• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • In Australia's Misguided Carbon Tax, a Warning for the U.S.

    On Sunday, the government of Australia announced that it will implement a US$24.74 per-metric-ton tax on carbon emissions. The damage the tax is expected to do to the energy sector there, and to the Australian economy generally, offers insight into what the effects of a carbon tax could look like in the United States.

    The plan will tax 500 of the nation’s largest polluters, and will redistribute some of the revenue in an effort to offset increased costs to energy producers and consumers – though significant economic damage is expected to persist. After five years, the tax will convert into a cap-and-trade regime.

    Estimates on the extent of the damage to the Australian economy vary. One estimate pegged that damage at US$31 billion to US$39 billion. The country is expected to lose between US$24.5 billion and US$48 billion in export revenue by 2022.

    Employment in Australia will also take a hit. One study estimated that the economy will shed 14,100 jobs as a result of the tax. As expected, the coal industry will be hit hardest, and according to the study, will lose between 22,700 and 31,020 man-years. “Conservative estimates of employment losses from applying emissions pricing to potential new coalmining developments, “ that report stated, “would be elimination of 25-37 per cent of potential new jobs.” The result: 4,000 likely job losses in the coal industry in the first three years of the tax, and another 700 expected after that.

    The tax is aimed at the heart of the industry – coal – that provides 80 percent of the country’s electricity. Eighteen of the country’s coal mines are expected to close within nine years of the enactment of the tax, resulting in an estimated US$23.5 billion of foregone revenue for the industry.

    The first power plant to close will likely be the Hazelwood power station, which generates 1,600 megawatts of power. The government of the state of Victoria recently stated that the closure of the Hazelwood station would cut off a quarter of the state’s energy supplies. “This represents a threat to our capacity as a state to be able to generate sufficient supply for our needs,” said Peter Ryan, Victoria’s Acting Premier.

    Hazelwood insisted that the federal government’s redistribution scheme would not be sufficient to keep the power plant operating. Its parent company, International Power Hazelwood, owns another two power plants nearby, and employs 1,200 workers directly and another 5,000 in a maintenance capacity at the three plants.

    Other major coal mining companies sounded also sounded off against the law. Seamus French, the head of the metallurgic coal arm of mining giant Anglo American PLC, warned that the new tax “puts at risk current and future coal investments in Australia, the jobs of 40,000 direct employees and the jobs of 100,000 contractors, suppliers and other workers indirectly employed by the coal industry.”

    Those “indirect” consequences of the tax are the inevitable result of increased energy costs, which affect far more sectors that just energy. The airline industry, for instance, is expected to take a hit.

    “Qantas, Australia’s largest airline, said it can’t absorb the cost of the tax,” reported Bloomberg on Sunday, “while budget carrier Virgin Blue Holdings Ltd. [parent company of Virgin Airlines] said higher fares in Australia are ‘inevitable.’” The new tax will more than double excises on jet fuel in Australia, which Qantas estimates could cost the company in excess of US$122 million by 2013. Both companies’ stocks took a hit on Monday on the news of the impending tax. Qantas stock dropped 3.25 percent, while Virgin Blue share prices were down 2.86 percent after the market closed in Sydney.

    All of this economic damage is being wrought in the hope of reducing Australia’s carbon footprint by a paltry five percent by 2020. As a measure to prevent global warming, then, the new tax fails utterly even assuming it accomplishes its stated goals. As Australian scientist Joanne Nova noted recently, the tax, if fully successful, would yield the following results:

    • “By 2020, CO2 in the air would be 411.987 parts per million by volume, compared with 412 ppmv if no action were taken.
    • “Global warming forestalled by 2020 would be 0.00007 C°: i.e. 1/14,000 C°.
    • “0.00007 C° is 1/700 of the threshold below which modern instruments and methods cannot detect a global temperature change at all.”

    Atmospheric physicist and MIT meteorology professor Richard Lindzen put it this way:

    I think there’s no disagreement in the scientific community that [the Australian carbon tax] will have no impact on climate, so it’s purely a matter of government revenue. And, as I say, I mean if they can fool the people into thinking that they really want to pay taxes to save the earth, that’s a dream for politicians.

    So Australia is poised to deal a body blow to its own economy in return for measures that will have a minuscule - imperceptible, even – impact on the global temperature. This is not model public policy.

