Impact of Burning Coal on Climate Change

Questions:

1. Critically evaluate the key arguments for and against the carbon tax. Using demand and supply analysis Illustrate how a carbon tax is expected to impact on the market price and quantity traded for a product that creates significant pollution during production?

2. One of Australia’s largest exports is coal, the burning of which emits significant amounts of carbon dioxide. Using the economic concepts and models introduced in this unit, explain the key differences between a carbon tax and an emissions trading scheme?

From ancient period of time coal has been considered one of the primary things which can be used as fuel. In recent time there are many other alternatives has been invented with the development of the present era. Burning of coals creates a huge quantity of carbon dioxide in the atmosphere, which is affecting the climate very badly. For that reason in recent time it has become a major concern for the government. Carbon pricing has become the centre for the government policies as to climate change. It signifies that the polluter has to pay for per tonne of carbon which has been released by him in the atmosphere. Experts and many politicians consider this as ‘carbon tax’. In the year 2011 the cost was set at $23 and which has been gradually increased till this year. In the trading scheme cost is to be set by the market. This concept is recognized as the most effective idea to diminish carbon output and to control climate change (Carbontax.net.au, 2011).

Imposing tax on releasing carbon in atmosphere will reduce the use of coal; subsequently it will also reduce the quantity of carbon in the air. Carbon dioxide changing the climate rapidly and earth is getting destroyed by climate change, it can be considered as a global issue. Climate change is affecting seasons, the biggest illustration of this, is hottest year of Australia on record. NSW has acknowledged the increasing temperature in winter season too(Postmes, 2015). In a survey it is observed that a vast number of animals are suffering from this changing behavior of seasons as well as change of climate. In Australia, mining conditions are very harsh for the companies. Carbon tax not only reduces climate change and use of coals but it also helps the government to earn more revenue (Schiermeier, 2014). This imposition has emit 2500 tonnes carbon dioxide per annum. This concept will help to grow the idea of sustainable energy. This step will enhance the scope of economic opportunities which may stem from global development, that will be motorized as to clean energy (Lund, 2015). In this present era, solar energies are more preferable than coal energy as solar energy does diminish the quality of climate as well as the human society(Symposium: SOLAR CELLS & SOLAR ENERGY MATERIALS, 2005). Carbon tax is not applicable upon all the energy resource; it will be applicable only on those resources which are harmful for the climate and also for the human society. This is rule is not applicable on the use of coal for the agriculture and transportation purpose. Electricity generation companies in Australia are mostly affected by this rule (Characterization of coal and coal by-products, 2002).

The Concept of Carbon Tax and Emission Trading Scheme

On 17^th July, 2014, the legislations enacted for enforcing carbon tax has been repealed by the appropriate legislatures.  The legislations which are repealed in relation to carbon tax those are:

1. Clean Energy Legislation (Carbon Tax Repeal) Act 2014
2. Customs Tariff Amendment (Carbon Tax Repeal) Act 2014
3. Excise Tariff Amendment (Carbon Tax Repeal) Act 2013 2014
4. Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment (Carbon Tax Repeal) Act 2014
5. Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment (Carbon Tax Repeal) Act 2014
6. True-up Shortfall Levy (Excise) (Carbon Tax Repeal) Act 2014
7. True-up Shortfall Levy (General) (Carbon Tax Repeal) Act 2014
8. Ozone Protection and Synthetic Greenhouse Gas (Import Levy) (Transitional Provisions) Act 2014.

Main objects behind the amendment of the statutes imposing carbon tax are:

1. Reduce the cost of retail electricity by 9% and the cost of retail gas by 7% (Heine, Norregaard and Parry, 2012).
2. Lower annual cost of ongoing compliance $90 million per annum (Robson, 2014).
3. To boost economic growth of Australia.
4. Condense cost of living.
5. Promote more industrialization.
6. Increase employment in the industrial sector.

Imposition of carbon tax upon the individuals and industries affect the demand and supply of the coal. Strict imposition of carbon tax rule decrease the demand of the coal, as every tonne of carbon dioxide releasing in air is incurring a cost. While removal of carbon tax rule increases the demand of the coal is impliedly it reduces the cost of the product. When demand of a particular product is affected then supply of that product shall also be affected as these two are co-lateral.

Conclusion:

From the above discussion, depending upon various statistics it can be considered that carbon tax in required for the improvement of the social phenomena and for the development of the environment as releasing of carbon in the atmosphere reduces the quality of environment to a dangerous level, it also affecting the life of human society and other living creatures too. Imposition of carbon tax also enhances the revenue sector of the concern government but in present era it is not possible to avoid the use of coal, as it is the basic requirement for industry and it has to be accepted that still there no such alternative of coal is available, which can be afforded by the general peoples. 

