Monday, July 11, 2011

At Last - The Carbon Tax

Well. It’s about time.

Yesterday Julia Gillard announced the details of the Carbon Tax her Multi-Party Climate Committee has been hashing out for the last few weeks. Throughout the negotiations, and since the announcement, Tony Abbott has been doing his darnedest to spread fear and misinformation as a means of sabotaging the government’s position, and has been doing a pretty good job of it – so this won’t be just my thoughts on the good and bad of the package but will try to clear up misconceptions about the facts of the issue as well. I will not, however, be discussing the science of climate change.

The first thing I want to deal with is the rise in cost of living. One of the major tools Tony Abbott has been using to scare people away from the carbon tax is the allegation that hard-working, struggling Aussies would be made a lot worse off. However, the details have now come out, and the compensation for taxpayers is generous to say the least – for every dollar you lose in cost of living rises, you’ll gain back at least $1.20 in various tax breaks. Assuming you’re of a relatively low income, anyway – the people Abbott was supposedly defending before.

I don’t want to get into the ways it varies between singles, couples, and families but the ABC has all the data you’ll need; after a certain level, which for singles is 40 grand, your return is cut back to even money, and then shortly after that you start losing a bit, until at 85 grand you don’t get anything back. Even then, though, the cost to you will be minimal; $463 in a year is nothing to someone who earns 85 grand. It’s also worth noting that the tax-free threshold will be raised to $18 200, which will be very helpful for low-income earners. It’s apparently not quite as big a difference as everyone is making out, though; while the current tax-free threshold is only $6000, the Low Income Tax Offset means we have an effective tax-free threshold of $16 000 (according to the hive mind, anyway. Don’t quote me on this one).

The takeaway from all this: if you were worried about how much this tax was going to cost you, you can sleep easy tonight. You’ll be fine, and indeed will probably be better off than you are now. Is this a good thing, however? I’m a little undecided. Tony Abbott’s calling it wealth redistribution, socialism, etc. Note that he was attacking it from the exact opposite angle five minutes ago, and that he considers socialism to be a dirty word, when it really isn’t, but it’s still something worth considering: is this the best way to be spending the money earned from taxing the polluters?

I suspect this is just the way it has to be. I would have had no problem with making a bit of a sacrifice to ensure we tackled climate change quickly and decisively, so such robust compensation was by no means necessary to me – and, technically, I’m below the poverty line. So from an ethical standpoint I don’t think it’s entirely necessary to overcompensate low-income earners; it’s unreasonable to expect major change without at least a small sacrifice by somebody. That said, if there was a huge revolt and the government fell apart because of this – and in their current fragile state that’s a legitimate possibility – we’d lose all the good aspects as well, so in that sense, if it placates the fears of voters it’s money well spent.

One thing I was quite worried about prior to the announcement was how the tax would affect agriculture. If the tax had been levied on the emissions of livestock, for example, that would have been both disastrous for farmers (with all the flow-on effects that entails) as well as pointless; unless you want to move away from farming livestock altogether (an argument for another day) there’s really not you can do about lessening those emissions, so as a catalyst for change it would be completely ineffectual. Similarly, while farmers need to do their bit in the same way as everyone else with respect to moving to cleaner energy sources, some pragmatism is required; farmers may hold millions in land assets but are better compared to small business owners than large corporations, so their ability to absorb financial punishment is at times quite minimal; and having farmers leaving the land in droves is bad for everyone.

The end package, though, is quite excellent. Farmers are exempt from the carbon tax for their off-road vehicles (tractors etc) and the light on-road vehicles (utes) but if and when heavy on-road vehicles (trucks and road trains) lose their exemption, farmers will not be treated differently to anyone else. This seems to me to be a fair compromise as a beginning point; as cleaner cars become more economical, it’s going to be important for farm machinery to adopt this technology as well, so I think as we move into the future there might be scope for taxing those emissions as well. But in the meantime, this definitely doesn’t slug them too hard. Furthermore, there are a number of programs that allow farmers to actually benefit by helping the environment; carbon sequestration of varying sorts, adopting no-till techniques, etc. As I said a while ago, with every downside to a raft of legislation there will be an upside, and it’s important to take advantage of these opportunities.

The one big gripe I have with the package, though, is in regards to transport. While the maritime, aviation and rail industries will be taxed on their fuel, road transport (trucks) will not – at least not at first. I think it’s safe to say the decision was not made on ideological grounds, but instead on pure politicking grounds; the truckers are threatening strikes and we’re so dependant on trucking in Australia that they hold a fair amount of clout. Still, it needs to be pointed out how wrong this is – rail transport is much better for the environment – and the economy – than truck transport. Per km/tonne, it uses about a quarter as much fuel, over long distances it’s considerably quicker, it’s much safer (truck crashes versus train derailments, both in sheer numbers and likelihood of killing civilians) and an increase in rail freight would take a huge burden off our roads, which would save a lot of money both in wasted time (traffic jams) and in repairing and maintaining our roads.

Obviously trucks are needed to go where the tracks don’t – from the rail depot to the final destination – but in terms of long-distance hauling, on a level playing field, rail will out-compete road any day of the week. The thing is, though, the playing field is currently far from level in Australia. We’ve been plagued from the beginning when it comes to interstate railways because between the five mainland states there are four different gauges of track, making interstate freight nigh-impossible. There has been some attempt to slowly Standardise the tracks in Australia over the last few decades but there has been minimal headway.

Furthermore, in Victoria especially, the Liberal state governments of the 90s gutted the railway industry and privatised what remained, which has had disastrous consequences. Right now, rail is a shadow of what it used to be, so it doesn’t have the infrastructure to compete with trucks, especially given the huge amount of funding road has been given in its absence. It’s unfair, and antithetical to the spirit of the carbon tax, to further incentivise trucking, when it is exactly the kind of dirty industry we’re trying to eliminate.

So I think what needs to happen is this; we have a 3-year period in which trucking is exempt, and this should be treated as an opportunity. We have 3 years to start building the kind of infrastructure – and the kind of awareness and reputation – that would be necessary to make rail a serious competitor to road freight, so that when the full-fledged ETS comes into effect in 2015 we can start moving our freight off the roads and onto the cleaner, more economical option of rail.

I don’t usually solicit comments directly in these essays but this time I will – if you have a question, or an objection, about the carbon tax, I’d encourage you to say so in the comments. I’m serious when I say there’s a lot of misinformation out there, and that there may have been industries I’ve failed to take much notice of (though my general policy is: if I didn’t include it here, it seems fine and roughly what I expected), so consider this an open invitation to make use of my political nerdistry and black-belt Google-fu.

One exception: nothing about the science of global warming and whether this is a good idea in the first place – I want to confine the discussion to the political and economic models for dealing with it. It’s kinda moot now but I’ll deal with the science another day.

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