Carbon Tax: what’s in a name?
On 16th July 2013, Prime Minister Kevin Rudd announced that Australia would switch from a fixed price ‘carbon tax’ of $24.15 / tonne CO2-e to a floating price based on the European permit price. Interestingly, this was exactly 5 years to the day, that the former Rudd Government launched its Green Paper on a Carbon Pollution Reduction Scheme). Back then, I supported a price on CO2 but objected to the ‘carbon tax’ moniker which I thought misrepresented what was a reasonable pricing mechanism to encourage companies and individuals to cut CO2 emissions. The term ‘carbon tax’ was used heavily by the Federal Opposition, and particularly by its leader, Tony Abbott. Of course, Abbott’s aim was to damage the government and discredit the CPRS, but perversely I think Tony Abbott unintentionally helped the CPRS / carbon tax to achieve it’s goal of cutting CO2 emissions.
- By calling the CPRS the ‘carbon tax’ Abbott and his shadow cabinet made people think of the scheme as a tax.
What do people like to do about tax? They like to minimise their payment. Voila. Call it a tax and people will avoid it.
And how can they do that? By using less energy. And that’s what people and businesses have been doing since the CPRS came into effect on 1 July 2012.
- By mentioning the CPRS / carbon tax at every opportunity, the Opposition ensured that the scheme stayed front-of-brain, further reinforcing the message that the tax was there.
(More on the reduction in CO2 emissions in the next blog).
Of course, companies and individuals also looked at the financial return on potential investments in energy efficiency and solar power, and the financial returns were improved by the higher energy prices of the CPRS. But remember that electricity and natural gas prices only rose by about 10% for households, and up to 25% for businesses that had negotiated extremely low commodity prices. These increases in energy prices would marginally improve the return on investment. Many investments which were already attractive without the carbon tax, say simple payback periods of under two years, should have been implemented before the CPRS was introduced. But it was the publicity and scary thought of paying more tax which shone a spotlight on these opportunities, and was the catalyst for their implementation.
So what effect do I think the switch to an emissions trading scheme will have on emissions, and on our company?
As an energy efficiency implementation company, you might expect that Genesis Now would dread the switch, because the cost of energy will be lower, and so there will be less incentive to save energy. Actually (and I know I am out of step with most people on this), I think the publicity surrounding the change, will prolong the time that energy efficiency and renewable energy can enjoy basking in the limelight of media attention, and that this will further increase the implementation of energy efficiency opportunities and the installation of renewable energy generation.