Carbon Tax Bill to be Presented to Australian Parliament
Oz provides an excuse for some comparative politics.
Via the BBC: Australian PM Julia Gillard presents carbon tax bill
Australian Prime Minister Julia Gillard has presented her bill for a controversial carbon tax to parliament.
The legislation would force about 500 of the biggest polluters to pay for each tonne of carbon dioxide they emit.
The tax is central to the government’s strategy to combat climate change, but the opposition say it will cause job losses and raise the cost of living.
The legislation would start with a carbon tax and then move to a cap-and-trade type of program:
It will be introduced on 1 July next year, and will then evolve into an emissions trading scheme three years later.
The internal politics of it all highlight some of the ways politics and policymaking are different in a parliamentary system (as opposed to the separation of powers system as in the US).
A couple of things that struck me as interesting:
1. The fact that the PM is going to introduce the bill means that it is almost certainly going to pass the parliament. This is rather unlike, say, when a President proposing a piece of legislation there is absolutely no guarantees that the legislation will be voted on, let alone passed. Further, even if a vote takes place, the legislation voted upon may bear little resemblance to the original proposal.
President Obama can make a speech to Congress, admonish them to “pass the bill” and then go on a bus tour, but he can no more guarantee his jobs bill passes Congress than he can fly to moon and back under his own power.
2. In parliamentary systems, coalitions are often needed to form a government, which can have political implications:
Thousands of Australians have protested against the bill, accusing Ms Gillard of lying before last year’s election.
Ms Gillard made a pledge during last year’s federal election not to introduce a carbon tax.
The proposed tax was drawn up after Ms Gillard failed to win an overall majority in parliament at the polls and had to rely on the support of the Australian Greens.
3. In parliamentary systems there is a far clearer feedback mechanism between voters and legislators. To wit: if the current parliament passes policies that a majority of voters do not like, then those voters can elect a new majority which would have the power to reverse what the previous parliament did:
The conservative opposition leader has promised to ditch the tax if he wins office.
Tony Abbott said on Tuesday that the government had “no mandate” to “ram the bill through”.
Granted: such things are often easier said than done. That having been said, if one government does massively overreach on policy, the opposition can directly take the matter to the voters in ways that is far more difficult to do in the US (despite frequent campaign rhetoric to the contrary).
This is to be contrasted with separation of powers systems where the feedback loop is more complex (i.e., voters elect the legislature and the executive, with mixed signals possible within the feedback loop), not to mention that in the US system in particular, the internal rules of the Senate make it possible for minorities to block major legislation.
A clear illustration is to be found in the US in the fact that major policy changes are difficult to begin with (e.g., the Obama health care reform took large majorities in both the House and Senate to pass and will require similar majorities to repeal—and those types of majorities do not come around often).
More on the Australian plan (which is a package of 18 bills) can be found here:
Via the Sydney Morning Herald: It’s time to act on climate: Gillard.
Via News.co.au: Help us decode the carbon law
Two very basic concepts at work here:
1). I cannot dump my trash on the Koch Brothers front lawn without facing fines and/or incarceration. The Koch Brothers, on the other hand, can spew filth into the air that I breathe and face absolutely no repurcussions.
2). Cap and trade is a Republican policy idea and a free-market solution to a problem – which Republicans no longer support because Obama and most Democrats do.
They are introducing a more-effective measure and then transitioning to a less effective measure?
The most important factor, really the only factor that matters, in carbon tax debate is price.
If the $/ton are small then the tax will have little effect on industry, but will only be a convenient place for collection. It draws some money from the economy, but for small tax, less than any of the other revenue programs in place.
If you go nuts with a high tax, well, you still might be revenue neutral from your own national reference, but you risk introducing distortions relative to trading partners with smaller, or low, tax.
The referenced article states:
That can be put in context with the Wikipedia Carbon Tax page. They impute a social cost of $43/tC. So the Australian plan is about half that. That means the Australian plan reduces to roughly 2 cents US per gallon of gasoline, or 1 cent per kWh of electricity
I’d say the Australian plan falls in the “not so big to worry” category.
@Neil Hudelson:
I agree. Cap and Trade is most often a shell game to make sure there is no real cost on carbon.
I disagree.
