A climate disaster levy could provide the best mechanism to address significant environmental costs, writes Edward Treloar.
THE AUSTRALIA INSTITUTE recently launched a full-page advertisement in the Sydney Morning Herald, again calling for a climate disaster levy. The levy could charge $1 per tonne of embodied carbon dioxide emissions (CO2) from coal, oil and gas mined in Australia or other heavy polluters.
Similar to a carbon tax, this levy would aim to tax those who benefit off the emissions that fuel climate change and amplify natural disasters. In contrast to the Medicare levy, which taxes 2 per cent of our taxable income, this levy would be directed at emitters and not taxpayers. It will be challenging to pass this levy onto Australian consumers as the main emitters export their resources overseas. This conflicts with the belief that all emissions come from the domestic energy market.
Even if it is passed on to the end consumer, is that any different from taking the levy from taxpayer dollars or worse, continuing to rely on generous donations? I would feel safer with a structural change that ensured funding year in year out. We need to value our land and our future.
A $1 per tonne CO2 levy is substantially smaller than the $23-24.15 per tonne carbon tax that we saw in Australia between 2012-2014 but still could generate approximately $1.5 billion per year. The Prime Minister just announced that $2 billion is to be set aside for a national bushfire recovery.
Alongside this, bushfire fundraisers are approaching $50 million, and the Government has already spent a similar amount on dealing with the fires. These funds only scrape the surface of the total damages. The annual economic cost of natural disasters is at least $18 billion according to Deloitte Access Economics, which could move towards $39 billion in 2050. Insurance covers a small part of the total costs, leaving the rest to be paid by the directly impacted. Australians are incredibly generous, but they should not be made responsible for all of these damages.
Linking carbon dioxide to social and environmental costs is not a new phenomenon. The U.S. Environmental Protection Agency (EPA) calculated the average social cost of carbon to be $61 per tonne of CO2 currently. Less conservative estimates have found the median cost to be U.S.$417.
Regardless, a $1 per tonne levy is a bargain for the emitters that are currently polluting our atmosphere free of charge. Any time the cost of carbon is lower than its social cost is a time where our environment and regular Australians are getting a bad deal. Just because it is a clear gas and its impacts are not immediate, it does not mean that its damages are not severe and measurable.
Treasurer Josh Frydenberg has dismissed a disaster levy. It could still be a small move they could make, without being as aggressive as a full carbon tax. Over the last two years particularly, climate change has been widely recognised by Australians. In time, we may shift our focus to the next strawberry needle scandal or cathedral fire. News changes so quickly that we can mistakenly forget how damaging climate change can be.
Our previous carbon tax was met with much backlash because we did not collectively see its value; we only saw its cost. Should we be expected to cancel our fireworks or make significant personal donations to fund disaster support, or should it just be a part of how we operate? How long will our empathy last when this becomes our new norm?
Edward Treloar is an engineering student at Australian National University, majoring in renewable energy systems.
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