Sunday, July 10, 2011

The Carbon Price: The Tim Tams are safe; not sure about hyperbole

So word leaked out this morning that the Carbon Price was going to not wreak the  expected havoc on the price of consumer goods. It was reported that the price of Tim Tams would increase by $0.012. This I guess means my masterful plan to stock up on chocolate biscuits and reap the windfall gains once the world comes to an end with the institution of a carbon price was rather misplaced.

Oh well, no less stupid than suggesting the mining industry is fighting for its survival, I guess. 

But let us not be side-tracked, when Julia Gillard came out at noon and announced the carbon price, it was a significant moment. One of the criticisms of the Rudd Government was that is didn’t make the tough decisions; didn’t do anything unpopular. Putting a price on carbon is definitely in the tough decision pile, and quite snuggly fits in the “unpopular” drawer as well. Deciding something which heretofore had been free will now have a price is not something that happens everyday.

The whole policy can be read here (56 pages – have fun). The Treasury modelling is here (even more fun).

To say that it is pretty complex is to take a big drink out of the understatement bottle. So let’s have a quick squiz at a few things:

First the Government has come up with a bit of a video on how the carbon price works. I quite like it:

It’s simple yes, but not demeaning, and not boring like the bloke with the power point trying to explain the RSPT. Do not underestimate how few people understand how a carbon price works. I would bet a majority think it is like a GST or is something we need to account for in our incomes tax returns. So explaining how it works is item number one for the Government.

Now to the announcement:

The introduction of a broad based carbon price in Australia, commencing from 1 July 2012 with a fixed price period and transitioning to a fully flexible cap-and-trade carbon pricing mechanism on 1 July 2015.

  • The fixed price will commence at $23 per tonne of CO2-e;
  • Coverage of the scheme will include stationary energy, most business transport emissions, industrial processes, non-legacy waste, and fugitive emissions, with direct liability under the mechanism limited to large emitters;

The price was not a shock – it had been leaked on Thursday. The general reaction seems to be – yeah that’s lower than we’d like, but higher than we’d hate. The Treasury modelling gives a nice graph on where it sits visa vis the European carbon price:


So it’s pretty comparable.

What does it mean for prices?


So not a big hit to prices; a lot less than the GST – but remember as well the GST was accompanied with much bigger compensations and tax cuts. But the difference of course is the GST was meant to do that, the carbon price is supposed to be felt – Abbott is exactly right when he says that.

When it goes to the flexible ETS in 2015, the rules are thus:

Pollution caps:

  • Five years of pollution caps will be announced in advance and extended each year to maintain a minimum five year period of caps at any given time.
    Price cap:
    – A price cap will operate in the first three years of the flexible price period. The price cap will be set at $20 above the expected international price in 2015/16 (as set in regulations no later than 13 months before the end of the fixed price period) and will rise by five per cent in real terms each year.
    – A review of the role of the price cap will occur after the first three years of the flexible price period.

Price floor:

  • A price floor of $15, rising by four per cent in real terms each year, will operate for the first three years of the flexible price mechanism.
  • A review of the role of the price floor will occur after the first three years of the flexible price period.

So a minimum of $15, and a maximum of $20 above whatever is the international price.

What else was there?

  • International linking will be allowed in the flexible price scheme;
  • Kyoto compliant credits from the Carbon Farming Initiative will be able to be used for compliance.
  • The establishment of a new more ambitious 2050 target for emissions reductions which will be set at 80 per cent below 2000 levels.
  • The establishment of a new independent Authority – the Climate Change Authority – which will provide advice to the Government on progress towards meeting announced targets;
  • make recommendations on pollution caps, voluntary action, trajectories, long term emissions budgets and mechanism design issues;
  • conduct regular reviews on the carbon price mechanism, NGER reporting, the Renewable Energy Target and other matters upon request.

