The federal government’s chief climate adviser has recommended a carbon tax should be weighted heavily to forcing industry to change its ways, with the bulk of the revenue used to compensate consumers.
The federal government’s chief climate adviser has recommended a carbon tax should be weighted heavily to forcing industry to change its ways, with the bulk of the revenue used to compensate consumers.
In his final report to the Gillard government this week, Professor Ross Garnaut supported the introduction of a fixed carbon tax of between $20 and $30 a tonne, increasing by 4 per cent a year in real terms.
That would shift to a floating price and cap on carbon level allowances in 2012, aimed at encouraging industry to trade carbon permits, initially for sale by auction two years before their use.
Initially, 55 per cent of the money raised by the tax would go to low and middle-income households, with the tax-free threshold to be capped at $25,000 a year.
That would increase over the course of the scheme, as the income from the tax decreased, alongside emissions.
Business and industry will initially receive 35 per cent of carbon tax revenue, equivalent to $4 billion, according to the Garnaut report. This will decrease over time to 20 per cent by 2021-22.
Parsons Brinckerhoff technical executive for climate change Arek Sinanian said at an Urban Development Institute of Australia sustainability conference this week that the point of a carbon price was to incentivise change through cost to individuals and business.
“There will be an economic cost, there is no doubt about it … that is the whole idea of a market-based mechanism,” Mr Sinanian said.
He pointed to the theory that market-based mechanisms were superior to direct action, such as the solar panel rebate schemes, because they encouraged operational changes and innovation in sectors that produced the bulk of carbon emissions, like energy.
“We are eventually going to end up with a capital trade system … that encourages larger users of energy to invest in energy efficiency,” he said.
“Businesses have to deal with all sorts of uncertainties. We are part of the global economy and businesses that are operating in this global economy have to deal with all sorts of uncertainties every day – Australian dollar fluctuations, the GFC effects, China’s demand, India’s growth, what happens in America.
“What Garnaut is saying, and many other studies, is the actual impact of a price on carbon, even if it is going to be $20 or $30 a tonne, even that will have a relatively minor impact compared to these others fluctuations and other uncertainties.”
Mr Sinanian insisted opportunity lay in technology development, rebated by the scheme.
“Australia has always been a clever country, we have done some wonderful things in engineering, science and innovation. We have a huge opportunity to provide a lot of this technology,” he said.
