Chasing the Norm

Australian academic and blogger on politics, international relations, and culture

Abbott boxed in by climate change rhetoric

Pollution_Factory There is a tendency when it comes to political rhetoric to always go nuclear. To deploy the most strident, attacking, and damaging language you can to label an opponents position or policy. And no word has more power today than ‘Tax’.

Case-in-point: In the US 2008 election, the Republicans attacked Obama for ‘palling around with terrorists’ and saw no electoral traction. Yet when they caught him saying he wanted to ‘spread the wealth’ to Joe the Plumber, their spirits soared. It didn’t help their cause that Obama had a tax cut for about 95% of the country, yet McCain still devoted almost the entire second Presidential debate to claiming Obama wanted to raise people’s taxes, causing a few wobbles from Obama’s campaign.

While there was certainly a strong case for Tax Cuts in the 80’s & 90s, today when there isn’t much fat left on the revenue side of the budget, the social stigma applied to the word is impeding our political debate. Of course this criticism has been mounted before by social democrats who want to spend more on infrastructure or key social services, but it’s also damaging the way Liberals and Conservatives develop their policies too.

A few months ago when The Nationals were the only party against the ETS in principle, Barnaby Joyce took the obvious rhetorical step of calling it an ‘Emissions Tax Scheme’ (clever guy huh). As the vote got closer, he increased the volume calling it a ‘massive tax on everything’. A theme picked up by a number of other opponents of the scheme, and instantly adopted by Tony Abbott when he took over as Coalition leader and defeated the Governments’ policy. This was not the only rhetorical attack on offer against the governments CPRS (it could also be called complex, confusing, ineffective, counter-productive, special-interest laden, bureaucratic etc etc) however “Tax” was the leading punch. To Abbott’s reckoning he had given the Government a black eye (a defeated policy), a cruel new nickname (big taxer) and was now the hero who had saved the people from a major tax. Only, and annoying for him, the people still want something to be done. However, nothing that looks or sounds like a tax can possibly be advocated by the Coalition, leaving very few options available.

If Abbott had avoided dropping the Tax bomb on the governments scheme (and he did not need to do so to have it voted down the bill) he could have offered a much simpler and attractive scheme: A Carbon Tax.

By Jeremy Hansen in the NYT (Who Paul Krugman calls “a great climate scientist. …the first to warn about the climate crisis”)

‘Under this approach, a gradually rising carbon fee would be collected at the mine or port of entry for each fossil fuel (coal, oil and gas). The fee would be uniform, a certain number of dollars per ton of carbon dioxide in the fuel. The public would not directly pay any fee, but the price of goods would rise in proportion to how much carbon-emitting fuel is used in their production.

All of the collected fees would then be distributed to the public. Prudent people would use their dividend wisely, adjusting their lifestyle, choice of vehicle and so on. Those who do better than average in choosing less-polluting goods would receive more in the dividend than they pay in added costs.

For example, when the fee reached $115 per ton of carbon dioxide it would add $1 per gallon to the price of gasoline and 5 to 6 cents per kilowatt-hour to the price of electricity. Given the amount of oil, gas and coal used in the United States in 2007, that carbon fee would yield about $600 billion per year. The resulting dividend for each adult American would be as much as $3,000 per year. As the fee rose, tipping points would be reached at which various carbon-free energies and carbon-saving technologies would become cheaper than fossil fuels plus their fees. As time goes on, fossil fuel use would collapse’….

Emissions Trading Schemes were preferred because they let governments set a limit on emissions which can be reduced over time, giving assured levels of pollution reduction. Carbon Taxes are more elusive in this area, but the same logic of a rising price = less use of carbon emitting fuels/products/technology applies. This offers a wiggle room would perfectly suit a coalition party which both wants to look serious on the issue, but doesn’t want to be too tied into international deals and wants to be able to regulate Australia’s actions in line with economic circumstances.

Carbon Taxes have the advantages of being more economically efficient, and ‘just’ in a Liberal sense of being applied equally across the population. While small refunds could be applied to some industries (such as agriculture), it likely wouldn’t be the hodgepodge of deals and allowances & exceptions that the Government has set up with its ETS (which for the Greens make it now useless). And given that a carbon tax would reward individuals who act positively to reduce their own carbon footprints, it would also be in line with the parties preference for individual responsibility and reward. Not only that, but the Coalition could even piggyback some of the potency of the tax argument, by offering to sharply reduce all income taxes in line with the CO2 taxes. Just like the GST, not all taxes are equal, and given the public demand for action, this would be strongly in line with their past actions.

