Cause and effect of carbon tax on Australian mining industry

¶ … measure cause and effect of carbon tax on the mining industry in Australia and South Australia. The trick for Australian politicians will be to balance off saving the environment and preventing climate change with preserving the jobs of working men and women in Australia and South Australia.

Prime Minister Julia Gillard have recently place their political careers on the line to sell this idea to Australians who are skeptical about the plan's effectiveness. She will have a tough time on her hands convincing her constiuency of this (Whatnall 2011).

Carbon taxes and mining in Australia and South Australia are controversial by any stretch of the imagination. As early as 1999, Australia was named as a prime carbon emitter and a major coal exporter in a bid to bolster the fledgling then Kyoto Protocol. An inability to control the output of carbon emissions from Australia would potentially have an adverse effect upon meeting the goals of Australia as a signatory to the agreement based upon climatic models (Light, Kolstad, & Rutherford 1999).

How do these taxes work? The government has plans to tax carbon pollution caused by the burning of fossil fuels, especially coal and petroleum. A carbon tax places a price tag on carbon released as fossil fuels are burned up. Such taxes are designed to include in the price of the fossil fuel the costs of the environmental damages they cause.

By increasing the price of the use of fossil fuels, supporters of such a carbon tax argue it will create financial incentives to develop and promote the use of technologies that reduce carbon emissions This includes fuel-efficient cars as well as renewable energy sources. The supporters of the tax say that it will make individuals take more into account the price of using fossil fuels in the evaluation and use of products and services in their lives (At a glance... 2011).

It is widely assumed that cutting greenhouse gas emissions of carbon will prevent global change. The plan is being sold as something akin to an insurance policy. In this line of reasoning, there is now compelling and substantial advice from the scientific community that a sharp cut in world greenhouse gas emissions will substantially reduce the risk of catastrophic climate change over the next one hundred years. In this insurance policy, we will incur a cost (economic loss in GDP) to reduce the risk (monumental climate change).

In any decision on insurance, cost matters as much as effect. If a decent reduction in risk costs 50 per cent of income, then living with the risk of carbon emissions may be preferable. However, if the policy it costs say 1 per cent of income, then taking out the insurance policy may be justified as the best option as opposed to doing nothing at all (Adams 2007 p1-2) .

The most controversial part of this issue is that billions of dollars raised by carbon tax in Australia will end up overseas in order to help poor countries fight climate change. Gillard's new tax will end be up being used to help Australia to keep up with its share of a $100 billion-a-year United Nations fund which will transfer wealth from developed nations to help undeveloped countries. Gillard's Government is a party to a UN agreement that Climate Change Minister Greg Combet signed in December at a under which approximately 10 per cent of carbon taxes in developed countries will go to a Green Climate Fund. While Ms Gillard has been denying she would support a carbon tax last August, her government had already committed to spend $599 million on climate change handouts over the current three-year Budget period. This will occur mainly in the Pacific and South-East Asia, $470 million of which has been allocated already (Murray 2011).

Solutions and Reclamation

So, what is the middle path? Can a compromise be reached? While there was some support in the time of the former Howard government, the current situation may jeopardize this as the then administration assessed its options with regard to the situation Australian Government 2011). This was also the opinion expressed in a Bloomberg piece that "Australia's carbon-tax policy is discouraging investment in the nation's power industry, resulting in possible shortages in as little as five years, electricity supplier TRUenergy Holdings Pty said."The fear is that it will choke off available investment money (Raja 2011)."