The Climate Change Authority is interesting – it will be headed by former Reserve Bank head Bernie Fraser, and will advise the Government on the carbon pricing mechanism – including future pollution caps, which will in effect help determine the carbon price under the flexible pricing system – because it will determine how many permits are in the market. The CCA will also work with the Productivity Commission on issues such as assistance to polluters. The Productivity Commission report will be looking at such matters as: “Industry sectors where there is strong evidence of windfall gains as a result of the assistance.” Of which you can bet there will be many, given emissions-intensive trade-exposed are getting free permits covering 94.5 per cent of their activities affected by the carbon price. (This point alone pretty well renders Abbott’s suggestions that the mining industry is fighting for its survival and that Whyalla will be wiped off the map are complete bulldust)

But enough of this; let’s get down to a couple things – what will it do to emissions:


As you can see a big swag of the reductions in carbon emission come from overseas. Abbott will be onto this, suggesting it is a waste of tax payers money (and also trying to suggest his own policy would not require such abatement if it was to get to 5 per cent reduction). What it also shows is that in terms of domestic levels only we are not going back to the stone age. Two per cent by 2050 sounds like nothing, but bear in mind the population will grow to an expected 35 million by then, so we’ll have an extra 13 million people generating 2 per cent less emissions.

What it also shows is just how damn hard it is to reduce carbon emissions. And given no one – not even those economists who do not like the carbon tax – thinks a direct action policy such as suggested by Tony Abbott will reduce emissions more efficiently, it gives an indicator of the job ahead of Abbott – especially if he wants to tell us it can be done without abatements sourced from overseas.

To believe Abbott is right is like suggesting price increases of cigarettes has been less effective at reducing smoking than warnings on packets. Sure warnings and nicotine patches (essentially direct action measures) are great, but if smokes still cost $4 a packet, a hell of a lot more of us would still be smoking.

What the ALP will focus on is the reduction compared to what would have happened had there been no carbon price. In her speech announcing the policy, Julia Gillard said:

By 2020 our carbon price will take 160 million tonnes of pollution out of the atmosphere every year.

That’s the equivalent of taking forty five million cars off the road.

That’s a good figure to spout. It makes sense to put things in a form people can grasp. 160 tonnes of carbon sounds a lot, but is it – you feel like you need to know a climate scientist to ask to find out? 45 million cars on the other is a lot and you don’t need to be a bloke in a scientific white coat to grasp it (you just need to ignore that the main driver of car use, petrol, is excluded from the carbon price!). 

But what will it do to the economy – especially electricity generation. This graph is pretty instructive:


Notice the green column next to “brown coal”? Err no? That’s because it ain’t there. By 2050 it is planned that no brown coal fired power stations will be operating. Black coal ones also take a big hit. They are replaced by a huge boost in renewable.

This policy is hoping to change the economy. As the Treasury modelling states:

Over time, the electricity sector will move away from coal-fired generation to renewables, with renewable energy growing from 10 to 40 per cent of the generation mix by 2050, and conventional coal-fired generation falling from 70 to below 10 per cent of the generation mix by 2050.

The key is that “over time” bit. The statement also contains:

Once commercially viable, carbon capture and storage (CCS) technology will deliver significant emission reductions, comprising almost 30 per cent of generation by 2050.

Which is ummm… optimistic. It ends with:

Of course, the exact mix of generation will depend heavily on a range of uncertain factors, including the cost of new technology and the price of energy commodities like gas.

In other words, we hope it’ll get there, but geez, we’re talking 2050.

So that’s the result, but let’s get down to what it is all really about. This policy might be about reducing carbon emissions, but it is also just as much about the compensation, and the changes to the tax system.

The big sell item is that “9 in 10 households will get a combination of tax cuts and payment increases.” This is a bit tricky – it certainly doesn’t mean all 9 will get their costs fully met – but then again, given what the carbon price is meant to do, nor should it.

