Carbon tax modelling hopelessly optimistic

Henry Ergas

Henry Ergas in The Australian exposes the ridiculously optimistic basis for the government’s carbon tax modelling:

THE one thing you need to know about Treasury’s modelling of the carbon tax is this: it assumes that by 2016, the US and all the other developed economies that do not have carbon taxes or emissions trading systems in place will have them up and running.

This implies that in next year’s US presidential election, likely to be fought at a time of high unemployment, the winning candidate will campaign on the basis of introducing a carbon tax that will go from zero to $30 a tonne in a matter of months. And that tax will then not only get through Congress but in record time.

Moreover, that feat accomplished, by 2021 China will sign up too, and with 14 per cent of the world’s population and barely 20 per cent of world income, will agree to shoulder 34 to 35 per cent of the costs of global mitigation. As part of that deal, China’s leadership will accept a fall in national living standards, relative to business as usual, of between 5 and 10 per cent, while per capita incomes in the far wealthier US and European Union decline by a fraction of that amount. And with China on board, the rest of the world will join the party. (source)

Yep, looks pretty realistic to me.


  1. Hey Simon,
    I have a what may be a silly question: Is GST going to be paid after the carbon tax has been added, on a total amount, for goods and services?

    • Whatever the official position is (and I’m not sure) the reality is that increased manufacturing costs will be passed on to retail prices which will then be subject to GST. Anyone else have anything more to add on this?

      • Baldrick says:

        The carbon dioxide tax will not be levied directly on the consumer, unlike the GST which you can see how much you pay on your receipt. The carbon tax will be levied against the top ‘500 polluters’ who will pass that cost onto the consumer in the form of extra production costs.

        In simple terms, an item that cost $100 to manufacture (pre carbon tax) + extra costs from carbon tax 1% (Government figures – not mine) = $101 + 10% GST = $111.10.

        The carbon dioxide tax is added to production costs, by the manufacturer, then add the GST on the total – effectively a tax on top of another tax.

        • Baldrick says:

          The Government will not reveal to the public just who are the ‘top 500 polluters’. They say commercial privacy laws prevents them … but this article gives you some idea. Woolworths, Coles, Aldi, energy suppliers, petrol manufacturers:

          So while petrol itself will be exempt from the carbon dioxide tax the manufacturers are not??

        • Hang on, I thought it was going to be levied on everyone, its just the “top 500” who aren’t going to be compensated. So, to use electricity prices as an example, eventually a carbon tax will be passed on to consumers per the kwh used and the comensurate calculation of emissions. (Its on our bills already, we just dont have the x $23 bit yet.) We are supposedly compensated via tax breaks and a fun cash hand out just prior to the tax coming in next year. We’re not exempted per se. Anyhoo, what I want to know is, do we pay GST on the x $23 bit?
          This, plus what Simon mentioned earlier of the knock on effects of an increase in manufacturing prices, means the government is in for a potential three-fer of tax reaping.

        • Baldrick says:

          In short, everyone will have to pay the carbon dioxide tax, but only indirectly, through added production costs on the final price. The ‘top 500 polluters’ will pay it directly to the government per tonne of carbon dioxide they produce.
          So whilst you will not pay GST directly ontop of the $23 bit – you will pay it indirectly to the manufacturer. Basically it’s a sneaky hidden tax designed to rip millions from producers and consumers.

  2. The Loaded Dog says:

    Yep, looks pretty realistic to me.

    About as realistic as Gillards tears…

  3. Can anyone help me with understanding the facts about Kyoto type agreements and carbon trading.
    It runs out next year and I have heard that it is too late to get another agreement done, so what will happen to trading schemes?
    Will there be enough trading done for it to be valid?
    If other countries pull out, what happends then?

    • Baldrick says:

      The Kyoto Protocol is an international agreement between countries, worldwide, to limit emissions of greenhouse gases. It requires 55 industrialised countries to reduce their greenhouse gas emissions to target levels 5.2% below that of 1990. If unable to, they must buy emission credits from countries that are under these levels.
      Further, it provides that developed countries pay for costs of developing countries. Developing countries have no requirements under the Protocol. They may sell emission credits and receive funds and technology from developed countries.
      Australia’s target of 5% reduction will be met mainly due to reduced land clearing, but in essence the whole thing is more about shuffling paper than any real achievements. We could have achieved our targets by simply cutting the size of our Labor Governments bureaucracy.
      Canada and Japan have recently pulled out of the agreement due to economic concerns. The highest emitting countries – USA, India, China gave the agreement the flick due to costs that would be incurred by them.
      Kevin O’Lemon left Australia with a legacy to help fund the UN’s climate change fund thanks to signing the agreement. We’re now committed to $600 million over 3 years.
      After Kyoto there is no other agreement in place as yet. Copenhagen failed as have many other attempts to instigate another Kyoto style agreement. Economic concerns, Global Financial Crisis help countries decide it was to expensive to participate.
      The whole thing is a sham anyway. It has more to do with wealth distribution along the lines of socialism than anything else. Developed countries give money to developing countries which ends up in the pockets of crooked politicians and scam green energy initiatives.

      • Thanks Baldrick. But I have to ask about the end of the current agreement, does that then end our comittment to the UN slush fund if the agreement is not renegotiated?

  4. Uhavitbad says:

    I watched Australia’s Top Model, and my favorite didn’t win.
    Neither will theirs.

