I wrote this document because I needed to understand what the Carbon Tax is and how it will affect my business and how I should respond to it. Writing is to me, a good way to clarify my thinking.
Australia is going to be the world leader in imposing a financial burden on itself, over carbon emmisions, courtesy of the proposed carbon tax. Our tax in one year will be many times what the European Union raised in several years, and without there being any significant reduction in carbon emissions in Europe.
The Carbon tax is based on the idea that a tax will force the carbon producers to put their prices up. This is supposed to make the consumers of product made from carbon emmisions seek cheaper alternatives. Plus, the producers will look for alternate ways to provide what they provide or businesses will emerge that provide the alternative. This will result in there being less carbon being emitted into our planets atmosphere. This is the theory.
So what produces carbon emissions? … products made of carbon based items that when consumed released carbon emissions into the atmosphere … ie oil, plastics, wood, coal. Where are these products used? … Power/energy manufacturers, metal manufacturers, plastic manufacturers, oil manufacturers. These manufacturers should be hit with the carbon tax. (I say should be because the government is not telling us who the “secret 500” businesses to be taxed are in Australia)
Will the businesses who use the product produced by the 500 be compensated? No. Will the 500 be compensated? Yes, and then fazed out. Will the people be compensated? Yes, those who earn the least more than those who earn more.
I do not see the common sense in taxing the polluters, then give some of it back to them but then faze that out, (95% to the steel industry?), give some more to low income earners, make money available to the “secret 500”’s competitors or to the “secret 500” to develop alternatives and employ another tier of public servants to shuffle the money. A system where most voters and the carbon producers are going to get a % back of the extra costs and most businesses will get an increased cost of doing business.
What I think the carbon tax is doing is making it difficult for the polluters to find alternatives by increasing their costs of doing business and reducing their profit. R&D comes out of profit. The government is making it difficult for all business, so how will that make it more easy for business to develop alternatives to carbon production?
The government plans to give some of the money to those businesses who want to develop alternatives. In simple terms, they may take $1 off a carbon emitter and give them back 50c to develop an alternative. How is this sound logic? If I was an ordinary business owner, not being taxed directly, but indirectly, because I buy carbon produced product ie power, it might cost me 10c extra to run my business and they may give me 50c to find an alternative.
If you were a carbon producer, would take the compensation money temporarily given over 3 years and use the time to move your business and/or source product overseas? (That is if you could) If you were the producers of power or oil, would you take the money and pocket it until someone else came up with an alternative that forced me to do something? The government giving R&D tax money to the “secret 500” would be like giving money to the home insulation installers in Australia. Taxing Power and Fuel is like taxing oxygen, without it we die, so we are going to have to buy it. What are the alternatives? Currently there are no viable solutions in Australia. But the government says there will be because the alternatives will become more competitive. When and by how much? The Government is unable to answer that one truthfully.
Giving subsidies to business, subsidies that are to be fazed out, is the same as giving low interest loans, that escalate to market rates, to home buyers in the USA. This practise was a trigger to the 2008 GFC – it was the WIIFMSU paradigm. Irresponsible borrowers borrowed off irresponsible lenders loans they would not be able to afford. It is what Greece, Ireland and Portugal did in the EU – cheap money available to the EU members because the responsible governments, ie Germany, France needed money to stimulate their economies also meant the irresponsible ones borrowed more than they could afford. It is the same as the Australian Government giving unregulated money to home insulation installers who rorted the system, resulting in outright fraud, improper installations, homes burning down and people dieing. This was the WIIFMSU paradigm is action.
WIIFMSU stands for “What’s in it for me, screw you”. I argue that WIIFMSU is a fundamental paradigm that drives much of humanity.. This paradigm I suggest needs to be considered in understanding the impact of a carbon tax in Australia.
The carbon tax will make it easier for foreigners.
Most of the developed world is treating this issue as a minor issue, the USA talk it up but do nothing, China is China (once they understand it will hurt them they will do something about it. and are, but are not really caring of what others think, but even they are having issues, eg massive wind farms being built by Government money and then not being used… something akin to the Pink Batts stuff up here.), except for the Scandinavian countries, the Europeans indulge in a talk fest but on close inspection, have achieved little net gain; South America IMHO, is focused on South America and “having a good time” is a primary consideration in the peoples mind, and generally have done nothing and Asia is run by Cantonese Chinese businessmen, who are the role models for WIIFMSU, or corrupt politicians/military; the Arabs by dictators and the rest of the world is struggling to feed itself or run by corrupt dictators or military who operate on WIIFMSU.
