Australian Guide to Legal Citation and Harvard Referencing, Essay Example

Introduction

As the world’s economy continues to struggle it has become fashionable in some political circles to advocate the adoption of a type of tax described as a carbon tax as a method of minimizing spiraling government costs. Use of the word, “carbon,” in this forum is somewhat misleading. The broad meaning of the carbon tax term is to define a tax that is designed to not only raise revenue but also change the behavior of a society’s consumers [1]. The theory is to raise the cost of a good or service through the imposition of a carbon tax in an effort to offset the negative effects that the good and service causes. The most obvious example is the use of a carbon tax to fight the effects of pollution. The manufacturer who builds its plant next to a river and proceeds to dump its polluting by-products into said river would ordinarily not suffer any additional costs for its polluting activity. Carbon tax advocates, however, would impose a tax on the manufacturer in an attempt to offset these polluting effects.

The Government of Australia has taken the carbon tax idea a step further and actually decided to impose a real carbon tax on polluters that emit carbon into the atmosphere[2]. The theory behind this new carbon tax is the same as the traditional one but the Australian Government has decided to impose it against the actual use of carbon. Initially, the Government will tax those who release tax into the atmosphere on a per ton basis with the intent of eventually allowing the market place to determine how the costs will be distributed[3]. The goal is to have the manufacturers who cause the pollution to bear the costs of cleaning up the environment from such polluting on a proportional basis.

Political Division

The public discussion regarding the adoption of a carbon tax has been highly acrimonious. Prime Minister Julia Gillard and her Labor Party have been the main impetus behind the passage of the tax but a handful of independent members of Parliament and the Green Party have combined to provide Gillard the slimmest of majorities on the issue. The most severe opposition to the carbon tax, however, has not come from within Parliament. It is the Australian public and business that have spearheaded the fight against the carbon tax. In an economy that is already struggling there is a fear among the opposition that the imposition of the tax will wreck Australia’s coal-dependent economy, drive up the cost of living, and force thousands out of work. Many of those opposing the tax also argue that the true purpose of the tax is to raise revenue and that Guillard is using environmental concerns as a ruse. In any event, Guillard, and many others, have likely staked their political futures on the back of the carbon tax[4].

Critical Discussion – Analysis

Carbon is one of the most prevalent and dangerous by-products of the manufacturing process[5] As a by-product of manufacturing and the use of fossil fuels, it contributes significantly to social and environmental problems such as global warming. The pollution caused by carbon is one of those negative externalities that impose costs on the entirety of society and not just on the individual who either consumes a certain product such as an automobile or the factory manufacturing a particular product. Absent the imposition of a carbon tax, the costs that are caused by these types of processes are absorbed by society.  Ordinarily, the cost of purchasing manufactured goods does not fully incorporate the collateral environmental costs that are involved in the manufacturing process. The costs that are involved include the mining of the iron ore, the electricity used to operate the factory, and the trucks used to transport the goods to market. Each of these steps involves the release of carbon and other pollutants into the atmosphere that is only partially reflected in the cost of the product. The residual costs have been partially ignored and absorbed largely by society in general. The intent of the new Australian carbon tax is to change this scenario. The intent of the tax is internalize the externality and to include these external costs on the final price of the good. In theory, the carbon tax would equal the social cost of the manufacturing process or the burning of fossil fuels. Carbon pollution has become an increasingly more serious problem and the Australian Government has determined that taxing the goods that are more polluting should be taxed at higher level so as to pass on the polluting costs[6] on the public at whole.

Part of the reason that carbon taxation has become a political volleyball in Australia is the fact that Australia is among the world’s leaders per capita in carbon emissions. Although Australia contributes only about 1.5 percent of the total global carbon emissions, it is the fact that its per capita emissions are so elevated that has caused Australian politicians to concern themselves with the issue[7]. The goal of Australian politicians is to decrease carbon emissions by 5 percent in the next decade[8]. This is an aggressive stance but one that the Australian government is determined to accomplish.