  5. Hi Banana.
    Can anyone help me with understanding the facts about Kyoto type agreements and carbon trading.
    It runs out next year and I have heard that it is too late to get another agreement done, so what will happen to trading schemes?
    Will there be enough trading done for it to be valid?
    If other countries pull out, what happens then?

    Sorry to be so pessimistic.

    In the USA they have realized that kyoto is a dead duck, so at the next climate fiasco conference in Durban SA they are going to try and cobble a type of extension, a toothless touchy feely announcement to keep the dead duck on life support.
    This will be made to look good (dressing a corpse) but will be a complete failure, mainly due to the illuminant financial breakdown of the EU and USA economy’s (There simply isnt the money sloshing around that there use to be).

    Carbon trading is going the way of the dodo bird as one corruption after another is brought to light, the latest is by the German government that the Carbon tax money is going to finance Coal fired power stations- LOL = bloody hypocrites!!!

    Into the financial morass goes the EU followed by the late great USA and with a great deal of help from Juliar and the greens Australia is just about to step onto the same slippery slide,

    I think it will be shear luck if we don;t have a serious world wide rescission.

    In the US and California there are reports of ex-white middle class family’s with children are homeless and broke living under freeway underpasses, this happen last in the 1930s.

    Governments at every level don’t learn or get it till it’s always to late.

    We may all be the property of China sooner than later thanks to wanton stupidly by politicians and voters who believe them.

    • Just hope they don’t still have debtors prisons in China.

    • Thanks Dave,

    • Sean McHugh says:

      “Carbon trading is going the way of the dodo bird as one corruption after another is brought to light,”

      I expect carbon credits will get a boost in value when it is learned that Australia might be stupid enough to buy them.

  6. Obviously we, as members of the general public ASSUMED Julia meant one thing when quite obviously she meant something very different. By virtue of our assumption, Julia has made an Ass out of You and Me!

  7. David Davidovics says:

    Hang on, you’ve got this all wrong. The fact that the United states and China do not yet have an emission trading scheme or national carbon dioxide tax only means that Australia will be showing true leadership by being the first.

    I remember when Canada signed onto Kyoto. The then prime minister was already planning to retire and hand over power to the then finance minister (both were at each others throats for the longest time, not unlike brown and Blair up in the UK). The liberal party rammed it through parlaiment faster than approving a pay increase for MPs much to the rave cheers of the general public and media (I wasn’t too smart back then either).

    In the end, Chretien (outgoing PM) was able to walk away on a moral high horse while at the same time sticking it to Paul Martin since there was no possible way to actually meet those targets.

    When a conservative PM ended up booting Martin (Steve never really was much of a tree hugger), he looked at the only way to meet our “Kyoto commitments” and said Eff that! – We’re not sending our money to banana republics overseas just to say we did our part. I suspect he is very much a climate change septic, but for now our PM still can’t quite say that in public. Although with a majority in the upper and lower chambers on his side, the left leaning opposition can shriek all they want because thats all they have left.

  8. Dave D…..

    I could only pray we had a P.M. with backbone who would do this!

    the only way to meet our “Kyoto commitments” and said Eff that! – We’re not sending our money to banana republics overseas just to say we did our part.

    • David Davidovics says:

      He didn’t exactly say that word for word, but his actions spoke loud and clear and he did comment that it made no sense to throw money away overseas without any guarantee of accountability, when it could be invested domestically to directly benefit the people it came from. Many of the countries that would benefit the most have human rights issues and are not even close to being democratic in practise.

      Looking back, the smartest thing he did was to not directly campaign against climate action. Instead he campaigned on the economy and succeeded in reducing climate change to a quasi fringe issue. No doubt I wasn’t the only one that saw through his strategy and would like to believe I wasn’t the only one that wrote my MP to say I supported the sceptic view.

      It would have been refreshing of course if he made a public stand against AGW alarmism, but many Canadians are still very much the ignorant progressive type that would support anything that claims to make the world a better place. I guess we aren’t all ready to hear the truth just yet…..

      • still looking for a politician with a backbone…. its bothering me that the opposition in Australia has none!

        It seems whichever way you look in Australian Politics today there is consensus that we need to reduce Carbon Dioxide (which the government calls) Carbon Pollution.
        So Dear friends, should the thinkable occur and Julia Gillard be thrown down as Kevin Rudd was – and (whoopee) an election be called, who would you vote for?

  9. Hi david–your first nation committee reports, and victims of vancouver’s royal mounted police running child molesting rings for politicians–generally don’t receive much press either.-

    there is a cartel of canadian mining, who house gunships in their uganda exploration camps and then allow them to fly out with ‘rebel colors’–presumably so the media ‘can get it right’ is sited over your way

  10. Laurie Williams says:

    Climate and economic “models” are mostly crap.

    I prefer “fitness models” (do an image search on that), but not those with artificial distortion implanted into their figures to achieve preconceived outcomes.

  11. Laurie Williams says:

    Some wit just posted this on FB:

    “PLEASE put this as your status if you know someone (or are related to someone) who has been eaten by pandas. Pandas are nearly unstoppable, and when hungry, also breathe fire. 71% of people won’t copy this into their status because they have already been eaten by pandas, 28% are hiding in their showers with fire extinguishers awaiting the coming pandocalypse, and the remaining 1% are awesome and will re-post.”

    My comment:

    Julia, we need a panda tax.

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