Tomorrow, July 1, Australia gets the carbon tax the Prime Minister, Julia Gillard, promised she would never introduce. The nation’s 500 “biggest polluters” will start paying a $23-a-tonne carbon price.
Retired geologist and engineer, Peter Lang, calculates what this tax, and the Emissions Trading Scheme to follow, will really cost Australians:
Introduction
Popularly called the ‘Carbon Tax’, the CO2 tax and ETS will cost us more than the government claims. Initial costs will be relatively small – a ‘honeymoon rate’ – but an accelerating rate thereafter will soon create much higher costs. Some people will be partly compensated for a while, but after that we will all pay the full costs.
Actual costs are not easily derived – much depends on assumptions and estimates. From Treasury estimates, for instance, the cost will be more than $13,000 per person (every man woman and child), or more than $26,000 per worker, total to 2050 (in today’s dollars).
However, the costs will most likely be much higher. Firstly, while the ‘honey-moon rate’ includes only the 500 largest emitters, all CO2 emitters will eventually be brought into the ETS to make the scheme work as planned.
Secondly, emissions will eventually have to be measured, not just crudely estimated as is done now. Not only CO2, but all the other twenty-three Kyoto gasses, from all sources, will have to be included. The compliance costs are not included in Treasury’s estimates (see The ultimate compliance cost for the ETS). Therefore, the actual costs the ETS will impose on us will inevitably be higher than we are being led to believe.
Below I explain the calculations of:
- the benefit (total to 2050)
- the cost (total to 2050)
- the benefit to cost ratio
- the cost per capita and per worker
Lastly, I list the assumptions that underpin the estimate of the benefits.
The cost and benefit analysis figures I used as inputs are chosen from sources well respected for reliability and credibility. The figures and subsequent analysis tell us, in effect, that Australia is planning to spend $10 dollars for every $1 of benefit it hopes to derive – provided the assumptions about the consequences of AGW are correct. This suggests that our climate policies are flawed and need major change.
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Jennifer Marohasy BSc PhD has worked in industry and government. She is currently researching a novel technique for long-range weather forecasting funded by the B. Macfie Family Foundation.