First let’s look at the changes to the rates and taxation and the increasing of the tax free threshold from $6,001 to $18,201

Tax Scales  2011-12  2012-13  2015-16
  Threshold ($)  Marginal Rate  Threshold ($)  Marginal Rate  Threshold ($)  Marginal Rate
1st Rate  6,001 15% 18,201 19% 19,401 19%
2nd Rate  37,001 30% 37,001 32.50% 37,001 33%
3rd Rate  80,001 37% 80,001 37% 80,001 37%
4th Rate  180,001 45% 180,001 45% 180,001 45%
LITO  Up to $1,500  4% withdrawal rate on income over $30,000  Up to $445  1.5% withdrawal rate on income over $37,000  Up to $300  1% withdrawal rate on income over $37,000
Effective tax free threshold*  16,000   20,542   20,979  

Now the key aspect of all of this is that this legislation will be separate to the legislation introducing the carbon price. This means if the Liberal Party wants to oppose it all, they will have to vote against tax cuts.

I don’t think that would disappoint the Labor party.

The other aspect is the compensation.

Among the compensation assistance are increases to Family Tax Benefit A , the pension, and the ‘Essential Medical Equipment Payment’.

You can go over to the excellent website Clean Energy Future to find out how much the carbon price will affect your net income. (As an aside – it is great to see a Government website that doesn't look  like it was designed by a blind accountant).

Now back after the budget, Matt Cowgill did an excellent post of what is the average Australian income. He found:

a single person, living alone, would need around $36 000 in disposable income to sustain the typical Australian’s standard of living. Following a widely-accepted methodology, each additional adult adds $18 000 to this figure, so a childless couple would need a disposable income of $54 000 a year to enjoy a median standard of living. Each child adds $10 800 to this figure.

A couple family with two children would therefore have needed $75 600 disposable income in 2007-08 to have the same standard of living as the typical Australian.

So let’s bear those figures in mind when we look at the impacts of various scenarios:

First, single people:

Single Person No kids
Incomes Price Impact Assistance Net Cost Per Week
$30,000 $229 $323 -$94 -$1.81
$35,000 $251 $303 -$52 -$1.00
$40,000 $270 $303 -$33 -$0.63
$45,000 $287 $303 -$16 -$0.31
$50,000 $304 $303 $1 $0.02
$60,000 $346 $303 $43 $0.83
$70,000 $392 $266 $126 $2.42
$80,000 $441 $16 $425 $8.17
$90,000 $485 $3 $482 $9.27

So let’s add a few thousand onto Matt’s figure of $36,000 to update to today’s figures (his were 2007-08), and the $40,000 single person actually comes out $33 a year better off. Nothing astounding, but certainly nothing to lose sleep over. It’s only when you get up to $70,000 a year income that the single person starts feeling more than $1 a week pain. And remember as well that’s only if you don’t do anything to change the price impact (ie use less energy). The estimates also assume (correctly) that the more you earn the more you spend. But I doubt the single person on $40,000 is going to shed too many tears for the poor sod earning $80,000 who decides to spend more each week, because they can. Perhaps it might just be wise to turn off the plasma when you’re not watching it.

What about if we add a child into the equation?

Single Person 1 Child 5-7 Years
Incomes Price Impact Assistance Net Cost Per Week
$30,000 $371 $864 -$493 -$9.48
$35,000 $376 $1,119 -$743 -$14.29
$40,000 $381 $1,419 -$1,038 -$19.96
$45,000 $386 $1,545 -$1,159 -$22.29
$50,000 $392 $442 -$50 -$0.96
$60,000 $408 $442 -$34 -$0.65
$70,000 $434 $391 $43 $0.83
$80,000 $475 $391 $84 $1.62
$90,000 $511 $391 $120 $2.31

Yes, those on around $50,000 and with one child – ie around the median using Matt’s figures will be $50 better off a year. Not much again, but no harm either – and remember as well they would be better off if they change their behaviour. The price impacts assume no change in behaviour. But look at the $45,000 level. Under these assumptions you are $1,159 a year better off.

The reason for this is because targeting those under median incomes to bear the brunt of a carbon price is dopey. They don’t have much opportunity to adjust behaviour – they actually are spending money on needs and not just wants.

