Taxation

Thinking Out of the Box Taxation

Polluters Must Pay

Polluters must pay. Regulations and taxation systems must be implemented to ensure compliance from companies, especially big polluters, because we don't have time to wait for them to become responsible. The legislation in Australia will take effect in July 2012, there are a number of countries with carbon taxes in Northern Europe and then obviously the European Union has regulations and legislation on emissions. New Zealand is at the beginning of emissions tracking schemes. The reaction has been incredibly disproportioned to the impact of the actual changes. The changes have been announced, introduced starting with a very generous compensation. In fact the biggest polluters will receive 94.5% of the pollution permits they require for free, in other words they’ll only have to buy 5.5% of the pollution permits they need. Most of the public debate about the introduction of the price has been entirely confused or misleading and in reality the actual financial liability of the biggest polluters will be small. The legislation has some modest flexibility built into it which means there are some opportunities for the government to, for example, review the amount of free permits being given away, but the timing of those reviews is years away. For the next nine years polluters in Australia will pay some but not very much as a price for their pollution. The Australian government had already introduced a green house gas inventorying, we always had quite good emissions accounting. Only the very big polluters will have a direct liability to pay a carbon price, only polluters who generate more than 25,000 tons of greenhouse gas emission will be liable. And all households will have no obligation at all. But while citizens will have no direct liability their electricity bills will rise slightly, because the company that generates their electric power will have to raise the price, so private citizens' bills will be higher. It’s important to point out that the price of petrol will not go up, because while the carbon price is being introduced on transport fuel, other taxes are being reduced at the same time. The challenge of introducing a carbon price has nothing to do with it being a threat on the macroeconomy and everything to do with its impact on big polluters. So, building solar panels and renovating buildings to make them energy-efficient is job-creating and favors economic growth. However, companies that make millions of dollars selling coal or coal fired electricity will continue to push for the lowest possible carbon price. So the problem is that in the public debate we keep confusing what’s good for the polluters with what’s good for the economy and what’s bad for the polluters with what’s bad for the economy. But the invention of the automobile was devastating for the people who made most of their money selling horses. Nobody would suggest that moving from horses to cars was bad for the economy. Many seem to think that anything that is good for energy efficiency is somehow bad for the economy when in Richard reality such incentives are simply Denniss bad for those that profit from pollutis Executive Director ing. The companies that generate the of the Australian vast proportion of greenhouse gases Institute. He is an will only change their behavior when economist with a they’re forced to do so by regulation particular interest in or required to do so via higher prices the role of regulation. for pollution. We simply can’t wait for Richard has published companies to want to protect the enextensively in academic journals, is vironment, we need to pass laws to make them. • a frequent contributor to national newspapers, was the co-author of the best selling Affluenza and is the co-author of An Introduction to Australian Public Policy: Theory and Practice.

[W australia.gov.au eea.europa.eu newzealand.govt.nz tai.org.au]