Carbon tax a breeze

Geelong Advertiser
Tuesday 24/6/2008 Page: 13

FEARS that petrol and electricity prices will soar when a carbon tax is introduced are unfounded, according to a new report. Australia will enter the bold new world of an Emissions Trading Scheme (ETS) in 2010 that will put a price on greenhouse gas emissions to tackle climate change. There are concerns the scheme will leave people struggling to pay their bills. But the report by CSIRO and the Australian National University has found people will hardly notice the price rises because incomes will rise much more quickly.

"There's nothing to be afraid of," said report coauthor Steve Hatfield-Dodds, senior policy economist with the CSIRO. "In the long-run perspective, we can be reasonably relaxed about it." Professor Hatfield-Dodds said the ETS would increase energy prices relatively slowly, over a long period of time.

Incomes would rise more quickly, as they have been doing for some time, outstripping energy price rises. So,"almost despite" the ETS, households will spend less of their income on energy. The report, commissioned by the Climate Institute Australia lobby group, modelled the impact of the carbon price. Electricity prices would rise 18 per cent by 2025 if a low carbon price was set, and by 67 per cent if a high price was set. The scheme would add 8 per cent to petrol prices by 2025 at the lower level, and 36 per cent at the highest.

The report found incomes would generally outstrip that growth, but warned low-income households could be worse off in the short term. The report recommended the Federal Government make an "affordability payment" to poorer households of $50-$185 a year to cover the gap. This could be in the form of a direct payment, increases to social security or cuts to income tax. The Government will rake in billions of dollars a year from the sale of emissions permits. The report advocates spending that money on the greenhouse payments, energy efficiency measures and better public transport.