Comparison Of Carbon Tax And Direct Action Plan Policies For Climate Change In Australia

The main motivation behind the implementation of policies

The general climate all over the world has been deteriorating at an alarming rate. It is the same for Australia, and the government perceived a personal risk from the changes. Global warming was seen as a serious threat, and the challenge of protecting human health from the drastic environmental changes came up, along with the question on how to protect and preserve ecosystems. According to the findings of the CSIRO as well as the GCCR (Garnaut Climate Change Review), it has been estimated that climate change will have drastic effects on several species, activities, regions and the public health (Pollard, et al., 2016). The economy as well as the infrastructure of areas in Australia would be affected, and the effects are supposed to be markedly adverse on the ecosystems of Australia. The continuing rise in the oceanic temperatures and the high rate of erosion from the sea coast contributes to the accelerated bleaching of the Great Barrier Reef, and the tropical cyclones are estimated to become more powerful and the droughts have been estimated to become more prolonged. The effects will however be varied across Australia, and the floods, heat waves and bushfires triggered by climate change are predicted to get worse as the years progress (Dai, 2013). Their impact on the property and animal and human life is also bound to increase. The climate change has been seen in the coastal areas as well, with a significant rise in the sea level, averaging at 1.1 metres. More than 39 thousand buildings were situated within the 110 metres of the shorelines that were prone to erosion because of this rise in the sea level. Also, the repeated droughts have brought about significant harm to the Murray-Darling basin which becomes difficult to be preserved if it does not receive enough water. Chronic water shortages were observed, but the situation has been relieved a little due to the increase in rainfall in the last few years. The Australian government had no choice but to frame and implement climate change policies as a counter measure for the changing climate.

The carbon tax policy in Australia was a policy or scheme first introduced by the Gillard Labor Government in 2011. It was a part of their Clean Energy Act 2011, which came into effect from the month of July in 2012. It required the companies or entities to acquire carbon units, which were emission permits to emit over 25,000 tonnes of greenhouse gases (mainly carbon dioxide). These permits or carbon units could either be issued by the government, or be purchased from them. In June 2013, it was stated that only 260 companies were a part of this carbon tax policy, and an approximately 185 of them were liable to actually pay for the units under the policy (Robson, 2014).

The main aim or objective of the policy was to reduce the carbon emissions upto 80% below 2000 levels by the year 2050. This target was to be achieved by investing in other sustainable forms of energy, and the scheme was regulated and administered by the Clean Energy Regulator. The personal income tax threshold was raised from six thousand dollars to over eighteen thousand, and the cost for one tonne of carbon fixed at $23, which later rose to $24.15. This policy was applicable especially for the electricity generating and the industrial sectors, and the agriculture as well as the road transport sectors were let off (Fahimnia, et al., 2015). The domestic airlines did not have to pay a carbon tax, but were under a 6 per cent per litre fuel tax.

The Carbon Tax policy of the former Labor Government

One of the main initiatives of the Direct Action Plan was to boost the production and utilisation of renewable sources of energy, especially solar. A $2.5 billion Emissions Reduction Fund was in place to support this Plan and help in reducing emissions. The plan also intended to extend support to the technologies through the Renewable Energy Target. Their main objective is to reduce the CO₂ emissions, support the construction of solar panels and hot water systems in homes across the country, and fund solar towns and schools (Clarke, Fraser & Waschik, 2014). The Emissions Reduction Fund uses the NGERS or the National Greenhouse and Energy Reporting Scheme to measure the total amount of carbon emissions by the companies.Moreover, the businesses that emit carbon more than their permitted level are entitled to a financial penalty, which is not applicable to newer business expansions or organisations. However, some of Australia’s biggest emitters of greenhouse gases have declared that the Direct Action Plan is not as motivating or successful as the carbon tax policy of the Labor government. Although the government had replaced the carbon tax scheme with this Plan, an estimated $1.7 billion had been invested by the Australian government by 2014. The main issue here was that the Direct Action Plan had not been successful in driving companies to control their carbon emissions as the carbon tax policy had been, as the carbon tax gave businesses the incentive to act as it increased the prices of utilities, which added a financial pressure on some organisations. The Emissions Reduction Fund operates alongside the Renewable Energy Target, the National Carbon Offset Standard and other existing programmes. It implemented a framework, which in the long run would work towards a stable as well as a sustainable policy on climate change. It offers strong bonuses to identify actions that are in the interests of both the businesses and the environment by reducing costs as well as the emissions (Fabian, 2015).