The term ‘carbon tax’ means the proposed policy of the Australian government in relation to carbon pricing. This concept has been criticized by the opposition as well as the government. It is very uneven as it is not a tax actually. Emission trading scheme means emitters will hold a permit to emit each tonne of carbon dioxide. If any emitter would like to emit a certain amount of coal then that emitter must obtain a prior permit from the appropriate authority. If the emitters do not hold the permit then they have cut back their emission or buy a permit from another emitter, who has to cut back their emission then. The price is not actually causes the cut in emission at overall. The level of emission is determined by the cap, and the price is caused by the requirement of cut in emission. It means the cost of emission is impliedly imposed upon the price of the permit of emission. Permit has the actual value as it renders the permission of emission. Carbon tax is directly imposed upon the emitters while emission of trading scheme impliedly renders the cost of emission upon the emitters. Emission of trading scheme cut back the emission while carbon tax does not cut back, it determines the level of emission. The government has realized that carbon tax is very strict in nature and it also not falling within the scope of ‘tax’, for that reason the government has to introduce the carbon pricing in a different manner, emission trading scheme has been introduced by the government and all the statutory provisions related to carbon tax has been repealed.

The Effectiveness of Carbon Tax and Emission Trading Scheme

From house hold perspective, the carbon tax rule will affect the household budget of a common man in a noticeable mark but introduction of emission trading scheme not only reduce the previous household expenses but it also make an impact in the entire segment. Households are not liable to pay for permit of emission directly but they have to make an indirect way of payment in lieu of business pass in the higher cost they face. If the government would have imposed carbon tax then household level results would not have been dissimilar. They had to face higher prices in respect of the higher costs. It could be possible to reduce the burden of taxes from the shoulder of common household purpose, just like the execution of emission trading scheme but it is in an implied way. The proposed system of carbon tax is factually incorrect. The opposition used to call it a tax as people dislike any kind of tax. But it was odd that the government also adapted the same idiom. The proposed initiative of the government was not tax this time, it was emission trading scheme with a predetermined penalty. Imposition of carbon tax has been considered as the inducement to reduce pollution, doing that would cost less than paying tax. The cost of tax was associated with the unit of pollution or damage and it was also associated with the cost of controlling the damage. The quantity of pollution depends upon the level of imposed tax. It become a bitter dish for the household works, it opt to paying tax and continue polluting. As per the impact of industrialization taxation on releasing carbon dioxide become difficult for the governing bodies, in such situation the government had to adapt some new measures for accomplish their targets in respect of the pollution controlling.

The main difference among these two policies is the way of distributing the cost of pollution towards reducing the increasing level of pollution which is happening from dilution of carbon dioxide in the atmosphere. With cap-trade, quite often, the permits were given out at free of cost in the initial stage, which was known as “grandfathering”. It was done as the organizations had to buy permits at extra cost from other firms. This approach was initially famous as far as industrialization is concern. Most of the emission used to be done by the industrial organization but making general rules also affects the common people. So, emission trading scheme was quite impressive as it mainly targets the trading organizations. Auctioning emission permits not only enhance the government revenue but it also helps to reduce other taxes.

From the above differentiate discussion it can be summarized that carbon tax was a primary initiation to reduce pollution which happens from carbon dioxide but these concept was not a comprehensive one for accepting in general, for that purpose the initiation for reducing the pollution has to be made in a comprehensive manner, then the concept of Emission Trading Scheme has been introduced.

References

Carbontax.net.au, (2015). Carbon Tax | The Facts about the Carbon Tax. [online] Available at: https://www.carbontax.net.au [Accessed 16 Feb. 2015].

Characterization of coal and coal by-products. (2002). Fuel and Energy Abstracts, 43(1), p.3.

Heine, D., Norregaard, J. and Parry, I. (2012). Environmental tax reform. [Washington, D.C.]: International Monetary Fund.

Lund, P. (2015). Clean energy systems as mainstream energy options. International Journal of Energy Research, p.n/a-n/a.

Postmes, T. (2015). Psychology: Climate change and group dynamics. Nature Climate change.

Robson, A. (2014). Australia’s Carbon Tax: An Economic Evaluation. Economic Affairs, 34(1), pp.35-45.

Schiermeier, Q. (2014). Anger as Australia dumps carbon tax. Nature, 511(7510), pp.392-392.

Symposium: Solar Cells & Solar Energy Materials. (2005). Solar Energy Materials and Solar Cells.