Big business to pay
Public ‘ better off’ under carbon tax: Garnaut
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.