The Australian government has been issuing policies since the last two decades to reduce emissions and for a sustainable environment. There are in place a variety of market-based schemes, which promote emission reduction at the State and national levels. Such policies have been implemented since as early as the 1980s, which began with the4 voluntary schemes like the energy labelling (1986) and the National Greenhouse Challenge Programme (1995). It became mandatory to use energy labelling from 1992 on a range of household devices as well, such as air conditioners and refrigerators. The Greenhouse Gas Reduction Scheme was introduced in 2003, making it the world’s first mandatory emissions schemes. The carbon pricing mechanism required the largest greenhouse gas emitting entities to surrender applicable units for every tonne of carbon dioxide they emitted, and covered over 50% of Australia’s emissions. The price was set at $23 per tonne of carbon dioxide, and was scheduled to rise at 2.5% every year. The applicable entities often acquired units from the government itself or by trading with other organisations. The Direct Action Plan was introduced as an alternative to the Carbon Pricing mechanism (Schiermeier, 2014), and it includes discounts for solar panels and hot water systems as well as solar heat pumps, along with grants for renewable energy implementation in schools and towns and an additional planting of almost 20 million trees. The Emissions Reduction Fund was framed to promote the emissions reductions by setting a baseline that would inhibit the rise of emissions above the acceptable levels. It recognised the fact that electricity was possibly the largest source of the nation’s carbon emissions, and was therefore a potentially key source of emissions reductions. The opinion on which policy is better –– the carbon tax or the direct action plan –– is debatable, as the feedback is variable. The Direct Action Plan was launched with an ambitious target of a 13% cut on 2005 levels, and it is an impressive performance when the developed nations of the world are taken into account. Also, the system of taxes on carbon emissions is obsolete and is dying out, and have markedly failed to actually cut down on the carbon emissions(Sheridan, 2017). Nothing notable has been actually done for the environment by such policies or schemes. However, different researchers have stated that the carbon tax was more motivating than the direct action policy, as the focus on carbon emission matters was lost by the companies and therefore they did not have the commercial imperative for the implementation of long-term action for the reduction of emissions after the repealing of the carbon tax policy (“Direct action not as motivating as carbon tax, research finds”, 2017).

In 2011, the Clean Energy Future scheme was legislated, and this Act aimed at establishing long-term goals for the reduction of emissions to 80 per cent 2000 levels by the year 2050. The RET or the Renewable Energy Target used a tradable scheme of certification which encouraged the development and use of renewable energy sources. It was split into two schemes in 2011, and ever since its implementation, the capacity of renewable energy production of Australia has almost doubled. The Carbon Farming Initiative was one that allowed the generation of ACCUs for the projects that had signed up for carbon reduction (Climate Change Authority, 2017). The Clean Energy Finance Corporation was also an investment fund towards cleaner and greener energy, while the ARENA or the Australian Renewable Energy Agency was introduced to provide assistance to work towards a more competitive usage of renewable energy technologies and the increase of its supply.

References

Chapter 5 Australia’s policies on climate change | Climate Change Authority. (2017). Climatechangeauthority.gov.au. Retrieved 13 July 2017, from https://climatechangeauthority.gov.au/reviews/targets-and-progress-review/part-b

Clarke, H., Fraser, I., & Waschik, R. G. (2014). How much abatement will Australia’s emissions reduction fund buy?. Economic Papers: A journal of applied economics and policy, 33(4), 315-326.

Dai, A. (2013). Increasing drought under global warming in observations and models. Nature Climate Change, 3(1), 52-58.

Direct action not as motivating as carbon tax, research finds. (2017). ABC News. Retrieved 13 July 2017, from https://www.abc.net.au/news/2016-09-02/direct-action-not-as-motivating-as-carbon-tax/7808098

Fabian, N. (2015). Support low-carbon investment. Nature, 519(7541), 27.

Fahimnia, B., Sarkis, J., Choudhary, A., & Eshragh, A. (2015). Tactical supply chain planning under a carbon tax policy scheme: A case study. International Journal of Production Economics, 164, 206-215.

Pollard, S., Dooley, K., McConnell, D., Meinshausen, M., Meyer, R., & Workman, A. (2016). SUBMISSION TO THE CLIMATE CHANGE AUTHORITY SPECIAL REVIEW SECOND DRAFT REPORT ON AUSTRALIA’S CLIMATE POLICY OPTIONS.

Robson, A. (2014). Australia’s carbon tax: An economic evaluation. Economic Affairs, 34(1), 35-45.

Schiermeier, Q. (2014). Anger as Australia dumps carbon tax. Nature, 511(7510).

Sheridan, G. (2017). More efficient than carbon tax. Theaustralian.com.au. Retrieved 13 July 2017, from https://www.theaustralian.com.au/opinion/columnists/greg-sheridan/direct-action-four-times-more-efficient-than-alps-carbon-tax/news-story/81c67754e5a880df54e94ecefa689ed4?nk=718f25c6d0fb75141b3708f083a238b9-1499927099