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  • Carbon Tax: Australia’s Experience Is a Chance for the U.S. to Get It Right

    Album / Raga / Prisma/Newscom

    “This is the most effective and efficient way to drive innovation to find better, less-polluting ways of producing power, goods and services,” Australian Treasurer Wayne Swan said at the passage of Australia’s carbon tax in July 2012. One wonders if he would say the same today—or, perhaps more importantly, if those proposing a similar scheme in the U.S. have any clue about the extra burden the tax is putting on Australia’s businesses.

    For example, Penrice Soda, a soda ash company that makes glass and detergents. It has been operating for 70 years, but it will be closing its factory and will begin importing soda ash. Penrice Soda originally faced an $8 million (Australian dollars) annual carbon-tax bill, which they petitioned to decrease to $1 million.

    Or again, Tourism Accommodation Australia expects that price increases in energy bills, food, transport, and other goods and services due to the carbon tax will cost the Australian hotel industry $155 million a year.

    Over the past 12 months Australia has seen 10,632 companies collapse, a record high total for a single year, according to the Australian Securities and Investments Commission. Nearly one-fifth of these companies were manufacturing and construction.

    Australia’s new carbon tax is not solely to blame for businesses’ struggles, but the Australian government has been crediting the difficulties to the high exchange rate and global competition.

    “We accept business is under pressure [on] a number of fronts including the impact of a high exchange rate,” said Australian Chamber of Commerce and Industry economist Greg Evans. “However what business operators find hard to deal with is deliberate policy actions of government designed to increase the cost of doing business.”

    Australia’s carbon tax adds a significant new cost to businesses trying to make a profit and stay afloat. But business closures are the worst case scenario. A carbon tax affects nearly every good and service that depends on electricity to be made, transported, and sold. These higher costs also lead to less visible changes in the market such as deferred investments and slowed hiring.

    “When the dust settles following the furious debate that we’ve had about carbon pricing, I think Australians will come to see that this has been an important reform at the right time,” said Prime Minister Julia Gillard back in July 2012. It seems the dust has whipped up to a dust storm that will have almost no environmental benefit or effect on global temperatures.

    Is Washington paying attention? Americans should run hard and fast away from the prospect of passing a carbon tax in this country, which some on Capitol Hill are proposing as a way to make a quick buck in the face of a spending crisis. But there is no reason to think America’s experience would be any better than Australia’s.

    Posted in Energy [slideshow_deploy]

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