What about the DINKS – double income, no kids:

Couple, Double Income (50-50 split), No Kids
Incomes Price Impact Assistance Net Cost Per Week
$60,000 $455 $646 -$191 -$3.67
$70,000 $480 $606 -$126 -$2.42
$80,000 $512 $606 -$94 -$1.81
$90,000 $547 $606 -$59 -$1.13
$100,000 $582 $606 -$24 -$0.46
$110,000 $618 $606 $12 $0.23
$120,000 $658 $606 $52 $1.00
$130,000 $700 $606 $94 $1.81
$140,000 $744 $531 $213 $4.10
$150,000 $788 $281 $507 $9.75
$160,000 $833 $31 $802 $15.42
$170,000 $873 $6 $867 $16.67
$180,000 $913 $6 $907 $17.44
$190,000 $954 $6 $948 $18.23
$200,000 $994 $6 $988 $19.00

Until you together earn over $100k, you’re sitting pretty. But then it starts to bite or nibble in the case of the $1.81 a week for households on $130k.

Once you get over $150,000 you will notice the hit – nearly $10 a week. But let’s not forget if you’re on $150k you’re not struggling – you’re about $70,000 a year above the median. 

Ok, families. First a couple with only one income and one kid who has just started school:

Family, Single Income, 1 child 5-7 years
Incomes Price Impact Assistance Net Cost Per Week
$30,000 $364 $767 -$403 -$7.75
$35,000 $372 $791 -$419 -$8.06
$40,000 $374 $791 -$417 -$8.02
$45,000 $388 $442 -$54 -$1.04
$50,000 $406 $442 -$36 -$0.69
$60,000 $433 $442 -$9 -$0.17
$70,000 $467 $391 $76 $1.46
$80,000 $507 $391 $116 $2.23
$90,000 $542 $391 $151 $2.90

Compare to having no kids – you do better. A single person on $70,000 with no kids is $126 a year worse off, here you are now $76 a year worse off. Once again – get up higher – say $90,000 a year and you are $151 worse off. Maybe it is time for the other partner to look for some work. For example if that $70,000 was from two incomes, one of $49,000 and one of $21,000, the family would actually be $585 a year better off.

Which leads us to two incomes, two kids – one pre-school, one at school:

Family, Dual Income (70-30 split), children 0-4 and 5-7 years
Incomes Price Impact Assistance Net Cost Per Week
$60,000 $501 $773 -$272 -$5.23
$70,000 $526 $1,274 -$748 -$14.38
$80,000 $553 $1,064 -$511 -$9.83
$90,000 $594 $819 -$225 -$4.33
$100,000 $638 $661 -$23 -$0.44
$110,000 $667 $466 $201 $3.87
$120,000 $696 $306 $390 $7.50
$130,000 $735 $306 $429 $8.25
$140,000 $774 $306 $468 $9.00
$150,000 $812 $306 $506 $9.73
$160,000 $850 $306 $544 $10.46
$170,000 $889 $306 $583 $11.21
$180,000 $934 $306 $628 $12.08
$190,000 $978 $306 $672 $12.92
$200,000 $1,022 $306 $716 $13.77

Again using Matt’s media of around $80,000, you see that such a household will actually be $511 better off a year.

This remains even if the incomes of the two are equal rather than one fulltime and one part time

Family, Dual Income (50-50 split) children 8-13 and 13-17 years)
Incomes Price Impact Assistance Net Cost Per Week
$60,000 $510 $843 -$333 -$6.40
$70,000 $546 $803 -$257 -$4.94
$80,000 $578 $803 -$225 -$4.33
$90,000 $610 $679 -$69 -$1.33
$100,000 $650 $679 -$29 -$0.56
$110,000 $674 $679 -$5 -$0.10
$120,000 $694 $606 $88 $1.69
$130,000 $734 $606 $128 $2.46
$140,000 $775 $531 $244 $4.69
$150,000 $817 $281 $536 $10.31
$160,000 $859 $31 $828 $15.92
$170,000 $899 $6 $893 $17.17
$180,000 $943 $6 $937 $18.02
$190,000 $986 $6 $980 $18.85
$200,000 $1,030 $6 $1,024 $19.69

Tony Abbott will no doubt focus on the red parts – the people who are worse off. He did this today – take this from the Liberal’s media release:

For example, a policeman and a nurse each earning $70,000 a year with one dependent child will be on average $230 a year worse off even after compensation. And that’s just for starters.