Unfortunately, as one might expect, there is disagreement among Australia’s leaders as to how to make the cuts in carbon emissions and who should shoulder the costs of such cuts. The political fortunes of many Australians have been affected by the issue and it can be expected that the issue will remain an acrimonious one for many years.

The long term hope is that the imposition of these taxes on carbon intensive goods or manufacturers will cause a shift in the market place toward consumers beginning to purchase goods that are less carbon intensive[9]. In theory, these goods should be less expensive and, based on traditional economic theory, the manufacturers using carbon intensive methods should begin changing over their manufacturing process to less polluting methods in an effort to remain competitive in the market.

Like the imposition of any tax there are advantages and disadvantages. The most obvious advantage of the carbon tax is the encouragement that it provides to manufacturers to develop more efficient engines that are less polluting and consumers to choose to use their fossil fuel dependent less frequently. The hope is that on the consumer side of the ledger more people will choose to walk, cycle or use mass transport to find their way to work and that businesses will develop more green sources for their energy needs.

The carbon tax also benefits society by providing a potential source of income that could be used to not only subsidize present green energy producers but also provide capital for new research in the area. Finally, the imposition of the carbon tax will shift the burden of the social costs of using carbon polluting products and processes to society at large. The costs of eradication the effects of carbon pollution are considerable and cumulative. These costs have been largely ignored by society and this condition cannot be allowed to continue. The imposition of a carbon tax addresses the issue in a constructive and equalitarian manner as it spreads the cost across the whole of society.

Carbon taxes are not without their disadvantages. Those who oppose their use argue that they will cause businesses to either choose to manufacture their products elsewhere or manufacturers from countries that do not have carbon taxes will suddenly become the source of carbon polluting products. This argument certainly has merit but lacks any concern for the social responsibility aspect of the carbon tax. Opponents of the tax also point out that the revenue generated will be diminished substantially by the cost of the collecting and administering the tax. The bureaucracy created as a result of already existing income and sales taxes is considerable and costly to maintain. Opponents of the carbon tax argue that a similarly expensive bureaucracy will be necessary to administer the carbon tax and that the resulting financial benefit of the carbon tax will be minimal and not begin to offset the social costs that are the focus of the tax. Similarly, opponents of the tax feel that the imposition of the tax will also encourage both tax evasion and the reluctance of firms and individuals to be forthright about their level of carbon emissions. These are regulatory problems that can be expected with any new legislation and, in time, the Australian government can be expected to remedy both potential problems.

Another problem with the imposition of the carbon tax is a less pragmatic one is related to the general unpopularity of taxes. Historically, taxes are not popular. Those responsible for the paying of taxes can be expected to complain bitterly when mention is made of additional obligations and there is no reason to expect that the carbon tax will be accepted willingly. Several polls have been taken by a variety of media sources and political institutions of the Australian public’s attitude toward the carbon tax and the results have consistently demonstrated disapproval[10].

One of the more popular arguments used against the enactment of the carbon tax was its potential to have an inflationary effect on the Australian economy[11]. Proponents of this argument point out that adding this tax would cause a substantial rise in the price of manufactured goods and that such rise, without a corresponding rise in income, would be inflationary. The Australian Government, however, argues that this rise in costs will be offset by the changes in the tax law. The Australian Government also argues that the overall effect on most Australian citizens will be minimal. Most prices, they argue, such as food will go unchanged[12].

This move by the Australian Government is, arguably, an enlightened move toward demonstrating environmental leadership. Critics have argued that the enactment of this tax will significantly damage the Australian economy but proponents argue that the costs of carbon pollution on the environment will eventually have to be dealt with and that doing so sooner as opposed to later inures to the benefit of everyone. Some proponents of the tax have actually argued that the tax will not only benefit society but also benefit the Australian economy. John Connor, CEO of The Climate Institute has stated: “Australia stands at the doorway to a clean energy transition that can drive tens of billions of dollars of investment in the electricity sector creating a net increase of close to 34,000 new jobs in regional Australia[13].”

