Big busi­ness to pay

Pub­lic ‘ bet­ter off’ un­der car­bon tax: Gar­naut

Townsville Bulletin - - National Snapshot -

LOW and mid­dle-i ncome earn­ers could ac­tu­ally be bet­ter off with a car­bon tax if cli­mate change ad­viser Ross Gar­naut has his way.

Prof Gar­naut wants to re­di­rect bil­lions of dol­lars raised by charg­ing big busi­ness emis­sions into the tax and wel­fare sys­tem.

In the sixth up­date to his 2008 cli­mate change re­view, Prof Gar­naut said the car­bon tax should start next year with a price of be­tween $ 20 and $ 30 a tonne, ris­ing by four per cent an­nu­ally.

An emis­sions trad­ing scheme with a float­ing price should be­gin in mid-2015.

Past mod­el­ling sug­gests $ 26 is the min­i­mum price needed for Aus­tralia to meet its tar­get of re­duc­ing emis­sions by five per cent by 2020.

That would bring in $ 11.5 bil­lion in 2012/ 13.

Prof Gar­naut re­com-mended 50 per cent of that should go to­wards com­pen­sat­ing low and mid­dle-in­come house­holds.

He wants to do that via tax cuts and wel­fare re­form mod­elled on the Henry re­view.

‘‘ Over­all, lower and mid­dle- in­come earn­ers in Aus­tralia will be bet­ter off di­rectly as a re­sult of these ar­range­ments,’’ Prof Gar­naut said.

‘‘ In ad­di­tion, fu­ture gen­er­a­tions of their fam­ily will be pro­tected from dan­ger­ous cli­mate change.’’

Trea­sury Sec­re­tary Ken Henry, in a re­port re­leased in 2010, sug­gested a pro­gres­sive sys­tem based on a $ 25,000 tax-free thresh­old and a con­stant mar­ginal tax rate of 35 per cent for 97 per cent of tax­pay­ers.

Prof Gar­naut’s up­date flags sep­a­rate sup­port for house- holds with lit­tle or no in­come. Petrol would be in­cluded but the up­date sug­gests the ini­tial price hike be off­set by a one-off cut to the fuel ex­cise.

It would be funded by tak­ing an axe to fringe ben­e­fits ar­range­ments for com­pany cars. Prof Gar­naut rec­om­mends emis­sions-in­ten­sive, trade-ex­posed in­dus­tries re­ceive com­pen­sa­tion in line with the doomed car­bon pol­lu­tion re­duc­tion scheme.

That means they would re­ceive 66 or 95 per cent of their pol­lu­tion per­mits for free, de­pend­ing on in­dus­try type.

The econ­o­mist pre­vi­ously ar­gued that was too gen­er­ous but now says adopt­ing an ‘ ‘ ex­pe­di­ent’’ ap­proach i s nec­es­sary. Pay­ments to land own­ers who store car­bon would be­gin at $ 690 mil­lion a year but grow to 14 per cent of the to­tal rev­enue by 2020 – $ 2.25 bil­lion in to­day’s dol­lars. The en­tire car­bon pric­ing regime would be over­seen by a ‘‘ car­bon bank’’ which would act as an in­de­pen­dent reg­u­la­tor, much like the Re­serve Bank of Aus­tralia.

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