Notice the “each earning $70,000” rather than “together earning $140,000”. And certainly no mention that such a family brings in around $60,000 more than the median family…

Nonetheless the hits are there – some small, some large – and it will be up to the Labor Party to convince the public that the cost is worth it to reduce carbon emissions.

But now the framework is set. Abbott’s hyperbole about the end of times looks decidedly overblown – and his performance in his press conference suggested he is still trying to work out how he is going to counter the tax cuts, and the fact that the big hits are to households well above the median rate.

Gillard, once again looked comfortable – but she often does when introducing new policy and gearing up for the fight. She has been less impressive once the battle is joined and Abbott has found his spin.

And so now we prepare for the fight – armed with some facts and not just assumptions. Will that change the fortunes of the ALP and the LNP? Or has the battleground been set already and the voters will take the tax cuts and still stay firmly opposed to the ALP?

Today Tony Abbott’s attack lost a bit of puff, and it would be tempting for the ALP to focus on that aspect, but, for mine, the best thing the Labor Party could do now is to ignore him, and just get out there and sell this policy.

There is plenty of time to show up Abbott’s outlandish predictions for the dopiness they are, for now Julia Gillard need to focus on the electorate, not the opposition.


RosE said...

Thank you so much for this Grog.

rochuck, Korumburra

Aidan said...

ABC News defined $200k pa as " middle income"!! Lift yer game ABC News!

thefactis said...

Brilliant summary Greg. More informative than the articles published by the newspapers.

I think the carbon tax/ price is fair and is as friendly as it gets. Let's hope that the electorate finally sees that this was just a beat up by the opposition and some media organisations. The whinging of the 'battlers' over 150k is getting annoying but it's great for Abbott I guess. God I hope Gillard will sell this well. Everything depends on it.

fuzzball said...

Thanks for the detail Grog, excellent analysis as usual.

Just one small question: On the "Sources of emission reductions under the core policy scenario" there is a "fugitives" category. What is that referring to?

Unknown said...

Thank you.

The Rev Mountain said...

Fantastic, as usual. Best extensive coverage yet. Keane and Farnsworth both gave good summary and analysis, but your application to income is invaluable.

Unknown said...

Other bits and pieces of interest - Australian Youth Climate Coalition is first out of the blocks of the NGOs:

The Greens are GetUping a billboard in Federation Square; but since the graphic isn't loading, I don't think anyone knows what it says:

Anonymous said...

Citizen Murdoch mustn’t approve, just looked at Herald Sun, Shannon Deery “Carbon Tax:Heat Rises as Voters Reject Julia Gillard’s Plan” pure fantasy, shock and awe sh*t again?,this Journalist? spins so hard I suspect Shannon Deery and Tony Abbott would win Dancing with the Stars hands down,of course conveniently underneath you can Vote, as many times as you like,I voted 3 times not a problem no scrutineering?,they held a plebiscite in four locations 4x News limited sites?, and I quote:”100.000 votes of which{ 70% of voters or 15,866???} said they would vote coalition next time” that’s very creative accounting! now there’s a bit of News Limited Democracy for you,kick out Julia install my man Tony, Why? cos that’s what I want, and so do you ! This mob make Richard Nixon look like Julie Andrews,Corporate moral insanity?, or preparation for our very own Australian Spring,they’re as see- through as the Hubble Telescope . There you go, Shannon (the hack) Deery’s diatribe.

kazann said...

My family will be about $300ish worse off and thats fine with me. I'm sick and tired of the political game playing on an issue that science (as much as science can) has been in agreement on. I would rather play safe and be wrong, than ignore the warnings and leave our children and grandchildren to deal with the consequences of our inaction.
Hold your hats children we are in for the longest running version of Henny Penny ever. Faithfully narrated by our very own T Abbott.
You really have picked an interesting time in politics to reduce the number of your blogs. On the plus side there will be plenty of fodder generated by this subject alone for your book.
Thanks for you input Grog. Its always appreciated.

