Report: Carbon tax drags Australian economy down under

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Michael Bastasch DCNF Managing Editor
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In addition to potentially costing the “democratic socialist” Labor government its seat of power, Australia’s efforts to curb carbon dioxide emissions also damaged the country’s economy through higher energy prices and fewer jobs, according to a new report.

“Poor policy processes tend to lead to poor policy outcomes, writes Dr. Alex Robson, economist at Australia’s University of Brisbane, for the Institute for Energy Research, which opposes a carbon tax. “Australia’s carbon tax experience provides a number of important lessons in how not to go about implementing sensible climate change policy.”

According to Robson, Australia’s one-year old carbon tax increased taxes on 2.2 million people in the country and has not actually decreased the country’s carbon emissions — which won’t fall below current levels until 2043.

The tax is the highest in the world, set at about $24 per metric tons of carbon, and applies directly to about 370 businesses in the country. Robson found that a year after the tax was enacted electricity prices had risen 15 percent, including the biggest quarterly price increase in the country’s history.

Furthermore, 19 percent of the typical Australian household’s electricity bill is due to the tax and other “green” programs in the country. Taxing carbon may have also impacted the job market, as unemployment shot up by 10 percent after its implementation.

Australia’s carbon tax has become a political hot potato and even the Labor government –which enacted it — is looking to appease those impacted by the tax. The government announced in July that the country would move swiftly from a tax to an emissions-trading system in an effort to bolster support for Labor.

“The government is moving in this direction because a floating price takes cost-of-living pressures off Australian families and still protects the environment and acts on climate change,” Labor Prime Minister Kevin Rudd told reporters. “We have still got a fair bit of budget work to do, as this has to be a budget-neutral undertaking.”

The push to move to an emission trading scheme ahead of 2015 came after reports came out that businesses and hospitals were being burdened with high power costs.

News Limited Network reported in March that the carbon tax was contributing to a record 10,632 businesses that faced insolvency in 2012 — up from 10,481 for 2011.

The Herald Sun reports that Victoria provincial hospitals forked over an extra $6.1 million for energy costs in only six months due to the carbon tax — payments to which ranged from 8 percent of hospitals’ total energy costs to 22 percent.

However, the Liberal Party fired back, arguing that the Labor government’s emissions trading plan was a carbon tax with a different name.

“Rudd can change the name but whether it is fixed or floating, it is still a carbon tax,” said Liberal-National leader Tony Abbott, who pledged to get rid of the tax entirely if he is elected.

The Institute for Energy Research-backed study also comes as U.S. policymakers openly discuss the possibility of imposing a carbon tax as a way to pay down the deficit and cut carbon dioxide emissions, which Democrats and environmentalists say cause global warming.

“[T]he promises of those calling for a ‘pro-growth’ U.S. carbon tax have been have been proven to be utterly false in Australia: Its carbon tax came with income tax increases and fewer jobs as well as more command-and-control energy regulations,” writes the Institute for Energy Research’s Dr. Robert Murphy.

“The debate over a carbon tax is now not just one of theoretical speculation; proponents need to explain why the U.S. outcome would be different from what actually happened in Australia,” Murphy added.

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