to the households. With the finances available the government will be able to invest that money into the development of renewable energy sources and thereby reducing pollution and providing a healthy habitat for the people.

Carbon farming

In a county like Australia, agriculture accounts to more than 20 per cent of the carbon emissions. The government is all set to provide better economic opportunity to the average farmer and thereby reducing carbon emission and pollution. The Government has set up the Carbon Farming initiative (CFI) to reduce greenhouse emissions and is aiming at giving farmers better cost efficient methods to achieve their tasks. They are also taking initiatives to further develop carbon farming, in the near future they are hoping to introduce new technologies and practices so that the process of storing soil carbon is put into action and simultaneously applying these in practical farming.

RECOMMENDATIONS

It is time for the Government and people to take bold decisions and a well-designed carbon tax scheme will be the start for an “ecofriendly future”. People and industries are seeing Carbon tax as a hindrance for their daily activities; this thought will have to change and industries should adapt to the current situation considering it as an industrial strategy and working towards it.

Slow and steadyincrease of carbon tax

In order for the industries to adapt to the carbon tax laws most industries will require time and material. These changes cannot happen overnight as the changes may include improvement of facilities, introduction of new technology, better waste disposal system, improved transportation facilities and most importantly awareness among their employees and customers about the environmental pollution control. These will have some financial as well as structural constraints and the law should be structured such that they are given enough time to find solutions.

Implementation of Carbon tax to other Industries

The current carbon tax law in most countries is applicable only to the combustion of fossil fuels which may cover up to 75 per cent of the Carbon emissions. In the future days the carbon tax should be expanded to emission from the cement, lime and the aluminium industries, even for industries such as the gas and oil sectors. By doing so we would be able to increase the coverage up to 80 per cent. We should also import tax on the international trade which will make sure that all the industries will have an equal and necessary impact from the Carbon tax rule.

Proper utilization of the collected tax

The government should take necessary precaution to ensure that the funds obtained through thee carbon tax scheme are put to ensure the betterment of the environment. Ensure that the money goes into the development of better renewable sources of energy which will reduce the usage of carbon emitting fuels and energy in most industries. The Government should Conduct awareness programs for the industry staff and the common public so that they will be better knowledge about the environmental risks occurring due their daily activitiesand making them think about renewable resources and find substitutes in order to achieve Eco friendliness.

Use of Natural energy as a substitute

In recent days we are seeing a trend of more and more people using natural renewable sources of energy from small households to large industries. These energy sources may include:
Solar energy
Wind mills
Hydroelectric plants

These energy sources are highly renewable and will cause no environmental hazards. This will help reduce Carbon emission by substituting carbon based fossil fuels and help us cut the expense on carbon by carbon tax. When we think about it we can understand that the amount of money we are paying by carbon tax can be easily utilized in order to build solar cells, wind mills, or hydro plants in order to generate more energy. We are also aware about the fact that other natural resources are also being depleted, in this circumstance if we are able to invest more in renewable resources we will be able to conserve more resources for the future.

IMPLEMENTATION

We can discuss all we want and create very good plans, but like the old idiom “It’s easier said than done”, so the effective implementation of the plan is essential. Based on the recommendation mentioned above we can implement measures for a better tomorrow.

First and foremost is the strict implementation of the carbon tax. The governments should enforce the rule and expand their vision in improving the law so that they can initiate a global change. Ensure better use of the tax for the improvement of the public sector as well as environment. They should enable the expansion of carbon tax scheme to other industries which cause pollution and gradually improve the society.

The next step is the proper planning on what to do with the fund obtained from the carbon tax. They should be properly distributed to each household and a fraction of it should be conserved for investment in developing better energy sources which results in less pollution. They can also use the funds to set up the recommended awareness programs for the public.

Another important action to be done is the substitution of carbon emitting fuels with other natural renewable resources such as sunlight, wind energy and water energy. The process can be helped by using the carbon tax funds to build new plants for these energy productions and thereby reducing the use of fossil fuels.

The conservation of other natural resources which are subjected to depletion is also necessary. Resources such as oil should be preserved for the future generations and in order to do that we must work to achieve better substitutes with lesser environmental hazards.

REFERENCES

1. Fisher, B.S. (1996). An Economic Assessment of Policy Instruments for Combating Climate Change. Cambridge University Press, Cambridge, UK, and New York, N.Y., U.S.A.
2. Hoeller, P. and Wallin (1991). Energy, Prices, Taxes and Carbon Dioxide Emissions. OECD website.
3. www.carbontax.net.au, Australian carbon tax info. Website.
4. http://www.renewableenergyworld.com, World energy research website.
5. Helm, D. (2008). Climate – change policy: why has so little been achieved? Oxford Review of Economic Policy.
6. www.climatechange.gov.au, official Australian climate change website.
7. http://www.abc.net.au, Australian news website.

References: 1. Fisher, B.S. (1996). An Economic Assessment of Policy Instruments for Combating Climate Change. Cambridge University Press, Cambridge, UK, and New York, N.Y., U.S.A. 2. Hoeller, P. and Wallin (1991). Energy, Prices, Taxes and Carbon Dioxide Emissions. OECD website. 3. www.carbontax.net.au, Australian carbon tax info. Website. 4. http://www.renewableenergyworld.com, World energy research website. 5. Helm, D. (2008). Climate – change policy: why has so little been achieved? Oxford Review of Economic Policy. 6. www.climatechange.gov.au, official Australian climate change website. 7. http://www.abc.net.au, Australian news website.