ADVANTAGES AND DISADVANTAGES OF GREENHOUSE GASES IN AUSTRALIA

QUESTION

Australian Government Carbon Taxation

Policy and Its macroeconomic impact on the Australian

                   Economy

SOLUTION

Greenhouse gases have been a main concern for the developing and the developed economies for a long back. They all are very much concerned about the effects of the greenhouse gas emission and its impact on the country. In this regards the Australian government also came up with an emerging taxation policy i.e. Carbon taxation policy to respond the potential threat of climate and environment changes due to emission of the GHGs. It is somehow and somewhere good for those who are interested towards the tax reforms and also not good for those who are not interested towards the tax reforms and new taxation burdens in the form of carbon taxation policy. Although it is quite true that the purpose of the new carbon taxation policy should not be to increase the tax burden or the tax revenue and not also to reduce the usage of energy but there should be a neutral effect and phenomenon that will lead to the optimal resolution of all these issues with the emission of the greenhouse gases.

It was really a hot topic for the Australian government to come up with the new carbon taxation policy. And after a long time and huge analysis they could come up with this carbon taxation policy in mid 2011. The imposition of new carbon taxation policy was being opposed by few and also accepted by few. So it is a kind of win-win situation for the Australian government to come-up with this new carbon taxation policy. It has a good impact on the Australian economic point of view and also helping in reduction of the carbon fuel usage. Firstly changes are always being negated but as soon as the people get to know about the effectiveness and the benefits of the changes for the people and economy itself, they start following and accepting that change. In the same very way the carbon taxation policy has come up as a change catalyst for the Australian people and the Australian economy.

Here in this report we will consider all those parameters which is going to be affected by the carbon taxation policy at a macroeconomic level and their advantages and issues with them is any for the Australian economic point of view. Although it is an extra burden for the people but for the macroeconomic point of view if we see there are great advantages of the carbon taxation policy. It will reduce the emission of greenhouse gases and that will really a potential requirement for the developed economy such as Australia to maintain and continue with its development and growth.

Introduction and Background:

From a long back the issue of global warming and its effect on climate change is being a big concern for Australia and also for the other developed and developing countries. Very first the Liberal and Labour policy makers and beaurocrates came up with the carbon trading policy in this regards but it was not very much effective and efficient towards all the aspects of the emerging problems and the concerns. But this approach was not very much adequate and perfect for the Australian economy and as a modified result the Australian government came up with the carbon tax to make and effective and integrated step towards the carbon emission reduction and the revenue neutralization. The main concern was not to reduce the energy usage but to stop the usage of the natural fuel which emits most of the carbon gases. Their concern was to encourage the alternative sources (such as nuclear energy, solar energy, wind energy, clean coal etc) and its usage rather than using the natural sources of energy.

Government is continuously refining its policy and working towards the encouragement of the alternative source of the energy and its potential usage. They have already spent around $2 billion over this aspect. They are encouraging new technologies and alternative energy sources to reduce the GHGs emission and the issue which is being arises due to high emission of the CO2 and its equivalents over the climate change and global warming. Government is also providing funds to encourage the new technologies and the new kind of hybrid industries to reduce the traditional factories and the usage of natural fuel which emits most of the carbon gases.

These approaches are really fruitful for the government that which ideas should be subsidized and which one should be taxed as per the need and requirement considering all the positive and negative aspect for future prospective and its effect on the Australian economy and its growth.

After analysing all the aspects the government reached to the end result that the carbon tax imposition is the best way to put a check over the usage of the natural fuel and to switch over the alternative energy sources and fossil fuels. That is why the carbon tax being introduced to make the people understand the need and potential requirement of the alternative energy sources rather than continuing with the traditional and natural energy sources which is actually creating a big question mark in path of growth and development of the whole Australian economy.

Advantages and potential benefits of the Policy:

There are various advantages incorporated with the carbon tax policy for the government point of view and also for the economic point of view which is indirectly concerned towards the common people interest and growth.

