Carbon tax is now a reality

WILL the sky fall, the economy founder and working families be thrown out of employment?

Or will life continue as before?

After this weekend Australians will start living with the reality of a carbon tax, and it shouldn’t take too many months to determine whether the doom-laden predictions of Tony Abbott and the Coalition, or the Gillard government’s soothing reassurances, offer the more accurate picture.

It is clear that prices of many goods and services will rise. Indeed, the government has never denied this. That’s why it has announced a compensation package for those households least able to afford the rise in costs.

What is less clear is whether the new tax will have a decisively negative impact on employment – as some critics warn.

Nor is it clear, on the other hand, whether the tax will have the desired effect of suppressing emissions of the greenhouse gases blamed for global warming and climate change.

The entire purpose of the measure is to use the marketplace mechanism of price to drive investment in less carbon-intensive activities. Put simply, if emitting carbon is costly for businesses, they will change their practices – if they can – to avoid that cost.

Critics of the tax argue, however, that its impact can only be negligible in a global sense, since Australia only produces about one per cent of the world’s manmade carbon emissions.

The same critics also say the tax will be counter-productive, since it will impose new costs on Australian businesses only, putting them at a disadvantage relative to overseas competitors.

Propaganda war

The Coalition, having made the carbon tax a central part of its attack strategy against the government, has promised to repeal it.

It has proposed, instead, to combat greenhouse gas emissions by imposing financial penalties on major carbon producers under a ‘‘direct action’’ scheme.

That could be problematic, however. Scores of state-based schemes aimed at cutting carbon emissions and supporting renewable energy are being scaled back or cancelled to accommodate the new tax and there are fears the Coalition’s threat, if carried out, would leave a policy vacuum in an area of high public interest.

In the meantime, while Labor remains in power, voters will have the opportunity to continuously monitor the real-world operation of the carbon tax.

Argument is already raging over the impact of the tax on everything from power bills to council rates. The mining industry has been fuming over potential effects on the profitability of ‘‘gassy’’ coalmines. Conflicting claims have been made about the role the tax might have played in job cuts in the aluminium industry.

The propaganda war can be expected to escalate, with every price rise for every product and every job loss announcement set to be examined for evidence of any connection to the new tax.

Both major political parties have made their predictions. Both have some credibility at stake on the real outcome.

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