- Internal Code :
- Subject Code : ECON4410
- University : The University of Western Australia
- Subject Name : Economics
Environmental and Resource Economics
Abstract for Economic Value of Carbon Pricing
The Australian Government have levied taxes on carbon emissions with a hope to make the environment clean through Clean Energy Act 2011.I the entire essay , the problem regarding the carbon pricing along with the pros and cons have been evaluated and analysed with the help of certain arguments and debates. The carbon pricing helps in long term corporate decision making and it is also one of the cost effective ways to reduce the emissions. Australia to certain extent had proved to be successful in the context of the carbon pricing. However after certain pint of time, again it had faced problems in the emission of the poisonous gases which had created certain problems that have highlighted the essay.
Introduction to Economic Value of Carbon Pricing
Through internal carbon pricing, innovation as well as sustained economic competitiveness gets encouraged. The main purpose of carbon pricing is to put a price on the carbon pollution to bring down the emissions and at the same time driving the investment into the cleaner options (Australia State of Environment, 2016). The primary reason for the governments to put a price on carbon to reduce the external costs of the carbon emissions that is the external costs public pays like that of the damage to the crops and also the health care costs from heat waves and from that of the droughts and the rise in the sea level. The carbon price helps in shifting the burden for the damage back to those who are responsible for it. This way the overall environmental goal can be achieved in most flexible and least-cost (BBC, 2019).
To reduce the carbon emissions, the Australian Government had undertaken the initiative of the carbon pricing scheme or “carbon tax” through the Clean Energy Act 2011, which was one of the important initiatives to control the emissions within the country. The aim of this scheme is that the polluters could pay a certain level of the amount as tax per tonne of carbon, they are emitting into the atmosphere. However, the burden that had been generated out of this policy is that an increase in the electricity costs for households and the industry which ultimately leads to business closures and the other business economic hardships (Enelfoundation, 2019). These are some of the cons which had been reflected. However, in addition to that, the pros of carbon pricing are that it had successfully reduced the greenhouse gas emissions within the country by 1.4 percent. AUD23 per tonne had been asked to be applied to around 500 of the nation’s biggest polluters based on which the cap had been imposed on the trade-in order to grow the economy. These are some of the important outlines which will be discussed in the following through certain arguments and critical analysis (BBC, 2019).
Discussion on Economic Value of Carbon Pricing
After the introduction of carbon tax policy that is “carbon tax” through the Clean Energy Act 2011, the public had opposed previously worrying about the rise in the price of the electricity. Most of the public thought, that the carbon pricing will increase the fuel price along with a rise in the grocery prices and also the interest rates. During that time, the largest aluminum company in the world had reported the fact that the large scale projects which provide hundreds of jobs could get halted due to the carbon tax. However, it had been critically analyzed by some of the critics like Kate (2017,p.258) that the evidence showed that with the increased time, the annual pool that had been created by the Climate Institute during 2014 had found that the number of Australians h had disagreed with this policy had come down to 30 percent from 52 percent during 2012during the time when the coalition’s campaign against the carbon tax was at the peak (Worldbank, 2019).
The commitment for the carbon tax scheme has come from the Labor governments of 2007 to 2013 with the strongest support from Australian Greens. However, the Liberal Party had put opposition to it. In this context, the Australian Parliament entire had expressed some of the concerns in the context of the scheme potentiality. The primary aim of the Australian government behind the introduction of the Clean Energy Bill is a commitment towards objectives which involve funding in the context of energy-efficient assistance and the investments of clean technology (Worldbank, 2016). However, the cons in the context of putting a price cap on the carbon emissions is that rise in the pension and at the same time the increase in the family payment. However, the research studies highlight that in the context of the carbon pricing, the Australian government had committed to spending half of the revenue from carbon tax so that the households for the higher electricity and the other living costs which ultimately pollutes the environment is passed on (Claudia, 2017). Again the imposition of the carbon tax scheme has been made in such a way such that the businesses might get helped with the cleaner forms of the energy.