    That economic damage, both realized and expected, should serve as a warning for Americans who would advocate similar proposals: in order to make any significant dent in the global climate, economic self-immolation would be necessary. A proposal such as Australia’s is likely to do less – though significant – damage to the economy, but will do almost nothing to affect the planet’s climate.

    While the federal government here in the United States is not, at present, considering a direct tax on carbon emissions or a cap and trade scheme, it is looking to implement regulations that will significantly increase the cost of doing business for heavy emitters – and will likely yield some of the same detriments expected under the new Australian tax.

    Posted in Scribe [slideshow_deploy]

    27 Responses to In Australia's Misguided Carbon Tax, a Warning for the U.S.

    1. Mark says:

      Australia is the developed world’s largest per capita emitter. This tax will cut their emissions by 159 million tonnes by 2020. They’re taking some responsibility and some action. It’s true that this action won’t fix the problem altogether. What would be a better way? Regulation by the UN? Central planning/direct action?
      The cost is reasonable. Qantas expect their local flights to cost $3.50 more.

      • limelite001 says:

        Awesome Mark. Just ignore that both China and India are INCREASING their emissions by 800% in the same time period. Oh, and 100 million of these 'tonnes' will have to be bought from overseas once the ETS comes into effect. So, try again.

        • Sebastian says:

          "China and India are INCREASING their emissions by 800% in the same time period".

          No they are not. The absolutel opposite it true. Get your facts straight. Even Google it. China has a goal of establishing a carbon trading market and cutting carbon emissions by up to 45 per cent by 2020 compared to 2005 levels.

    2. Sebastian says:

      This document is not a news article. I am an Australian, and not a journalist or politician, but even I have a much more secure grip on the facts that this author. The studies quoted were funded by the coal industry, yet even those are misquoted, with only the worst-case, perfect-storm scenarios quoted, which even the coal industry recognises are unlikely. To present information in an even more biased sense than the coal industry in the guise of journalism is irresponsible. The figures relating the to the CO2 ppm are quoting a widely debunked set of figures propagated largely by an Australian Rugby Coach turned Shock Jock. They are materially unfounded. The ACTUAL, relatively small effect of Australia on the total CO2 content of the atmosphere becomes a relatively HUGE effect when it is considered on a per-person basis. If the actions and effects of climate change are not considered on a per-person basis, then surely the only other valid measure is a per-Earth basis, and the Earth will undoubtedly need all the help it can get with organisations such as this devaluing it's future.

    3. D Smith says:

      Very biased reporting. Quotes and conclusions have been taken from an unnamed and hence unsubstantiated reports. The nonsense implying that the coal industry is in trouble is disproved by the worlds biggest coal miner, Peabody Energy in conjunction with steelmaker ArcelorMittal (from the US) by making a $5bn bid for one of Australia's biggest coal mines, MacArthur Coal after the carbon tax`had been announced.
      Qantas Airlines has said that it will add about $3 to an airline fare and that is about 15 minutes cost to park a motor vehicle in the airport carpark

      • Sebastian says:

        Bravo D Smith. Factually correct on all fronts. I might add that the estimated effect on Australians' cash after the income tax changes will generally be positive, up to aroud $110,000 incomes, when it is estimated at a $10 per week impact. That's 0.01% of their income.

    4. James says:

      Its not in, yet. Lets hope the majority of people in Australia fight against this. Its time for an election, if that happens before it is implemented, it will not come to fruition.

      • Sebastian says:

        Why don't people look things up before commenting? It is in effect NOW! Australian's are taking responsibility for themselves. As the Europeans, the British, even the Chinese and Indians, all committed to significant CO2 reductions.

    5. Alex says:

      Of course it will hurt the coal industry. But it will create new jobs by creating demand for carbon-neutral energy sources. The cost of the carbon tax represents the external social and environmental cost of the emissions. Without accounting for this cost, the corporations are using and exploiting a public good – clean air – for free. In other words, they are stealing and exploiting a tangible resource from the people of Australia. The government is simply making them pay for the use of this resource.

