Energy Tax
Posted by: Michael Smith
17 August, 2009 1:21 PM
Last week we spoke about Australia’s contribution to what Mr Rudd calls global carbon pollution.
Keep in mind that 97% of the carbon dioxide in the atmosphere gets there through Mother Nature.
And that carbon dioxide makes up just 380 parts per million of the atmosphere.
So as we said last week, Australia’s contribution to the so-called problem is miniscule.
If you think of 100% of the atmosphere as 1 kilometre, then Australia’s contribution to the so-called problem of carbon pollution is less than 1 millimetre, about the size of a human hair.
One hair per Gateway Bridge of atmosphere to clean up.
But Mr Rudd’s new tax won’t get rid of the hair.
The incredible thing is that this entire new tax system is not designed to blow the hair away. All the pain, all the angst, all the price rises – are designed to reduce the size of the hair by 5%!
And now we’re starting to see how much the new tax will cost. A tax on our people that India, China and other nations won’t impose on their people.
Taxing everything is not a by-product of the scheme. It is the central purpose of the scheme.
When the GST was brought in, the level was set at 10%. That was set in concrete. But the new emissions tax is designed to increase every year.It’s potentially infinite in its cost to you.
Australia’s grocery companies have warned today of price rises for food – in the first year – of 7%. View Link here
Electricity prices will jump by 20% in the first year – with much, much more to come.
And it’s probably no surprise that large sections of the business community support the scheme. Why? Money. As Glen Milne reports in The Australia this morning by way of one example, KPMG is charging companies $250,000 to audit individual facilities – that is every location – to determine their carbon output.Imagine the money in that.
This scheme will change Australia forever – yet the tax side of the scheme has hardly been debated at all.All we see on the news is pictures of smoke stacks.
Barnaby Joyce is the only political voice warning about the headlong rush we’re on.From a cost perspective, I can see nothing good for the broader community in this new tax at all.
Food prices to surge under emissions trading scheme
Blair Speedy and Glenn Milne
August 17, 2009
The Australian
SHOPPERS face a jump in grocery prices of up to 7 per cent under Labor's scheme to reduce carbon emissions, prompting calls for the Rudd government to come up with a compensation package to help low- and middle-income families.
Big retailers have warned the government that the proposed emissions trading scheme would add between 4 and 7 per cent to shopping bills in what would be a de facto tax on food.
Although the government has revealed plans to compensate households for increased energy prices when the ETS is expected to be introduced in 2011, it has yet to announce how it will cover the rise in grocery prices.
Reserve Bank assistant governor Philip Lowe last week told the House of Representatives economics committee that the ETS would add 0.4 percentage points to the Consumer Price Index measure of inflation in its first year of operation.
However, the Food and Grocery Council believes the increase in grocery prices would be much higher, about 5 per cent.
As food and grocery shopping is estimated to take up to 20 per cent of the weekly household budget, the council's chief executive, Kate Carnell, says the price rise will amount to a GST on food - the area the Howard government exempted from the tax after a prolonged campaign by Labor and the Australian Democrats.
Large retailers are understood to have also done modelling showing similar results, including a rise in food prices of as much as 7 per cent should Australia adopt the 25 per cent target on emissions reductions by 2020.
Large retailers, while privately concerned, are believed to be hesitant to voice their objections to the ETS for fear of tarnishing their reputation among environmentally conscious consumers.
Australian Retailers Association executive director Russell Zimmerman said the ETS would lead to a sharp increase in grocery shelf prices as costs increased at every stage of the production and distribution process.
"It's going to be a high cost to the consumer - the food manufacturer gets an ETS charge, then there's delivery, and the retailers use refrigeration and lighting, and the cost of that is all going to be handed on," Mr Zimmerman said. "Retail is a very competitive business. There's not a lot of margin in grocery retailing, so these costs can't be absorbed."
The ARA has set out its concerns in a submission to the government's green paper on carbon reduction but Mr Zimmerman said he had little hope the government would shield consumers from higher costs.
"The government has said it will cost consumers $1 a day, but that fails to accurately calculate the retail price impact on consumers, and there's no real handle on what it's going to cost consumers in the end," he said.
Retailers' anxiety is matched in the US, amid growing fears about the impact of carbon trading plans. US agriculture companies including grain giant Cargill, meat processor Tyson Foods and food-maker General Mills, have expressed concern they will bear an unfair proportion of the costs resulting from carbon-reduction legislation and warned this would lead to higher food prices.
Nationals senator Barnaby Joyce has warned that the ETS, once in place, would raise the retail price of a leg of lamb to almost $100.
The revelations on food prices come as a split emerges in the business community over the ETS. The peak group, the Business Council of Australia, is divided over its position on the plan to reduce carbon emissions.
The BCA is torn, with finance sector elements backing the ETS and the mining industry vehemently opposed. The split has led to the circulation of an anti-ETS paper from within the BCA that concludes 67 of its 109 members will not have a carbon permit liability under the government's proposed Carbon Pollution Reduction Scheme.
The overwhelming majority of the 67 are in the finance, legal or legal services sector, which the analysis says are expected to make huge profits out of the ETS.
The paper's author, who does not wish to be named, concludes: "While the BCA is held up as the voice of industry on the carbon scheme, the vast bulk of its members have no skin in the game. That is, they won't have to buy permits. In fact, the bankers and finance consultants like KPMG stand to make a fortune out of it."