As being pointed out by some of the authors like Kate (2017,p.458) it can be analyzed by stating that that the countries designed pricing polices which is based on locally CHG emissions inventory as well as the economic structure. The following image will highlight the adoptions that have been practised by the 11 focused countries. It can be stated by highlighting that only Denmark as well as Sweden had significantly uncoupled GHG emissions and the GDP growth (Rebecca, 2016,p.1081). The country had experienced stronger annual growth in GDP since the adoption of carbon tax from 1990 and it is largely attributed towards the modernization of coal fired power plants during the transition that have been occurred during the transition to the market economy. After the policy being implemented, Poland continued to generate around 80 percent of the electricity from the non-renewable sources. The following table reflected below as:
To bring the regulatory stability, the complex schemes on the carbon pricing have called for sophisticated monitoring, reporting as well as the verification of MRV systems based on which the quality information can be ensured along with the robust protocols in the context of accounting (Thepmr, 2020). There exist two ways to establish a carbon price. The first way is the levy of the carbon tax on the distribution, sales, and the use of fossil fuels based on the content of the carbon. This ultimately increased the cost of the fuels and the goods and the services based on which both the people and the businesses can get encouraged to switch themselves towards greener production and consumption. In this aspect, it will be the responsibility of the government in deciding how to make the proper use of the revenue through the use of the fee and dividend model. In order to serve the purpose, the carbon price which has been set by the tax or the cap scheme should be sufficiently high in order to reduce the emissions of the carbon by 8 percent in 2050. This is one of the important initiative that had been undertaken by the government of Australia to make the environment pollution free (Enelfoundation, 2019).
The primary causes behind the emissions is comprised of the stationery energy, transport as well as fugitive emissions from the fuels. It is defined as one of the most dominant sources of the Australian CHG emissions which ad accounted for around 74 percent of the net emission. The higher level of the emissions per person helps in reflecting the nation’s heavy reliance’s on fossil fuels as part of the energy source especially regarding the dominant role of coal (Wayne, 2011,p.156). The primary cause of carbon emission in Australia is that both the transport as well as the agricultural sectors contributed around sixth of the Australian net CHG emissions. Again the agricultural contribution towards the Australian CHG gas emissions is the emission of carbon dioxide and also the release of methane and nitrous oxide.
The management of Australia as a signatory to the Kyoto protocol which had been ratified during 2007, Australia, has committed itself in limiting the increase of GHG emissions to around 108 percent of 1990 levels from 2008 to 2012 (Worldbank, 2019). As per the National Inventory Report 2012, Australia has exceeded the Kyoto target with the emissions of leveraging 565 MtCO2 per year (2008-12) or 103 percent of 1990 base levels.
The recent debate, as well as the announcement of the carbon pricing policy by the Australian government, have generated a stronger reaction from Gillard’s political opposition, the business sector as well as the economists (Kate, 2017,p.458). It had been critically argued by Gillard’s political opposition party that the pricing on carbon emission is one of the “big one tax” which ultimately will increase the cost of the Australian businesses and the households without delivering the proper environmental benefits. Instead, the plan by the Liberal Party is one of the direct action approach which could be levied to reduce the emission by five percent within 2020 through the plantation of more trees (Wayne, 2011,p.157).
This way the better process of soil management along with better amount of the clean technologies can be provided at the proposed amount of AUD 3.2 billion for the next four years. However it has been argued by some of the critics like (Deb, 2013,p.40), recently a group of big industry organizations has agreed to spend a minimum of AUD 10 million on campaign to develop public opposition to price the carbon. On the contrary, a diverse group of the other sectors involving finance, energy, retail, and the technology has signed a letter declaring of the support for the carbon price which will ultimately help Australians to be globally competitive. After the introduction of the Cleaner Energy Act, the power stations in Australia had been regarded as one of the primary sources of carbon pollution and have accounted for over half of pollution in Australia. Australian Government had made a good start to make the environment pollution-free. Since the application of carbon pricing, important changes have been observed in the electricity generation sector of Australia which generates 12 million tonnes less pollution from the electricity generation (Enelfoundation, 2019).