Our carbon tax will hurt us more than any country in the world when it is implemented. We have the biggest carbon footprint in the developed world, per head of capita, it is said. Is this because we dig/suck so much carbon out of the ground and send it overseas, I do not know, but I suspect it is. If so, then we are hurting ourselves more so than everyone else. Is the logic of the government to indirectly get the Chinese and Japanese and Koreans to pay for the bulk of the tax, because the tax will result in coal and Iron Ore cost increases? Perhaps. But it also means we are going to cop it too.
No-one truly knows by how much, anyone who waits to find out would be a fool. The PM is touting a Treasury model which says we will incur a net cost increase to our economy of ½ %. No-one has mentioned or knows what the increased costs will be to those who are to develop the alternatives. They are the business owners who will have the courage to “boldly go where no-one has gone before”. The manufacturers of Australia. There is no modeling or information available for these people to determine what will be the cost to them. The government hasn’t provided it because it is reported as being too complex to determine or perhaps they have & are afraid to release it.
So what will this mean for me, I am a wholesaler of industrial packaging – a supplier to manufacturing in Australia?
There are no cheaper Carbon alternatives for me to choose from in Australia. I will be getting no subsidies.
I will not be taxed but the product I buy and the utilities I buy will be. I will not be getting any compensation… I could put my prices up.. but my customers are not the people getting the taxation concessions and nor will my Australian manufacturing suppliers. But will my competitors put theirs up? And if so, by how much?
For example, it is my conclusion that one of my biggest customers will shut down their Australian manufacturing operation and import from their China branch if the Carbon Tax increases their costs of doing business by too great an amount, and open up a large warehouse and distribute locally. I say this because this business is already suffering from increased pricing pressure from overseas imports .. they will not get any concessions and will be hit with increased costs of doing business, in a market where there is only a couple of manufacturers left in Australia and most product is imported. Unless I find a replacement, I would have to consider reducing my staff numbers. The issue here is no-one knows what will be the impact of the Tax on the operating costs of manufacturers in Australia, and those who supply them. In todays business environment I am finding I am under threat from bigger suppliers who enjoy lower prices from a wider range of imported product and from manufacturers who are attacking my customer base because their business is slow.
This is a key point. The cheapest alternatives for me will come from beyond our shores.
I will be hopping on a foreign owned airline, who is not putting their prices up because of a carbon tax, and doing more Australians out of a job. There are alternatives for me to choose from overseas. I will have to source more of my components and product from overseas. Thankfully, because of who we are and what we have I should be able to do this for my working lifetime.
Most businesses I believe do not make exorbitant profits. I do not. Competition does not let us. We would find it difficult to assimilate any cost imposition.
Oligopolies do – Woolworths, Coles, Coal mines, Iron Ore, Gas… etc.. some Corrugated carton manufacturers. Monopolies more so.. big business.
The Labor party and the Liberal party went to the last election on a no carbon tax agenda. The Greens did with a 23% carbon tax. We are getting a 23% carbon tax. So I am assuming that WIIFMSU was the paradigm the government took and went back on their word, because the Greens wanted it and made it conditional for the minority Labor government to stay in power. I do not see that the PM is doing this because it is “the right thing to do”, her record does not demonstrate this.
What are the alternatives?
- Abatement Purchasing.. currently used by the Federal Government to buy back water rights in the Murray Darling… which seems to suffer from WIIFMSU too.. championed by the Liberals. The government buys back low cost polluters from the polluters.
- Emissions Trading, which is reported to be working in NZ but is suffering from WIIFMSU in Europe.. ie rorting the system and talk fest.
- The PM said on national TV, “you can do your washing in cold water”… the ladies in my office said, “we already do wash in cold water”. A valid point.
I am not saying the Carbon Tax is a bad thing. I do not know if the alternatives are better. We currently have no alternatives to choose from in Australia to accelerate a conversion to non carbon fuel sources. A gas supplier has built a large number of wind powered generators near our nations capital, which is a good thing. We could implement some alternatives but some are not acceptable to The Greens, such as nuclear power.
The carbon tax idea has been used in the Scandinavian countries of Europe, since the early 1990’s. They are mature, sound and developed economies. Mostly this has worked in those countries, but the models used are vastly different from country to country around the world. There are others schemes which are not very effective – such as the EU’s.
We have to do something to save the Planet. Australia is, most others aren’t, and this will hurt me if I do not do business with those that aren’t. This is because of the WIIFMSU paradigm.
I could do the right thing and take the moral high ground and buy only local… (that is if I could because much of what I provide to Australian manufacturing is no longer made in Australia)… That product that is made locally will now be even less competitive. Will my customers care that I buy only local, or will they be looking for a lower cost product because their cost of doing business has gone up too?
Fat chance of the former occurring, a rock solid guarantee of the latter..