Hillbilly Skeleton said...

I was reading Lenore Taylor's piece online yesterday & one of the major losers who popped up was a Self-Funded Retiree on a Fixed Income of about $30000/year who did not qualify for a Health Care Card. Therefore, they said that they did not qualify for any assistance but did not think that they wwere in any way well-off and therefore should have qualified in some way for assistance. What do you think?

muskiemp said...

I thought that $34,000 was the threshold for a Health Care Card.

Craig said...

So: a $23/tonne carbon price, a target of 80% below 1990 by 2050, and individual compensation that slightly exceeds the projected cost for the vast majority of people.

Is it enough? Nowhere near it. In order to avoid potentially disastrous climate change we need the world to cut emissions by 6% annually (if we start by 2013; it'll be much more per annum if we delay), plus 100 billion tonnes of reforestation between 2031 and 2080. That's what it takes to reduce CO2 to below 350ppm before the end of the century. Those figures are from James Hansen, climatologist and head of the NASA Goddard Institute for Space Studies.

350 is what the IPCC say we need to keep warming below 2 degrees C. The structure of the IPCC ensures that its declarations are very conservative: they'll only publically state what they can get virtually everyone to agree to. Because of the that, the figures from the IPCC are, quite likely, overly optimistic.

Anything more than 2 degrees of warming has a very high chance of starting runaway positive feedbacks that massively accelerate the effects of what we've started. If the modellers are right, there is no such thing as 3 degree climate change, except as something you rapidly pass on your way to 5 degrees or higher.

If you don't think that 5 degrees sounds so bad, then you really don't get how climate works. If it's survivable at all, it is still going to involve millions of deaths, the destruction of countless cities, and a major crunch in the quality of surviving human life. Once you get to those levels, it doesn't matter if you turn off all the coal fired power stations; you're inescapably fucked.

$23/tonne doesn't cut it; it just won't get the change we need at the speed we need. Yes, a higher price is going to cause economic damage. But, eventually, we won't be able to always "compensate" everybody. Fixing this is going to cost money, and we're all going to have to pay it. I'm actually paying it more than most people: a lot of the compensation is going to be focussed through the tax system, and as a grad student on...adequate...government funding (ie: less than half of an average wage) I'm not really part of the income tax system.

So, do I support the new carbon tax thingie? Yes; anything is better than nothing, and even an inadequate scheme makes it easier to eventually crank it up to what is necessary. That might happen once the effects become so obvious that even the people who think science is just an opinion can't deny what they're seeing.

We can't ask anyone else to chop emissions unless we cut our own. We've got no reason to be snooty; we're not in advance of the world in our response, and our per-capita emissions are among the highest around. We need the whole world to get their shit together very, very quickly. Every year of delay increases the chance that we won't be able to stop before we hit the wall of irreversible consequences.

sam sunshine said...

For a single Retiree who is post Age Pension age to not receive the Commonwealth Seniors Health Care Card, their taxable income needs to be above $40,000. Couples need taxable income above $80,000 to not receive this Health Care Card.

Super pensions are not taxable (unless they are from the CSS) when you are over age 60.

Bellistner said...

I still think it's kind of piss-weak that people with kids (a choice, usually) are better-off then those without kids, but I guess that's the price I pay for having time to indulge my own hobbies inteads of theirs.

Gus Campbell said...

Thanks Greg. It very hard to understand what seems to me to be another tax. While the news is not good for me, at least I know where I stand.

Sleepy said...

Unfortunately your analysis fails to identify how much electricity and gas is used in each household and from which state they live. You also failed to consider the increase costs in travel, food, water (don't forget that water purification uses electricity), council rates (don't forget street lights use electricity) and the list goes on. In fact your analysis fails in much the same way the ALP's fails.

Anonymous said...

Excellent summary.

"160 tonnes of carbon sounds a lot,..."

I think you meant 160 million tonnes, the figure you used in the previous sentence.

