Over the past few years, one of the most-talked about topics in political conversations has
been the introduction of the carbon emissions trading scheme (ETS). The fact that the scheme has been put on hold demonstrates a number of important issues. Firstly, the issue is complex. Some of the smartest people argue about the likely outcomes and causes of climate change. Others argue if climate change even exists.
A lack of political action, both nationally and internationally, on climate change legislation is a terrible disruption for the business community. The worst situation that could unfold is where there will be a different system in place in each major economic centre, Europe, North America, and Asia.
Currently there are two different carbon reduction strategies that are possible. The most widely discussed scheme is the ‘cap and trade’ mechanism that was introduced into Europe in 1998. That system is directed at the top levels of industry, the big polluters. As these firms are required to pay for their excess carbon dioxide emissions, it adds to the cost of production. The policy aims to create a market where the increases in cost are “trickled” down through the purchase chain so that the cost of carbon is shared equitably in society. In the case of Australia, the immediate result would likely be that only the largest 1,000 companies would be required to report their carbon dioxide emissions.
The extent of reporting for these large firms under a cap and trade system would be significant. The companies would need to disclose direct and indirect emissions. Companies would likely need to set up small departments in their businesses in order to count and control their carbon dioxide, just like any other major manufacturing input.
Over the past year, a second type of carbon emissions mechanism is being popularly discussed. A broad-based carbon dioxide tax is a very likely contender for the Australian national emission model. A ‘carbon tax’ is a much more simple approach to the issue. It treats every person, and every business on an equal basis. Put simply, it is just an added tax on top of our individual energy use and consumption. It is fundamentally different to the trickle-down effect.
The way it would work is that when the regular electricity bill arrives, it will be in two parts. First is the consumption of energy, the amount of electricity that has been used by either the home or business and the price that must be paid. The second part is a tax component, just like the GST. The tax is the “price of carbon dioxide”. The benefit of this system is everyone is treated equally. The problem with a broad-based tax mechanism is that it’s just like an evenly applied devaluation of the AUD, without the international trade benefits. If Australia’s nearby print competitors do not introduce a carbon emissions scheme at the same time Australia does, then the cost of printing in Australia could go up in price.
Phillip Lawrence spent many years working in the paper sector and is now a consultant and public speaker who specialises in print and the environment.
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