Five questions about a carbon tax

Issue 

The proposal by the Greens to the Rudd government that it introduce a price on carbon (starting at $23 a tonne) "as an interim measure in the transition to a functional and effective emissions trading scheme" is provoking a lively debate in the grassroots climate action movement.

The plan amounts to an interim carbon tax, causing the movement to think about what — if any — carbon tax it should support.

Here are five questions about a carbon tax for the grassroots movement to consider.

Is an increase in the price of carbon necessary to reduce carbon emissions?

No. However, if we reject an increased price for carbon the entire burden of carbon reduction policy gets placed on regulation.

Of course, measures like setting mandatory building codes and timetables for the reduction of industry carbon emissions are vital.

However, in the present Australian economy — dominated by private business chasing maximum profit — a rising carbon price is a powerful incentive for capitalists to move to less carbon-intensive production methods.

It is true that regulation alone has succeeded in removing other pollutants, like lead in petrol and CFCs from the atmosphere, but these were concentrated in specific industries and products.

By contrast, carbon pollution is intrinsic to the entire process of production in capitalist industry. The climate movement cannot rule out any possible measure in the biggest challenge humanity has ever faced.

But would an increase in the price of carbon produced by such a tax be enough to reduce carbon emissions at the rate needed?

Only in economics textbooks. The climate crisis requires global carbon emissions to be reduced by at least 5% a year, and no carbon tax can achieve that. The core of an adequate climate policy can only be a publicly run and funded plan to convert industry, transport, agriculture and forestry.

A carbon tax would be a supporting element, providing an incentive for people to move away from carbon-intensive activities, while providing an important source of funding for a climate sustainability package.

If Australia's 2007 non-residential greenhouse gas emissions of 542 million tonnes of CO2 equivalent were taxed at $100 a tonne it would raise $54.3 billion (4.5% of Gross Domestic Product).

Can a carbon tax be progressive?

It can and it must. A properly designed carbon tax would make possible generous compensation schemes for working people and people on welfare faced with rising fuel and electricity prices.

Indeed, if combined with the elimination of the GST, increases in welfare payments and cuts to income tax for the low-paid, a carbon tax would help develop a "tax mix" that puts people and the environment before polluting corporations.

Couldn't the funds for the climate transition be raised in other ways, by increasing company tax and income tax on the rich?

There is no avoiding the fact that making Australia's infrastructure environmentally sustainable will be very expensive. Beyond Zero Emissions calculates it would take about $40 billion a year for a decade just to make energy production sustainable.

According to a 2009 BZE study, making housing stock climate-sustainable would cost $42.56 billion over the 11 years to 2020, and this figure omits the cost of double-glazing (estimated at $40.9 billion).

Other costs would include: conversion of commercial and industrial building stock, construction of adequate public transport infrastructure (including high-speed inter-city rail), conversion of the vehicle industry, retraining of workers in carbon polluting industries, conversion of farming, reforestation and compensation to workers and people on welfare for increases in energy prices.

The Socialist Alliance is presently working out the cost of an adequate climate sustainability transition plan. Our initial (very rough) assessment is it would cost between 7.7% and 20% of GDP a year for a decade.

While, over time, the benefits of such massive investment will start to build up, and there may be unforeseen benefits along the way, there is no dodging the fact that costly investment is needed in the short run.

Our initial figures support the view of works like Climate Code Red and Plan B 4.0, which argue that an adequate response to climate change would need to be comparable to the war mobilisation of the US economy in the 1940s, when defence spending exceeded 40% of GDP.

How would a 'great big new (carbon) tax' ever be made acceptable to the Australian community?

This is the key question. During World War II people accepted measures like forced saving and higher taxes, because they felt their very existence was at stake. The more successful the movement is in communicating the seriousness of the climate crisis, the more people will accept the measures needed to avert it.

It's important to guarantee ordinary people's living standards, and put the burden on polluting business (and big business and the rich in general). Otherwise there is the danger of pro-business politicians channelling people's legitimate financial anxieties into active opposition to action on climate change.

A properly designed carbon tax could actually help do this.

[Dick Nichols is a member of the Socialist Alliance.]