Mikc said...

Sleepy has a good point! Electricity flows into almost everything we consume. I do a lot of financial treasury has factored this in will be mind boggelling. Add to the fact that treasury has got far less complicated calculations grossly wrong (think budget revisions) and you get an idea how flawed overly complicated modelling can be. One slight oversight or miscalculation and the whole analysis becaomes crap. I will focus on the changes to the tax rates & keep an eye on costs overall. I would bet a years income that their modelling on the CPI impact is understated. Only time will tell.

I would also bet this policy makes sweet FA of a difference to CO2 in the atmosphere. If you think any different you are not educated enough in climate science & statistical analysis.

Sam said...

Superb analysis, thank you very much Sir!

Anonymous said...

"I would also bet this policy makes sweet FA of a difference to CO2 in the atmosphere. If you think any different you are not educated enough in climate science & statistical analysis."

Congrats on shutting down any possibility of debate with you, and in a pretty arrogant and contemptuous manner.

Your alternative to this policy would be...?

CycleSnail said...

Good explanation. What I don’t get is the way this “Climate change” or “global warming” dominates the discussion, and all the costs are focused on it.
Nobody seems to appreciate the simple, everyday pleasure of living in a less polluted place. A place where there is less smog etc.

Stephen Monk said...

Grog - your RSS feed is broken :(

I haven't received your posts in Google Reader for a week!

PP said...

Thanks Grog,
You use the analogy of taxing cigarettes and its effect on reducing smoking/lung cancer etc.
The signifiant difference here is that the tax from cigarettes is not being returned to the consumer to offset the increased cost. If it was I would not expect that taxing cigarettes would reduce smoking rates.
So as I see it, carbon tax is imposed on industry who as always will pass in on to the consumer. The consumer is to be compensated by the Government to afford the increased cost. So where is the incentive to reduce carbon use by industry or by the consumer? As you can see I have missed something crucial and am still struggling to understand how this is going to help.

pb said...

Some wanker said "I would also bet this policy makes sweet FA of a difference to CO2 in the atmosphere."

Whenever I read this sort of drivel, I am reminded of Ross Garnaut's comments when someone said the same thing to him.

No individual nation can fix this. Even the biggest polluters, China and the USA each only contribute 20% of the CO2. Every nation has to do something. Individually, a few percent here won't make a lot of difference, but collectively, if every nation does its bit, we can get this under control.

Thank God we are at last doing something.

sawdustmick said...

Another great analysis Grog, none of us should forget that Bad Habbotts has a Carbon Tax buried in his DAP. I also think that the PM should immediately task the CSIRO to develop a vaccine for Typhoid Abbott's Bullshit Virus that will be infecting all of us for the next two years.

Greg Jericho said...

Sleepy - it's not my analysis - it is Treasury's - and those costs you speak of are in the price impacts - but obviously averaged.

They also assume no change in behaviour as a result of price impacts.

Greg Jericho said...

Hillbilly, am not an expert of self-funded retirement conditions, but the calculator says that a person of pension age earning $55,000 in income will be $23 a year worse off. If they have an income of $50,000 they will be $402 better off.

This article suggests $50,000 is the cut off

Anonymous said...

Tough decisions? A tough decision would have been to tell Bob Brown that a promise was made before the election so he can go and get stuffed.

Bending over for the greens is hardly a tough decision.

Trying to negotiate an ETS through a hostile senate was a tough decision=.

Casablanca said...

Thanks Grog for another excellent piece.

Re the question from Hillbilly concerning self-funded retirees I ran the $50,000 and $55,000 incomes for a single person through the Household Assistance Estimator at
and for the $50k pa single the assistance will be $718.00 of which $338 would be paid as a Clean Energy Supplement and $380.00 would come via the proposed tax reform. At $55k pa a single person would receive $303.00 via the proposed tax reform but nothing through the Clean Energy Supplement.