1. The revenue raise may be used to cut or reduce the other taxes: The revenue which is being raised in this way of carbon tax will be used to reduce or even remove the other taxes for the common people concern and the economic consideration. This is a big advantage for the common people from the Australian government.
2. Common people will be encourages towards the usage of alternative energy sources: The carbon tax policy will provoke and encourage the common people and private sector to use more alternative sources of energy and new technologies rather than concentrating and depending over the usage of the natural and traditional sources of the energy which emits CO2 equivalents.
3. Increasing government concern towards the economic upliftment and growth: New government and the Hon Prime minister Julia Gillard have really taken a great step towards the economic growth and consideration with the carbon tax implementation. This is one of the most effective and efficient step towards a new change which will lead towards the economic upliftment and immense growth of the Australian economy.
4. More funds for the technological upliftment and the alternative energy sources: Australian government is releasing more funds for the alternative energy usage and the technological changes towards the alternative energy usage. They are coming up with various funds for the private and public sectors and their modification and to encourage the usage of alternative energy sources. For example, around $9 million was spent during 2001-02 on cooperative research and development that supports the fossil fuel industries and the Australian government continues to assist the Australian Nuclear Science and Technology Organization.
5. Reform of new taxation policy for the macroeconomic concern and betterment: Carbon tax policy and its implementation was really a reform of the Australian taxation policy and a potential step towards the effective and efficient taxation policy for the overall economic consideration and upliftment with a clean environment.

So we can see the potential advantages of the carbon tax for the macroeconomic point of view and it is a kind of win-win situation for the government and common people.

Disadvantages/issue with the policy:

Carbon tax had a macroeconomic impact to the Australian economy. So there were some issues started to arise with the implementation of the policy. These were not very much potential and valid but although we will discuss them for the economic consideration of the implementation of the carbon tax.

1. Question mark for Australia for being a competitive exporter of Coal: As Australia was one of the potential exporters of coal to China, Taiwan and other neighbour countries. So it was a question mark for Australia that production of coal is the more concerned part rather than reduction of usage of coal by the Australian government. That is why they came up with the use of clean coal for their domestic market to make an effective and integrated step towards this issue.
2. Carbon tax was seen as a political tool: As soon as the new government came into existence the Hon Prime Minister Julia Gillard validated the carbon taxation policy and the political parties started to oppose this by saying that it is a kind of political tools and concern for the new government.
3. Common people were concerned about the tax imposition: Common people and private sector were seeing the carbon tax as an extra burden and scared of this. This was just the less knowledge and concern towards the outcomes of the carbon tax.
4. Opposition to the change in the whole scenario: Carbon tax was the ignition to the change in the whole system of the private and public sector for the usage of the energy sources. Both the sectors were needed to think over it and put a check to the whole system. So it was a kind of huge change in the whole system and which was being opposed or resisted by them.

These were the main concerns which were arising during the implementation of the Carbon tax. The government had to face all these issues and they came up with the various updates and the concerns towards the common people and the whole economic point of view.

Conclusion:

Carbon emission and other CO2 equivalents emission were the biggest concern for the Australian economy and government had to put a check over this emerging issue. That is why the Carbon tax being implemented and came into existence to make an effective and efficient strategic economic methodology to reduce and even stop the usage of the natural energy sources and to move toward the alternative energy source such as solar energy, wind energy, nuclear energy and other energy sources which are not emitting the GHGs.

The Carbon tax was also a potential concern for the Australian government to make a good reform in the taxation policy. Carbon tax was a neutral revenue generation concern and tools for the government but the revenue generated was again being used for the beneficiary of the common people and the private sector in terms of various funds and technological upliftment for the encouragement of the alternative energy sources and improve its potential usage. They are already spending over the various R&D organizations and funds for the betterment of the economy and encourage the new and alternative sources of the energy.

Previously there was a contradiction between the carbon trading and the carbon tax policy. But as soon as the potential benefit for the economic point of view being synthesised, the carbon tax policy was given more weightage in terms of effectiveness and efficiency to stop the usage of the coal as the energy source. As a result the carbon tax being implemented in this regards to make a potential use of the tax reforms for the macroeconomic point of view and the upliftment of the economy and the reduction of GHGs to stop the potential threat towards the climate change and global warming.

After the whole analysis of considering all the aspects of the usage and emission of the carbon fuel, the optimal taxation amount which was being imposed in terms of carbon tax was as follows: A $30 per tonne could be effective to replace the current fuel taxes with little or even no economic costs. And one more important thing was also being incorporated that carbon tax could be reduced or even stopped if global warming failed to occur.

Here the main concern is to achieve the objective i.e. the reduction of even stoppage of the carbon emission as the potential threat to the climate change and it should be achieved at a minimum cost which is being reached with the help of carbon tax. As we have already discussed that the carbon tax is revenue neutral, equity neutral and welfare neutral, so this approach leads to no increase in

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the total environmental tax, but it is just a reform in the environmental tax to minimize the cost to achieve the set objective i.e. less reliability or non reliability over the ‘dirty’ coal as a potential energy source.