Voters strain at paying for even small carbon cuts

Bookmark and Share Economics & Deregulation, Deregulation Unit, Energy and Climate Change | Alan Moran
The Australian 24th May, 2012

The carbon tax and similar measures involve us making sacrifices to forestall what the government says will be catastrophic human-induced climate change. So how much do people consider they should pay to avoid these costs?

According to a Galaxy survey conducted last week for the Institute of Public Affairs, only 5 per cent of people said they would be prepared to pay more than $1000 a year and 37 per cent said they weren't prepared to pay anything. Thirty per cent said they were prepared to pay more than $500 a year. Reluctance to pay was highest in Queensland, Western Australia and South Australia.

In a survey such as this many respondents overstate their willingness to pay. Some people's responses may also have been conditioned by government misinformation that implies only the "big polluters" will pay. In fact, firms have to pass on the costs to the consumer - all of us - as the government acknowledges.

Willingness to pay to combat global warming can be compared with what people are paying now and what they will pay in future.

Renewable energy requirements cost $2 billion a year, rising to $4bn by 2020. We have $2.7bn a year in government subsidies paid to dozens of programs.

These include carbon capture and storage, the Australian Solar Institute, "clean technologies", Sustainable Cities and $988 million for the Department of Climate Change.

The average Australian adult now pays $100 a year for renewable energy and $135 a year on various carbon reduction schemes. As of July, the carbon tax will be raising $8.6bn in 2012-13 or $430 a head.

This brings total payments per adult to $665 a year. In addition the $20bn "Clean Energy Fund", will cost Australians $1000 a head to support proposals that cannot obtain commercial funding and are, almost by definition, losers.

But this is just the beginning, designed to bring a 5 per cent reduction in emissions by 2020. The government's target is to cut carbon emissions by 90 per cent by 2050 to reduce Australia's emissions to the world average.

To meet this at the lowest cost, according to Treasury, would involve at a minimum a $150- a-tonne carbon tax equal to annual payments of at least $3000 a head. Any tax rate less than this and we won't meet the target and the radical economic restructuring - the closure of the Kurri Kurri smelter is a foretaste - will have been for nothing.

With the carbon tax, the renewable energy requirements and other measures, Julia Gillard has moved us forward on what former prime minister Kevin Rudd called the "greatest moral issue of our time". But the grand objective of taking measures to save the world from some supposedly disastrous future has all but disappeared from government policy statements. It has been subsumed into measures that involve bribes to voters and green industry lobbyists together with funding and regulatory instruments to restructure the economy in directions favoured by the intelligentsia.

Regrettably, replacing low-cost mining and energy industries that make use of our comparative advantage with alternative activities would dramatically reduce our overall income levels.

Early evidence of this is provided by a recent Productivity Commission report, which demonstrates how forcing electricity supply away from coal has contributed to a marked downturn in energy sector productivity.

Last week's Galaxy survey followed one two years ago. The recent survey shows, if anything, a greater reluctance on the part of consumers to pay the costs involved. And the commitment of Coalition state governments to require the costs of some of the carbon taxation measures be printed on energy bills will increase awareness of costs. Fortunately, as evidenced by the IPA survey, public opinion is decisively against carbon tax impositions.

Notwithstanding the vast taxpayer sums spent on pushing the global warming scare, and promoting government handouts, people are unwilling to pay even the initial low tax instalment that the government says is necessary. And opinion polls demonstrate that carbon taxes are crucial to voters' ballot box intentions.