The paper's author also names at least 12 senior Labor figures - seven of them frontbenchers, including three cabinet ministers - who they say have expressed doubts about the government's ETS privately to either BCA member companies or their industry group representatives.
Emissions trading is a tax, no matter the name
Terry McCrann
The Australian
August 08, 2009
THE first and most important thing to note about Kevin Rudd's emissions trading scheme is that it is a tax.
It's not called a tax, but if it waddles like one, quacks like one, and most pointedly raises money like one, it's a tax. And not just any old tax -- it's a huge and continually growing tax.
It starts out in 2012-13 raising about a quarter as much as the GST. The budget in May put a number on it for the first time. Almost $12 billion in its first full year, 2012-13.
It is the equivalent of increasing the GST from 10 per cent to 12.5 per cent in that year. And in its impact on people it won't be all that different from doing exactly that.
In year one, that is, which if we actually get the ETS should be retitled Year Zero, because it will be the beginning of the end of Australia as we know it.
Crucially and very ominously, there is no, if you'll pardon the pun, cap on this insidious version of a GST. The effective rate could double or triple, the amount of money raised could skyrocket. Indeed, it is intended to do exactly that, with no referral back to parliament for endorsement.
Imagine the uproar if the government had proposed raising the GST to 12.5 per cent. That's 12.5 per cent, in year one, with it able to go to 15-20 per cent or higher, as events, not parliament, then took it. The uproar would have been loudest from the Labor Party.
Hey, but it's not a tax, it's a scheme. Indeed, the ETS was specifically chosen in rejection of a carbon tax. That's a tax.
Oh, for the benefit of hindsight. If only John Howard and Peter Costello had called it their GSTS, they would not have heard a peep out of media or opposition. It's not a tax, it's the Goods and Services Trading Scheme.
Simple. Instead of adding a tax of 10 per cent to the price of (almost) everything, you bought permits to allow you to sell goods and services, for what just happened to equal 10 per cent of the price you wanted to charge.
They and their GSTS would have had a charmed run -- I don't think.
On one level the ETS title is of a piece with the fundamental dishonesty of the government's overall so-called carbon pollution reduction scheme.
It has nothing to do with carbon as carbon, far less pollution, but with emissions of pure carbon dioxide -- without which there would be no life on earth.
It's not quite as dishonest, as it is after all about trading permits to emit -- although humans won't require such a permit to breathe out. At least, to be fair, not initially.
The ETS -- the Americans are calling their proposed version cap and trade -- sets an overall target each year for (non-human) CO2 emissions, and the government sells the permits to emit.
The tax is a tax is a tax. You can buy and sell the permits -- the very secondary trading in cap and trade. The alternative carbon tax would simply have applied a direct tax on emitting carbon dioxide -- I doubt you can emit carbon.
Once you get through all the fiddling at the start, the result is exactly the same: it becomes increasingly expensive to emit carbon dioxide.
The permits do it through the market, as they gradually reduce in line with the emission reduction target. It's like the old game of musical chairs -- each year the government snatches away some of the permits. The direct tax would have become increasingly punitive.
Each has its own big loophole in terms of end-CO2 reductions.
Under the ETS, emitters could buy permits from overseas, while under the direct tax, if consumers were prepared to pay the price you could just keep emitting. But nothing, so to speak, can save Australians from an increasingly punitive tax. Whether it's called a carbon tax or just a scheme.
Now the government has committed to handing back all the money raised -- the budget described it as using "every cent it receives from the sale of Australian emission units to help households and businesses adjust and move Australia to a low-pollution economy".
Now how come the government establishing what is in effect a gigantic slush fund -- indeed, the mother of all slush funds -- doesn't make me cry, "Well that's all right then"?
Who couldn't be happy with the government taking $12 billion every year in a new tax on the explicit promise to hand it back. Oh, I'm sorry, not back, but to those it thinks need it, or where it will do the most good.
Especially when it delivers the promise with almost childishly silly language. Every cent?
Reducing emissions of (non-breathing) CO2 is only one part of the CPRS. By making carbon-based energy more expensive and gradually strangling the amount that can be produced, we will be market-directed into non-carbon or low-carbon energy sources.
These other forms of energy are not even remotely competitive with coal-fired power generation. We make them "competitive" by forcing up the price of coal-fired power, but we also help them even further by directly subsidising them.
And just to make sure, we will force consumers to buy their high-priced power by mandating that power companies source 20 per cent of their power from "alternative sources" by 2020 -- mandating either at state level or nationally, and in fact both.
Where will this power come from? We can play around, in somewhat different ways, with gas and solar, but in the main there is only one answer: wind.
Except there's one problem with wind -- it's useless.
In a brief but utterly devastating analysis, Andrew Miskelly and Tom Quirk tracked the power output of all the now quite substantial wind farms in South Australia, Victoria, NSW and Tasmania for every minute of June. The simply devastating conclusion: when the wind don't blow, it don't blow everywhere at the same time.
This utterly shreds the claim that if you build enough wind farms nationally the wind will be blowing somewhere. You have to keep fully equivalent coal power up and running, not just when the wind is not blowing, but all the time. So, we have a government that is proposing a massive new tax. It then proposes to waste most, if not all, of the money from it. Either by compensating people for higher costs, or by pouring it into "alternative" energy production that can't work.
All this, of course, is to absolutely no purpose. Even cutting our CO2 emissions to zero would make zero difference to global emissions.
Anyone who votes for the ETS next week -- or indeed any week -- is betraying both common sense and their basic duty to the national interest and every Australian.