Finally, if they chose to keep back just a small part of that revenue, it could be invested in what is perhaps the real and only solution to climate change: better technology. This was an argument John Howard made consistently during his final years in office, and one the Coalition could pick up and run with. Australia has the minds, the education system, and the incentives to be the ones who create the next big breakthrough that fundamentally changes how we create and use energy. We’re doing it already, but with a big injection of funds imagine what we could create, what industries would come to call Australia home, what economic returns await us.

Of course Carbon Taxes are not a new idea, and I think Paul Krugman is somewhat right that having spent so long building up a Cap&Trade system, to throw it away and start down a different path just means too many delays to accept. But it’s worth noting again, how the rhetoric we use in one area, deamonising all taxation as bad harmful policy, if not outright ‘theft’ has left Conservatives (and many liberals) unable to offer sensible alternative policies in other areas. A Carbon Tax might not be considered as effective environmentally as an ETS, but it’s just as effective (if not more-so) politically for the Coalition. But it’s now off limits.

Instead, because Abbott accepted the rhetorical framework of calling a market based system a tax (thereby ruling out both) he is left with prescious little other than Command-and-Control type regulations. Not only does this also run up against 30 years of liberal and conservative economic thinking in Australia, it may well be at least twice as expensive(p152) if not even more so. But Abbott has no real options left if he wants to propose a policy that at least looks serious.

As Al Gore has said, what is ideally needed is to ensure we “tax what we burn, not what we earn”. Gore is another who has long supported a carbon tax. If the Copenhagen Summit succeeds, then to cap and trades we must committ. But if it fails, if it is all smiling handshakes with no commitment behind them, then a Carbon tax is an alternative we need to have a serious debate about.
If only we could get over the rhetorical stigma of the word ‘Tax’.

(Incidentally, this is why I like the Constructivist approach in International Relations. Everyone wants to be a ‘realist’ about the world and how to respond to it, but when you mentally close off avenues through certain rhetoric, then your options can be utterly distorted, even harming your own interests.)

For a more details explanation of Carbon Tax (and fully sourced), I recommend having a look at this testimony to the US Senate by Ted Gaynor of the Brookings Institute

5 ResponsesLeave one →

  1. Matt C

     /  December 11, 2009

    I don’t accept that you would have less deals emerging from a carbon tax. The tax would still raise the fundamental question of carbon leakage. In response, govts would be cajoled into using the revenue to give assistance to trade exposed industries.

    And, likewise, the electricity sector would be just as badly affected by a tax as an ETS. Again, why would the pressure for them seeking assistance be any less?

  2. True, the pressure would be identical, but industries would have an easier time explaining passing (part/all) on to consumers, and the Government would have an easier time sticking to a single figure across the board.

    Witness the Howard Governments’ introduction of a 10% GST, with only food taken out at the last minute, compared to the hodge-podge of Sales Taxes for different industries at differing rates & with differing rationales that previously existed.

    Until everyone comes on board with action against carbon, trade industries will be more exposed within those countries who act than those who don’t. Some concessions are obviously needed, I certainly don’t take a greens fundamentalist line, but a firm fixed line is much easier to defend, and the tax revenue more easily transferred to assist.

  3. Matt C

     /  December 11, 2009

    Yes, the GST is a good example but remember that it took a long time, and a lot of political capital. Also it had a broad effect on all businesses, I can’t remember businesses lobbying to be exempt, it was mainly the left seeking to exempt essentials.

    Why not simply wait for the world to act? Carbon leakage then won’t be a problem and we can you use the money to buy some worthwhile reform, like lowering income or corporate taxes.

  4. Jacob

     /  December 11, 2009

    Bloody brilliant article. You’ve made me understand this whole subject in one article, whereas I was mystified before due to the inability of newspapers, politicians, or anyone else, actually being able to EXPLAIN what it all means. Very good insight on the word tax too. Tax doesn’t always have to be bad!

  5. Matt – True, but Rudd already has the people on side, and whilst individual industries are lobbying, overall the business community wants something implemented that is readily understandable and fair. Tough, but possible.

    As for waiting, I thought there was a strong argument to have a deal by Copenhagen (for it would significantly increase our bargaining power), but there is now a bit of leeway over 2010. That said, the world IS acting. Most developed countries have policies in the works, with even the USA and China slowly walking down that path. So yes, having blown Copenhagen, use 2010 to get it right, but I don’t think it’s a justified argument beyond that.

    Jacob – Cheers. Hope you keep reading the site.