This is one of the pros that had been observed in the forefront after the imposition of the carbon tax. Side by side the electricity market also got down due to a range of certain factors like both the households as well as the businesses had gradually declined their electricity consumption rates and this is the reason, the market for National Electricity Market had been down by 2.4 percent. Hence the Clean Energy Future policies have driven around billions of investment dollars in the clean and renewable energy which have not only created new jobs and the industries but have also engaged themselves in the generation of the 24000 jobs in the renewable energy industry of Australia. Nowadays also, the individual households as well as the Australian businesses have been acting responsibly through the installation of the solar panels and the solar hot water systems on the roofs after getting support from small scale renewable energy schemes from the Government (Claudia, 2017).
The main point through which it can be stated that the use of energy in a more efficient manner not only lowers carbon pollution but also helps in saving the money in the larger amount. This policy had also helped the government in making the use of the revenue so that the projects like Low Carbon Communities which helped the households, local councils along with the community organizations. The Australian Government have proved to be successful in reducing the problem of carbon emission through certain efficient programs like that of Community Energy Efficiency Programme, Low Income Energy Efficiency Programme through which the medium-sized businesses along with the community organizations have managed themselves in improving their energy efficiency (Worldbank, 2016). Along with this, the other pros that have been generated form the initiation of the carbon pricing policy in Australia is that the initiative on carbon farming has ultimately helped the farmers in generating new income sources and also generating income for the land managers as well. With the help of this, the farmers have found themselves in an advantageous position in selling their credits to businesses like coal-fired electricity generators which had been approved through improved methodologies based on which the genuine delivery of the energy emissions had been obtained (Thepmr, 2020).
By 2050, the Australian government can make carbon-neutral nation after entering into the green agreement with Paris wherein the agreement there will be stated that the global warming gases need to be limited to 2-degree centigrade is that zero emissions can be reached easily. In the first step, the Australian government have committed to the reduction of the total carbon emissions by 26-28 percent below 2005 levels within 2030. However, under the Paris agreement it will be necessary for Australia to submit the strong targets every five years. However, some of the critics like Rebecca (2016,p.1100), have highlighted that as per the Climate Works, it has found that though the Australian emissions have fallen by 11 percent since 2005, the emissions have again steadily climbed up from 2013 and during 2013, around 520 million of the carbon dioxide have been emitted. It had been found that the emissions are above 2005 levels in buildings, transport sectors etc. The increased amount of energy efficiency and the expansion of renewable energy had also created modest contributions. The reduction of emissions from energy efficiency can be done through the development of better buildings, white goods and vehicles which will save the money in the long run (Australia State of Environment, 2016).
In Australia, it have been analyzed that the electricity sector have tried to cut the emissions by around 21 percent within 2030 but unable to achieve it by around 70 percent. Hence to ensure smooth as well as cost-effective transition to make a net-zero emissions economy by 2050, some of the sectors especially the transport sector need to go through Energy renewable Target which is needed in the sectors in order to encourage the investors. Despite of the importance in the electricity as well as the land sectors, the emission reductions is needed throughout the economy through re-vegetation and forestation, through the enhancement of renewables and phasing out coal and at the same time bolstering energy efficiency, switching of the fuels and at the same time reduction of the non-energy emissions (Rebecca, 2016). Under the Paris Climate Agreement, in order to tackle the global temperatures, it is the responsibility of the Australian government to set a target based on which 90 percent of the greenhouse gas emissions can be prevented in the future.
The agreement under the nation of the Paris had entitled themselves in viewing that the cumulative fire dangers in most parts of the areas are growing and hence they had recognised themselves regarding the State of the Climate 2018 report based on which the catastrophic extreme weather event can be controlled and tackled. In the context of competitiveness the economic impact of the carbon price on the businesses can be handled effectively through the design of the policy programmes based on which the future challenges can be easily tackled. The other polices involves the production as well as the investment tax credits which is important for the research and the development purpose (BBC, 2019).
The policymakers have also considered complementary measures to solve transition for the adversely affected firms, regions as well as the sectors. This includes dedicating the carbon revenues to the regional economic development. For example according to World Bank Organization, the EU ETS provides free allowances allocation to the business in certain sectors which is exposed to the carbon leakage. The adjustment towards the policy designs is in addressing the competitiveness concerns with an exit strategy vision so that the political impediments can be easily avoided. Linking the carbon markets is having the advantages to get the greatest reduction of the emissions at the lower cost levels (Kate, 2017).
