The Daily Wire: The Merits of the Gillard Tax as Contrasted Against 'Direct Action' - The Daily Wire

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In the days following the Gillard Labor Government’s Carbon Tax info dump, much is still up in the air. Do not worry friends we are among good company; ALP backbenchers don’t seem to know what is going on either. Those who do matter (The Australian Greens et al.) know what is going on, and have signed up to a whole of economy transformation that will effect all of us, so the question remains: will this be for good or ill?

I do not need to tell you that the political discourse surrounding the tax has been fraught, it has been – You are living through it – but the question remains: who has the right side of the argument? Is the Gillard model really the solution to Australia’s carbon ills? Does Tony Abbott’s direct action plan offer a better way forward? It is to this end that I will now turn my idle speculation.

The answer (just as the question) is anything but straightforward. Both sides of the political equation have built their respective sandcastles on wildly differing assumptions, and in the case of the Gillard government a decidedly heroic assumption. Essentially both sides of politics are telling you the truth with one huge qualification – their assumption must be vindicated in order for their promises and platitudes to have any meaning.

Climate change is certainly occurring, and is likely at least partially attributable to human behaviour. It is not beyond the realm of possibility that scientists could be mistaken, or acting in accordance to some partisan agenda – but to anyone with a workable knowledge of the process that goes into the empirical knowledge endeavour it seems that the case for human induced climate change occupies the privileged position of being beyond reasonable doubt at present. That said, not everybody (even among climate change believers) are willing to justify absolutely any course of action under the aegis of of global warming.

The Case for Direct Action

Tony Abbott’s ‘direct action’ environmental policy is not a robust carbon pollution mitigation program. It may just manage to achieve a 5% pollution reduction by 2020, but it is not likely to be capable of too much beyond this. Moreover the economists have spoken; if one begins at the premise that Australia must immediately begin to slash its carbon dioxide emissions, then the ALP carbon tax and eventual ETS is far and away the more efficient and cost effective of the two schemes.

But then there is the rub: we all know that Tony Abbott thinks that ‘climate change is shit’, it seems to me that the Coalition’s current policy is a plausibly deniable business-friendly placeholder adopted to mollify less environmentally engaged voters while the Liberals play a game of wait and see, to observe how things shake out before acting.

If the world moves toward an emissions trading system then I have very little doubt that an Abbott government would move toward some manner of compatible regime – but that’s a very big IF in the immediate term. In the occurrence of no agreement being reached then the Australian public’s patience and interest toward the question of global warming will eventually be exhausted; and on that day Tony Abbott will be more than happy to jettison his costly ‘direct action’ plan for something more modest.

Finally, as to the cost of the program itself; it bares mentioning that the ‘direct action’ policy is unlikely to exist into perpetuity. The Gillard government has been most vocal in squawking the assertion that Abbott’s program will cost Australian families somewhere in the vicinity of $700 annually, and technically this is probably somewhere within the vicinity of the truth, in that all government money originates from from the sweat of Australian peoples and industry. That said, it is not at all difficult to imagine that an Abbott government would be easily able to fund this policy (along with promised tax cuts) after cutting the fat from the flabby bureaucracy that the Gillard/Rudd Government has piled on over its tenure, and as such will not be an additional impost on Australian families.

The Case for a Gillard Carbon Tax

The Gillard Carbon Tax by contrast has been met with the big thumbs up by economists – yet again, this is heavily qualified by the assumptions on which it is based. The primary assumption seems to be that Australia must begin cutting carbon now, and that Australia must continue cutting carbon dioxide beyond its 5% commitment. The assumption this in turn is based on is that the rest of the world will enter into the carbon market in the near to medium term. The rest of the world must join – or in the case of developing countries: must commit to decreasing the intensity in the growth of their emissions. If this does not occur Australia puts itself at a trade disadvantage which stands to achieve a grand total of Nothing.