If Lenore Taylor's self-funded retiree is on $30k pa then he/she would qualify for a Commonwealth Seniors Health Card. Again, according to the estimator, someone on $30k pa would receive $1000.00: $338.00 of which would be paid as a Clean Energy Supplement and $662.00 would come as part of the tax reforms.

Alex said...

PP, we are "compensated" for the tax on cigarettes. ie, if it weren't for the revenue raised by the tax on cigarettes, we'd be paying a higher medicare levy, higher income tax, or both.

People just don't view it as "compensation" as it's been intrinsic in our taxation system for decades.

In a matter of years, the carbon taxes compensation will go the same way. And whether we're consciously aware of the compensation package or not says nothing for it's effectiveness in reducing emissions.

Notus said...

I agree with your advise to our Prime Minister when responding to Tony Abbott and suggest that she respond with the use of laconic phrases.
A laconic phrase is a very concise or terse statement, named after Laconia (a.k.a. Sparta in ancient Greece). A laconism is a figure of speech in which someone uses very few words to express an idea, in keeping with the Spartan reputation for austerity.

One famous example comes from the time of the invasion of Philip II of Macedon. With key Greek city -states in submission, he turned his attention to Sparta and sent a message: "You are advised to submit without further delay, for if I bring my army into your land, I will destroy your farms, slay your people, and raze your city." According to historical accounts, the Spartans sent back a one word reply: "If." Subsequently, Philip avoided Sparta entirely.

Anonymous said...

A bit OT, but after reading through the linked "Doorstop" I have lost even *more* respect for Tony Abbott (I didn't actually think this was possible.) Can the man even go 5 minutes without claiming someone is incompetent?

Regarding the impending doom that is the Carbon Tax, I think Julia Gillard's analogy of taking rubbish to the tip was quite a good one, especially since I grew up in a rural area with no council rubbish removal. My Dad managed to find uses for a lot of "junk" once we couldn't just take it to the tip.

Ardeet said...

Thanks for a very thorough breakdown of the pricing and putting the gobbledy-gook of the reports into something digestible.
The Carbon Tax/Price will certainly affect the economy but above else it is primarily a political move by a government (in this case Labor). If it wasn't Gillard doing this then it would be Abbott, depending on who held the reigns.
So many of the sheeple bleat in approval at this shiny new "solution" to climate change because it removes their responsibility to change.
The red and blue and green teams know that a confused or fearful populace is a pliable flock.
If the reduction of emissions in such a moral imperative then use the money to finance actual green energy and not just redistribute it for votes.
Abbott stealing from one group to give it to another or Gillard doing the same is just theft and vote buying.
The chicken littles will run around screeching that the sky is falling; the foxes in the hen house will howl that their lobbying dollars are not buying the favours they paid for; the sheeple will bleat "whatever is to be done!" - and all will wonder why trusting the lives of their grandchildren to self-interested liars and deceivers didn't fix the problem and went so horribly wrong.

Anonymous said...

Grog, you need to get your analysis published in the broader media.

Of course few 'professional' journalists understand tables and most editors shy away from graphs without furry animals, but you might get a run in a prestigious and objective paper, such as The Australian.

They'd just want to change the headline to 'Tim Tams are not safe - Labor's policy all hyperbole'

Jonathan said...

Just a quibble - the family with median standard of living that Abbott's cop and nurse earn $60k more than probably isn't a median family.

Anonymous said...

This is well worth reading.

Anonymous said...

Er, just in case that last link did not work:

byron smith said...

Thank you, this is very helpful.

The only improvement I would suggest is to include a brief consideration of the ambition of the targets. If Australia succeeds in doing this, and all other parties to the Copenhagen Accord succeed in their aspirational targets, then we're on track to a 4ºC warmer world, which is not a pretty place.

It may be impressive for a government to take such an unpopular step, but it's worth noting that we're going to need to scale up our ambitions and the sooner we do so, the easier it is.

Anonymous said...

Late to comment I know, but in answer to Mikc, my partner *is* an expert in climate change and statistical analysis, and he thinks a carbon tax will make a difference.

But there's no point in trying to use logic with people who have completely rejected climate change science because scientific consensus is 'only' 95%.