John Howard didn’t have time to give it a name. His election commitment in 2007 was to introduce an emissions trading scheme, as was Rudd’s. Turnbull has quipped that if Howard won that election we would already have an ETS. As it turns out, Rudd got up and called it the Carbon Pollution Reduction Scheme, which at least explained in a nutshell what it was trying to do.
The current government has not yet give its policy a formal name. So the Opposition has obliged and chosen one for them: a carbon tax.
Now this has got a lot of people, mainly tax advisers and accountants, barking up the wrong tree. It’s not actually a tax, and won’t provide a steady stream of clients with requirements for assistance to fill out their carbon tax return.
Colin Hargreaves, director of the International Bureau of Financial and Economic Modelling, wrote an interesting Opinion piece to the AFR yesterday, lamenting the high transactional cost of collecting taxes like the GST ($0.8-1.10 for every $100), and a central quote made the back page:
the carbon tax could be very efficient if it is collected at source rather than from each individual consumer.
That’s exactly what is being proposed, and was being proposed under Howard’s ETS and Rudd’s CPRS. Only those emitting more than 25,000 tonnes per annum CO2e are defined as ‘liable entities’. They are already reporting under the NGER Act of 2007 (brought in under the Howard government). From 1 July 2012, if the legislation goes through, they will need to pay for permits to match the amount of their emissions, and such permits are automatically surrendered (ie not traded). There’s only about 1,000 point sources (or facilities) with that level of emissions. So it will pass the test of being efficiently collected. Sure, costs will be passed through to consumers, but there will be little to no transaction cost in that pass through, as the carbon price will be embedded in the price of the goods/services.
The current proposal is not a tax, but a fixed price emissions trading scheme. This is exactly the same as the CPRS, which also had a fixed price at the start. Economically speaking, a fixed price emissions trading scheme has broadly the same economic impact and budgetary consequences as a carbon tax. But it’s not a tax.