The carbon tax will impact on the big polluters most heavily but it can be expected that these costs will be passed onto the consumer. This is traditionally how manufacturers recoup their costs and there is no reason to suspect that this will not be done relative to the carbon tax as well. The Australian Government, however, recognizing the impact that the tax may have on the ordinary citizen, has enacted several provisions to help offset these higher prices by raising the tax free threshold[14]. Plus, in the spirit of the traditional style carbon tax, the Government is optimistic that the imposition of the tax may ultimately manipulate the market so that consumers begin making more environmentally sensitive choices.

Conclusion

With any new tax it can expected that there will be strong arguments made by both sides of the issue relative to the pros and cons of the tax. This is particularly true in situations involving new taxes that have such far reaching effects. The carbon tax that is being proposed by an Australian Government that is barely holding on to power has stimulated a great deal of discussion. The move by the Government is admirable in theory but may be poorly timed in relation to the present state of the overall Australian economy. Few would deny that carbon levels must be lowered for the long term benefit of Australia and the world, but strong arguments are offered that such efforts could be accomplished in a more conservative manner. The fact that the vote on the enactment of the carbon tax has been continuously pushed back is indicative of the acrimonious nature of the issue and its overall sensitivity. Soon, however, the vote will be taken and, if it passes as expected, the results will be known and the efficacy of carbon taxes will be finally tested.

[1] Baumol, W. J. (1972). On Taxation and the Control of Externalities. American Economic Review: pp.307-322.

[2] Packham, B. (2011, September 13). Prime Minister Julia Gillard has introduced carbon tax bills into parliament. The Australian.

[3] Australian Energy Exchange (n.d.) Demystifying the Carbon Tax Proposal. Retrieved September 28, 2011 from Energy Action: http://www.Energyaction.com.au/component/content/article/69.html.

[4] Mercer, Phil.(2011, July 11). Carbon Tax divides Australia. Retrieved on October 6, 2011 from BBC Mobile . http://www.bbc.co.uk/news/world-asia-pacific-14102415.

[5] Union of Concerned Scientists (2010). Global Warming. Cambridge, MA: Union of Concerned Scientists.

[6] Goodall, A. (2008, July 23). Australia’s pollution problem. The Japan Times.

[7] Union of Concerned Scientists (2010). Global Warning. Retrieved on September 29, 2011 from Union of Concerned Scientists. http://www.ucsusa.org/global_warming/science_and_impacts/science/each-countrys-share-of-co2.html.

[8] Australian Government, Department of Climate Change and Energy Efficiency (2011). Reducing Australia’s Emissions. Retrieved from Australian Government on September 30, 2011. http://www.climatechange.gov.au/government/reduce.aspx.

[9] Metcalf, G. E. (2009). The Design of a Carbon Tax. Harvard Environmental Law Review: pp. 500-556.

[10] Benson, S. (2011, July 13). Julia Gillard digging herself a deeper hole over the carbon tax. The Telegraph.com.au Retrieved on September 30, 2011. http://dailytelegraph.com.au/news/julia-gillard-digging herself a-deeper-hole-over-the-carbon-taz/story.

[11] Sydney Morning Herald (2011, July 11). Carbon tax won’t affect monetary policy: RBA. Sydney Morning Herald.

[12] Herald Sun (2011, September 19). Wayne Sun defends economic effects of carbon tax. Herald Sun.

[13] The Climate Institute (2011, February 28). Pricing pollution and clean energy policies unlock door for regional clean energy. Retrieved September 29, 2011 from The Climate Institute: http:// climateinstitute.org.au/media-contacts/media-releases/789-pricing-pollution-and-energy-policies.

[14] Onselen, P.V. (2011, September 10). Carbon Tax will briefly keep Gillard safe. The Austalian.