Saturday, July 12, 2008

Burden of a carbon tax

A carbon tax in the form of an emissions trading scheme (ETS) could be the best thing to happen to corporate Australia since the invention of double-entry bookkeeping.

For decades there's been the public perception that the interests of business ("the big end of town") are different from those of the rest of the community.  An ETS would quickly dispel this perception.  One of the reasons an ETS is popular with voters is because they think it will be business that will pay for it.  If an ETS were implemented, it is not companies but mums and dads and households that will foot the bill.  The more an ETS is discussed, the more it becomes clear that ultimately the interests of mums and dads and households are identical with those of the businesses.

Until they started thinking about what the effect of an ETS on the price of petrol would be, most voters thought they'd somehow be immune from the operations of carbon trading.  Now they are asking, "Why didn't anyone tell me?"  Such a misunderstanding is understandable given that during the federal election campaign Kevin Rudd told Australia that implementing an ETS would be easy and painless and would do us good by creating new "clean" industries and jobs.  Few politicians bother to consider the consequences of signing the Kyoto Protocol.

The myth that the interests of business are separate from the interests of everyone else is often perpetuated by business leaders themselves.  While there are lots of sensitive, new-age executives preaching about the perils of climate change, very few are willing to talk about the impact of a carbonconstrained economy on families and households.  It is the business sector itself that has encouraged the notion that corporate Australia will be the only sector affected by an ETS.  Very few executives have been willing to talk about the impact of carbon charges on working families.  The Prime Minister, too, has not been particularly eager to discuss such things.

There's a certain irony in the fact that many of the business organisations loudly calling for government action on climate change are demanding at the same time that the government reduce regulation.  The legislation required to establish emissions trading will make the Income Tax Assessment Act look easy to understand by comparison.

It will be interesting to see how energy companies are treated in the brave new world of an ETS.

When banks were forced to lift their mortgage interest rate because of global conditions, politicians rushed to condemn them as greedy.  When the goods and services tax was introduced, former prime minister John Howard and his treasurer, Peter Costello, promised that the Australian Competition and Consumer Commission would prosecute anyone unfairly taking advantage of the tax change.  One can only wonder what sort of regime will need to be established to ensure that electricity companies (and all other companies, for that matter) don't profiteer from an ETS.

An ETS would involve government planning and regulation on an unprecedented scale.  The closest parallel to what an ETS would look like is what the Chifley government attempted with its nationalisation policies of the 1940s.  In the past few months many commentators have scoffed at the coalition's promise to reduce the price of petrol by $0.05 a litre.  But the price of petrol swings elections.  One of the reasons Robert Menzies was swept to power in 1949 was because he promised to abolish the petrol rationing imposed by Labor.

Many chief executives have paraded their virtue by supporting an ETS.  Some have been motivated, quite understandably, by self interest.  Executives of service companies stand to reap windfall gains by providing accounting, financial and legal services to those affected by the ETS.  Heads of green energy providers also stand to gain.  Others have volunteered their companies as greenhouse guinea pigs, safe in the knowledge that it won't be their company paying the price of the experiment.

Hundreds of companies and business organisations made submissions to the Garnaut review.  Only one submission doesn't support an ETS in some form.  But business support of an ETS comes with a catch.  While many companies say they want an ETS, at the same time they also say they don't want it applying to them.  Or, if an ETS were to apply to them, they should be compensated.

The attitude of business to an ETS is a little bit like that of St Augustine's approach to sin:  "Oh Lord, help me to be pure, but not yet".


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