This appears a rather heroic assumption on the part of the Gillard Government, given that a global agreement heavily hinges on a compact between America and China – which does not appear to be forthcoming. The Obama administration appears to all the world to have lost any and all appetite for hard-fought battles, while his Republican counterparts are openly hostile towards the mere countenance of climate action. Some fashion of global carbon trading system is all but assured in the fullness of time, yet after the Copenhagen debacle this process does not look to reach its culmination for a decade at a very bare minimum – meanwhile Australia undergoes pain for zero net benefit. Contrary to what the coalition would have you believe Australia would not go this alone, but nor would we be going it lock-step with our major trading partners. Australians can look forward to finding themselves in the same camp as the United Kingdom, European Union, New Zealand and a scant handful of US states including California.

The most compelling argument for the Gillard Carbon tax is that it is manifestly cheaper to transition to a low-carbon economy over the longer term than it is once we hit crunch time, and if the rest of the globe (or a substantial portion thereof) come to the party within the next few years then Australia is sitting pretty.

Verdict

What we appear to have here is dual approaches which are rather apt to their respective architects. Labor predictably adopts a risk big/win big approach, while the Coalition is advocating a cautious play it by ear stance toward climate action. Due to the differing assumptions upon which both policies are based it is not possible to give one scheme the thumbs-up ahead of the other until we are able to see how the global situation plays out – but we can nevertheless assess both policies based on their upsides relative to their downsides.

Tony Abbott’s ‘direct action’ plan is not an efficient way of mitigating carbon pollution, but it is likely to at least meet Australia’s %5 reduction commitment, and comes replete with tertiary material gains such as the greening of Australia and Investment in the energy efficiency of Australian industry. More to the point it will not inflict any major changes (or pain) upon the Australian economy.

The biggest risk posed by the Coalition’s policy is that in the event of the world reaching an accord on climate change policy – and that policy entailing steep cuts in carbon dioxide emission – then it will be more expensive and disruptive to make this change. Further, Australia would stand to miss out on the economic advantages on offer to States which have already made the transition to a low carbon economy. On the other hand the worst case scenario in this instance would find Australia on equal footing with the US as they transition toward a carbon scheme, and it is unlikely that the Americans would sign up to any deal which is over-precipitous.

The Gillard tax on the other hand faces myriad pitfalls. If the the tax impost drives polluters offshore then the policy stands to actually increase emissions if the effected industries relocate to less regulated climes, moreover if this transpires it will also disincentivise the beneficiaries of our lost trade from adopting their own carbon mitigation schemes. Even if Australia does not lose a significant portion of its industry to other States, we will nevertheless be at a competitive disadvantage – and who knows when the rest of the world (and Australia’s largest trading partners) will come to the party? Finally, the biggest bucket of cold water that can be poured on Carbon Tax jubilation is the fact that it has been conceived, designed and is set to be implemented by the Gillard Government. If one were to take a charitable view of the Gillard/Labor legacy they would nevertheless be forced to concede that they have not had a proud tradition of carefully and competently designed policy implementation – only this time the stakes are decidedly higher than a few dead insulators. Not in my lifetime has an Australian government been fighting their battles (many of them discretionary) on so many fronts at the one time – and Australians are being asked to trust in their competent formulation of a policy which stands to fundamentally alter the Australian economy. A safe pair of hands these are not. The wasteful expenditure and bureaucratic oversight generated by this leviathan policy is sure to outstrip several score of unnecessary school halls.

By contrast the immediate benefits of a carbon tax are rather ephemeral. If the stars align during a winter equinox ‘neath a full moon (hyperbolic license: my own), then the Gillard Climate policy stands to greatly benefit Australia – but the odds on this one are long. If the global community acts as the Australian Labor Party wishes they would then we will have a competitive advantage in acting early, along with the material gain of the ability to export our carbon mitigation technology, along with carbon credits. It has been argued that adopting a carbon tax will grant Australia extra influence in negotiating a global carbon agreement – but really Australia is only ever going to be a minnow in this conversation; and again it is built on the supposition that the rest of the world as Australia would like them to. Finally, the obvious benefit that people will attribute to the carbon tax is that it stands to solve humanity’s climate woes – but again the Gillard tax is simply incapable of achieving this end without comparative action being undertaken by much of the rest of the world.

Essentially one’s preference for one policy or the other will hinge upon whether or not they are a betting man – yet by the measure of the Gillard Government’s own pokies reform agenda: they have already exceeded their maximum betting limit …

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