Is an Emissions Trading Scheme a Better Option than the Carbon Tax?

When the carbon tax came into effect last year, it left a number of Australians and Australian businesses upset.

After all, the Labor Party had promised not to introduce one, then simply went ahead and did it anyway. And despite a few measures taken to try and ease certain industries into it, the carbon tax still had a notable impact on a number of businesses, particularly small businesses. Yes, it has led to a reduction in carbon emissions, which is great, but it’s also done it at the expense of people’s and businesses’ financial well being.

Now, with Kevin Rudd back in as prime minister, he has promised to change from the fixed price carbon tax scheme to a floating carbon tax with the introduction of an Emissions Trading Scheme next year. But is the ETS a better solution than the Carbon Tax?

The benefits of an ETS

For businesses, the introduction of an ETS offers some immediate benefits. First of all, instead of paying around 6.9 cents per litre of carbon, the floating tax of the ETS will see initial expenditures being reduced to around 1.6 cents per litre. 

Chairman of Australian Trucking Association, David Simon, had this to say in favour of the ETS to Logistics & Materials Handling Magazine:

“The Government’s original plan would have had a devastating effect on many trucking businesses. Its decision to move to a floating carbon price twelve months early would still see an increase in the fuel tax paid by trucking operators, but it would be much more bearable.”

In other words, while businesses will still be paying for their carbon output, the costs will at least be more affordable. This was the concern of the carbon tax. The cost per litre was simply too much to suddenly cope with, and businesses have suffered as a result. Not only that, but home owners have, as well. At least initially, the ETS will see costs reduce but still offer an incentive for businesses and individuals to be more vigilant with their carbon output.

The concerns of an ETS

While the initial costs will be lower, the problem that exists with the ETS is the floating carbon tax. In other words, the tax is variable. Whereas the carbon tax has one set cost, the ETS can increase or decrease without much notice. For the majority of businesses and individuals, it won’t be 100% clear as to what determines a fluctuation in carbon costs. So, yes, we may only pay 1.6 cents per litre to begin with, but over time the costs could increase and possibly even surpass the set carbon tax currently in effect.

Still, the ETS is currently a more appealing option in terms of easing cost of living pressures, but there’s also a fundamental question that isn’t being answered…

What about renewable energy?

One of the biggest problems we have with the carbon tax and the ETS is that neither present any real solutions on how we can move from the use of damaging energy sources to more environmentally friendly, renewable energy sources.

Given that the Australian Energy Market Operator recently released a report that stated Australia could move to a 100% renewable electricity solution if it wanted to, why is nothing being done to embrace such a change? Yes, it would lead to higher electricity bills, but it’s the type of prices we’d be facing under current electricity options within the next decade. Plus, this isn’t a case of being charged an unfair amount of money for some minor drops in carbon emissions. This is facing additional costs to truly turn around our carbon impact in a big way.

As for the trucking industry, if the government took steps to enable the industry to use higher productivity vehicles such as B-triples and super B-doubles, David Simon said this would both reduce fuel consumption and cut greenhouse gas emissions within the industry by 31%. That’s a huge drop in just one industry’s carbon emissions. It’s not about taxing businesses, but investing in more environmentally friendly solutions.

Unfortunately, it seems as though the focus of the government is more about reducing carbon output through taxing companies and individuals. Real solutions such as renewable energy and more environmentally friendly technologies aren’t receiving the amount of investment and consideration that they deserve.