If there’s a tax on carbon emissions, corporations will work to reduce the amount they pay…solutions will be created.
@ponce:
There are these things called “spreadsheets.” People use them to plot impacts and justify investment. When $/ton are low, the output of the study will be “do little” or even “just pass on the price.”
NOTE: The Austrailian proposal works out to like 2 cents per US gallon of gasoline.
Do you seriously think 2 cents per gallon US would change behavior? When gasoline price volatility is something like 50 cents per year?
@Neil Hudelson: Not really, cap and trade works as long as the cap is a hard cap and it is known in advance to all relevant economic actors.
A carbon tax puts a fixed price on CO2.
A cap and trade approach with a hard cap puts a fixed quantity on CO2.
If the goal of the carbon regulation/pricing schema is to raise money, then a tax makes some sense a priori, although with the caveat that it is extremely cyclical (which is not neccessarily a bad thing). If the goal is to reduce CO2 emissions, then a hard cap with fully tradeable permits is a priori an effective approach.
If there are no transactions costs and perfect foresight as to what the market clearing price of carbon is for a desired level of pollution then a tax and cap/trade are identical.
Two cents a gallon is about the profit oil companies make when they sell a gallon of gas.
Do I think a two cent a gallon tax would cause energy companies to hunt for ways to reduce it?
Yes.
Would two cents per gallon change behavior? Probably a bit, but we’re talking about a price increase of about one half of one percent (assuming gas prices of $3.80/gal, which is what I’m paying right now here in CT). It would likely be lost in the noise of constantly-fluctuating gas prices*.
jp says the Aussie proposal works out to 1 cent per kWh of electricity. Would that change behavior? Well.. it seems that here in CT the generation cost per kwh is about 9.5 cents. Transmission, distribution and fees basically doubles that to ~19 cents/kwh). Tack on one more cent and you’re at 20. That is a 5% increase in cost to the consumer and I’d guess that it would change behavior (and CT has high rates to being with, so a 1 cent increase somewhere else would represent a larger % jump). Moreso than gas going up two cents a gallon…
Hmm… for gas it’s a .5% increase whereas for electricity it’s a 5% increase. JP, are you sure about your math?
* – companies that use a lot of gas already hunt for efficiency. Gas at $3.80/gallon vs. $3.82/gallon doesn’t change that by much.
Damn, took too long editing and timed out. I was slightly off about the cost of electricity here…
Total cost, according to CL&P is about 17.5 cents/kwh. Tacking on 1 cent would be a 5.4% increase.
That doesn’t change the substance of my post, but I want to use the right numbers.
Rob…CL&P is the most expensive in the country…right?
I agree that the $24/tC level would drive changes on the electricity side. On gasoline no, because it is not a visible 2 cent change, it is hidden in the existing price rollercoaster. The rollercoaster itself is a bigger factor in planning and corporate profit margin.
It took me forever to get the idea out of my head that the PM was presenting a bill to be paid by the Aussie Parliament for their carbon emissions. Maybe just to get them to stop spouting hot carbon dioxide emissions into the atmosphere?
@snarky bastard:
But what is the likelihood of a hard cap actually being put in place? A weak carbon tax versus a weak cap and trade scheme–I’ll take the weak carbon tax.
If there was the political will for a hard cap, and a regulatory scheme to actually enforce both the cap and the trading market, sure, I’ll take the cap and trade.
@Hey Norm:
So I hear. I haven’t looked it up to verify it, but I see the claim made in the papers.
In @Neil Hudelson:
Exactly, and Cap in Trade has enough built in confusion that we hardly know what is “hard.” Whether or not a coal plant has an actual incentive for efficiency is buried in their cap, their credit grant, and trading rules.
Excellent points, Steven.
I would offer as an amendment that policy change and accountability, while much more direct In Australia than in the US, is less so than you characterize. Unlike some parliamentary systems, Australia has a second chamber that is both elected for fixed, staggered terms, and powerful.
So even if there were an early election for the House of Representatives that resulted in a change in government, any shift in the Senate would not happen rapidly. The new senators, despite being elected in August, 2010, took office only a couple of months or so ago. The Labor and Green parties jointly have a majority and will till at least mid-2014, and so they can veto any attempt by the Liberal-National Coalition to change the policy, even if the latter becomes the government.