      Furthermore, by representing this cost financially, the Australian government is enabling consumers to choose products with all of their actual costs accounted for. CO2 emissions have great long-term costs that are not accounted for at the time of purchase; this initiative brings those into account. Consumers can make more informed decisions. This allows the free market to operate properly while avoiding a collective action problem/tragedy of the commons. That is the point.

      • Derek says:

        Cheese and Rice, You Reds can come up with all sorts of fuzzy math to justify your schemes, but you can never ever just let the market work… C02 Emissions have 0 long term costs, you may think that it will affect the whether in 200 years, but a cursory glance at the historical record will quickly show you that temperatures were higher in the recent past while temperatures were lower, breaking the correlation between C02 levels and earth climate. You are not letting the market operating by forcing people to purchase something(… in this case it would be the right to exhale…). Why don't you tax a real green house gas by the way (water vapor)? I know, to easy for private enterprise to get around that and continue to thrive. Just stand on the hose of private enterprise and force them to lick the boots of big brother… Boy would Trotsky be proud.

        • Sebastian says:

          "a cursory glance at the historical record will quickly show you that temperatures were higher in the recent past "

          Cursory glance eh? Try a cursory glance at the results of a google image search for "temperature change graph". I can imagine that you will bury your head in the sand, claiming those results are a conspiracy, but I challange you to answer me this, should I believe you…

          … or NASA? http://climate.nasa.gov/evidence/

      • Ninjaneer says:


        As an American, i am very interested in this issue as a test case for what may befall us on the north side of the equator. I do not know whether to laugh or cry at your utter cluelessness on this subject. CO2 is NOT a pollutant but a requirement for life on this planet. "Clean" air includes the trace gas CO2, which comprises about .04% of the atmosphere. It's role in the life-giving "greenhouse effect' is minor compared to water vapor, which (thankfully) the totalitarian purveyors of global climate calamity have so far not attempted to regulate. Australians are being flimflammed by their own government for the purpose of raising revenue, controlling peoples' lives, and deliberately reducing the standard of living. That is the real point of this tax. No serious person can claim this microscopic change in an all but insignificant gas (by volume) will have any measurable effect on the environment. This issue is entirely about government power–not the environment. Wake up down there before it is too late!

        • Sebastian says:

          "It's role in the life-giving "greenhouse effect' is minor compared to water vapor,"

          That is true. But there is no significant CHANGE in water vapour. CO2 is in itself harmless as you say, but when the ratio of it CHANGES SIGNIFICANTLY in our atmopsphere, natual balances based on thousands of years of lower CO2 levels CHANGE ALSO. This includes weather systems and of course finely tuned eccological balances. The Earth has experienced changes in CO2 levels in the past, that should be recognised, but what is critical is that, as far as we know, IT NEVER changed nearly THIS FAST before. The speed of the change has a huge impact on the extent of the effects, particularly for eccological balances, where slow migrations and adaptations are possible over may thousands of years, but this change we Australians are acting to avoid could occur within a few decades. Too fast.

        • Alex says:

          Hi Ninjaneer. I respectfully disagree.
          1. CO2 is a naturally occurring gas, yes. But it is also a greenhouse gas that contributes to climate change, which does have real long-term economic costs. (If you thought this year's floods, droughts, and tornados were bad, just wait for what's ahead.)
          2. There are better ways to raise tax revenue than a carbon tax. This is simply an economic mechanism to account for the long-term costs of CO2 emissions on a per-use basis (so the fact that Australia's CO2 output doesn't make much of a difference globally is irrelevant to this conversation). It isn't a government conspiracy.
          3. It is irrational to think that the government of Australia is using this carbon tax to "deliberately reduce the standard of living" in their country. Just think about that one for a while.

        • ThomNJ says:

          Good grief,

          CO2 is NOT a greenhouse gas in its current volume. And the argument that when the "ratio changes significantly" as Sebastian notes below would be meaningful IF IT CHANGED SIGNIFICANTLY – but it never has and we certainly aren't going to do it. Even if the volume of CO2 went from .04% to .05% that is NOTHING in the larger scheme of things. C'mon, people get a grip. Sebastian, no offense, but you say that CO2 has never changed this fast before – you make it sound like it has gone from 0.038% to 38%. (You don't give a before and after reference amount or time period). It remains a trace gas that is small enough one cannot efficiently separate it from the air. Whether a pressure swing adsorption unit or in liquefication of air, one cannot get an appreciable amount of CO2 from the air. It is decidedly not a danger and cause of warming. increases can be as a result of warming, but it sure as heck doesn't cause it and NEVER HAS.