This way ultimately the modernization, as well as the productivity improvements, can be easily generated and hence the future market opportunities can be easily enhanced through the new technology operations. In the future, the National Emission Cap or the Carbon tax scheme have not undermined the emissions trading and it cannot be included since it requires some of the complementary policies in certain areas like the technology promotions and the institutional reforms so that the management’s broader role can be adequately envisaged (Claudia, 2017). In the future, new investments is required so that the additional compensating emission reductions can be reduced and the major investment proposals which will increase the production should be eligible for the export rebate.
Conclusion on Economic Value of Carbon Pricing
To conclude, it can be stated that without the effective market price, in Australia, it is a lesser chance for the private sector to economize in carbon emissions based on which the low carbon future can be generated in the future. There should be well-designed carbon pricing policies which takes into account the effectiveness of the reduction in the emissions along with regulatory stability, the potentiality of the negative distributional effects and at the same time interactions with other polices. This will enhance the global trade the future and at the same time will also help in cost-effective attainment in the environment as well as the social targets which will further include the efficiency of the resources, development of the green technologies and at the same time setting of the low carbon intensity industries through which the carbon leakage can be prevented and along with that the meeting of the global standards can also be done in order to strengthen the market integrity.
This way the socio-economic goals along with the liberalized entry of both foreign as well as private participates for the proper design of the ETS system. In this aspect, a well-framed implementation schedule needs to be designed which involves a multi-phased approach towards pricing so that both the economic as well as the social shocks can be easily minimized to attain sustained measurements in the future. As a matter of policy instrument, carbon taxes have been so far widely adopted and hence it is also referred to as one of the empirical experiences of the policy effectiveness in order to make a review. The carbon taxes gets favored by the governments due to their low implementation cost and at the same time the highest potentialities in the enhancement of the government revenues. This way the likelihood in the market distortion can get lessened along with the strengthening of the market integrity. The carbon taxes on the other hand is having the benefit in the context of the cross cultural adoptions in the context of the material flows , efficiency of the resources along with sustainable production and consumption.
References for Economic Value of Carbon Pricing
Australia State of Environment. (2016). Pressures affecting Australia’s climate. Retrieved from https://soe.environment.gov.au/assessment-summary-31-pressures-affecting-australias-climate
BBC. (2019). Is climate change to blame for Australia's bushfires? Retrieved from https://www.bbc.com/news/world-australia-50341210
Claudia, I. (2017). The Carbon Tax in Australia. Retrieved from https://www.centreforpublicimpact.org/case-study/carbon-tax-australia/#evidence
Deb, C. (2013). Carbon Pricing in Australia: An Expensive Way to Reduce Carbon from the Electricity Sector. The Electricity Journal, 26(5), 37-43.
Enelfoundation. (2019). Carbon Pricing as a Policy Instrument to Decarbonize Economies. Retrieved from https://www.enelfoundation.org/content/dam/enel-found/Carbon%20Pricing%20Report%20July%2019%202019%20FINAL1.pdf
Kate, C. (2017). Up and down with climate politics 2013-2016: the repeal of carbon pricing in Australia. Wiley Interdisciplinary Reviews: Climate Change, 8(3), 458.
Rebecca, P. (2016). Moving targets: Carbon pricing, energy markets, and social movements in Australia. Environmental Politics, 25(6), 1079-1101.
Thepmr. (2020). How Australia’s carbon price is workingOne Year On. Retrieved from: https://www.thepmr.org/system/files/documents/0045+Carbon+Price+One+Year+On+18_06+d_1_0.pdf
Wayne, G. (2011). Carbon Pricing Options for a Post-Kyoto Response to Climate Change in Australia. Federal Law Review, 39(1), 131-159.
Worldbank. (2016). What is the Impact of Carbon Pricing on Competitiveness? Retrieved from http://pubdocs.worldbank.org/en/759561467228928508/CPLC-Competitiveness-print2.pdf
Worldbank. (2019). Pricing Carbon. Retrieved from https://www.worldbank.org/en/programs/pricing-carbon#WhyCarbonPricing
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