Wayne Swan, standing in as Prime Minister for Julia Gillard while she is visiting America, has claimed on television this weekend that a carbon charge “will not act like a traditional tax, is not deducted from your pay packet, it comes from the big polluters.”
He’s correct that the carbon price will not be deducted by employers from remuneration and paid to the Taxation Office, but this in no way amounts to a non-deduction from household budgets.
Residential electricity users in Australia, in round terms, are responsible for about 60 million tonnes a year of carbon dioxide emissions through their consumption of electricity fuelled by coal and natural gas.
Assuming an introductory carbon price of $20 per tonne, rising through the decade to $35 per tonne, and it cannot be less than this range to have any meaningful impact on emissions, the aggregate impost on householders will be about $1.2 billion per year initially to about $2.3 billion a year by 2020, allowing for a rise in consumer demand, driven in part by a bigger population.
This assumes that the carbon price does not have to be much higher to drive abatement towards even its present goal. Manifestly members of the Gillard government do not fully appreciate what levels will be required – as witness Climate Change Minister Greg Combet talking over the weekend about the measure enabling technological change in coal-burning generation.
He needs telling that it will take a carbon price well over $50 to make carbon capture and storage technology commercially viable – at which point it may be seen off by the combined thrust of wind, solar and geothermal power as well as nuclear energy. And it would take still more to enable retro-fitting existing coal plants.
Back to Swan: is he now pledging that every dollar of any carbon cost will be rebated to householders, regardless of their wealth, through the government’s compensation scheme?
Will the government’s policy also encompass petrol prices – where the carbon charge will translate, given average passenger vehicle fuel efficiency and travel patterns, to about an extra $200 or so a year in its initial phases?
If so, for the average household, this will result in federal government carbon give-aways of some $500 a year at the start. In aggregate, something like $4 billion annually in hand-outs, rising beyond $5 billion as the net has to be stretched to accommodate population growth.
Or are the rumours in Canberra true that the end-product of the present arm-wrestling with the Greens and the independents will see a carbon price imposed just on electricity generation, making the yearly householder “gift” only about $2.5 billion initially?
Of course, in the present environment, following the polling reaction to Swan and Gillard breaking their now notorious pre-2010 election promise that “there will be no carbon tax” under a government they lead, who among voters will believe Swan’s latest claim or believe that his successors in office in five or 10 years’ time will sustain the compensation he seems to be promising?
Who will believe that this approach can help deliver the government’s existing promise to cut emissions by 160 million tonnes a year by 2020? Let alone, the higher abatement targets being pushed by the Greens, who seem to have Gillard in thrall?
Why does Swan himself believe that what he is offering will lessen the heat of voter unhappiness created by the inexorable shift in their power bills towards double what they were in 2008, driven by higher network charges, the cost of the renewable energy target and such other imposts as support for rooftop solar feed-in tariff schemes?
And this is before foreshadowed higher prices for coal and gas push up the wholesale price of electricity, a 45 per cent segment of the end-user bill. And before, “smart meters” enable distribution network service providers to win agreement to introduce “time-of-use” tariff regimes?
Lost to view in all this, by the way, is the fact that there must be a million small businessfolk working from home who are going to have to wear the carbon charge and power price rise burdens, too. No compensation for them is on offer.
What a tangled web this is becoming.