    6. Tim Az says:

      It appears that some in the Australian govt. are desperate to match the misery index of the Mao-Bama regime here in America. The socialists aren't happy unless their subjects are poor and totally dependent on the elite socialists themselves. I suppose they could be correct in that, if their subjects are equally poor and dependent then fairness abounds. Given that socialism fails every time it's tried. Just how long do we indulge them before we reach the point of no return without a total breakdown of society and the rebuilding of our republic? Do we really want to let it go that far? Had enough yet?

    7. Chris says:

      Undoubtedly there are economists on the other side of the argument that suggest the benefits of this action will offset the costs. How this plays out will be a great test case for us to watch and hopefully learn from.

      • Sebastian says:

        Credit to you Chris. It's rare I read an American opinion with a balanced perspective.

    8. chatmandu002 says:

      Just how long do you expect the world to support the human species and animal species? With 7+ billion people and untold number of animals consuming the earth's resources, I won't expect the world to last a few hundreds thousand years before all resources are gone along with most species. Oh, maybe the cockroach will will still be around when the last bones of the human species will be but dust.

    9. zenga says:

      well, now that the Australian enviro-nuts have weighed in, I hope that Australia likes their new economy, unemployment and standard of living. Perhaps the average Australian isn't wuite so enamored of these changes? let's hope that the people of America aren't as easily duped by the goverment and the environmentalists. oh, and AGW is a myth. don't believe me? look at the data. not the idiotic reporting by the people that want you to believe in it. look at the actual data.

    10. S Rubicon says:

      The good news for Americans is, we will have the experiences of Australia to show us what we want to do, and what we do not want to do.
      Lets let the consequences show us the way.

    11. Brad - Detroit says:

      Right on Zenga. AGW is a complete and total myth. Read Michael Crichton's "State of Fear". It is a work of fiction, but uses more facts, data, and real science than anything the idiots at the IPCC churn out. Crichton admitted that he had no dog in this fight, but wanted to publish the book as a possible example of environmentalism gone awry. Does anyone remember the "Next Great Ice Age" that was looming in the 1970's ? What happened to that ? The air is actually cleaner now than it was 40 years ago, but now that we have banned all CFC's and heavily reduced NOx, HC, and CO coming out of our tailpipes and factories, the NATURAL cycle of the world's climate continues to run its course.

    12. Brad - Detroit says:

      I just wish people would stop holding onto Global Warming and Climate Change as some religion. They dismiss data that doesn't agree with their religious beliefs, ask people not to refer to random weather events as climate (the very wet and cold spring we had in the midwest US this year), yet refer to weather events like Hurricane Katrina as proof of AGW or Climate Change. Sorry, you can't have it both ways. Cap and Trade and Energy taxes are just a money-making scheme, plain and simple. If you are too ignorant to realize that, please pay my share, will you ?

    13. Sue says:

      Australia's Carbon Tax is stepping into dangerous territory. Julia Gillard lied to Australians and is now implementing a tax she promised just before a federal election that she would not bring in. I was sent an email today with a link to this video that made me hopping angry as an Australian by what is actually REALLY behind this "carbon tax" http://vidcall.com/index.php/videos/show/2090/#ch… .

      I hope America does not go down the same path as us on this, but unfortunately it looks inevitable.

    14. joseveragio says:

      Are you Aussies gonna let yourselfs be done over again by lying cheating pollies, or stand up for yourselves before it's too late?

    15. John Huston says:

      If you believe this rubbish, I'll sell you a bridge in the middle of the desert. If you believe man is causing "Global Warming" rather than a natural cycle of the earth's climate, tell me how dinosor bones got the the Alaskan Slope that date back 60,000 years. Also tell me why Captan Cook and his men lost their lives, frozen to death while trying to map the Northwest Passage in the 1840's. Merchants had been using it to move goods from Ocean to Ocean for years rather than sailing around South America.

    16. A Rothschild made and Gore delivered master plan. The funny thing is a lot of scientists are saying the world is in a state of global cooling. Oops I said it!

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.