How a carbon tax needn’t break household banks

There’ll be, no doubt, lots of wailing and gnashing of teeth about how the awesome, large and novel carbon tax will send Aussie battlers broke. But it needn’t be that way. Let’s assume that the government will provide tax relief to low-middle income households (because that’s what they reckon they’ll do). Here are two scenarios to help make my point.

Both of the following households earn median income ($66,820 according to the ABS, 2007-08). Today, they spend money on goods and services in the same way as most Australians. Hypothetically, their carbon-intensity spending breakdown might look like:

  • 15% household income ($10,023) on high carbon-intensity items (eg. coal-fired electricity, petroleum, etc.)
  • 85% household income ($56,797) on medium-low-no carbon-intensity items (eg. food, clothes, mortgage, water, council rates, trips to the movies, bags of potting mix, whatever you like).

Let’s imagine that high carbon-intensity items increase in price by 10%, and that medium-low carbon-intensity itemsĀ  increase in price by 1% (on average – some would increase by more, many wouldn’t increase at all). If this family’s spending mix remained the same, then they’d be spending $1002 more on high-intensity products and $567 more on medium-low intensity products.

Let’s also imagine that the government provides tax breaks to average families to the value of $1,350. This might be because the government has made the reasonable assumption that the average Australian’s spending on high-intensity items would decrease somewhat due to the price signal.

Household A are average consumers. They don’t think too hard about where they spend their money. Some products on their supermarket shelf become more expensive and they consequently buy them less frequently. Petrol increases in price a bit, so the family make a little bit more of an effort to catch public transport or walk. All up, they change their spending mix to be 12.5% on high carbon-intensity items and 87.5% on med-low-no carbon-intensity items. They’ve expended minimal effort on this, and are around $50 worse off per year.

Household B are savvy, informed consumers. They seek out discounts, they aggressively change their spending behaviour to get the most bang for their buck. They also care a bit about the climate, providing more of an incentive to buy low intensity stuff. When high intensity items become more expensive, these guys avoid them like the plague. They get rid of one of their two cars, using carshare, public transport, bikes and legs as a substitute. They put in solar hot water to cut their electricity bill. They manage to cut their spend on high intensity items from 15% to 5% of their income. That represents a change from $10,020 to $3,341 and they consequently spend $63,476 on med-low-no intensity products. In total, they are spending $969 more per year due to the tax, but the $1,350 rebate leaves them around $380 a year *better off*.

The numbers are made up, but the principle is about right. The message is – if there’s a carbon tax and households are compensated, by aggressively curbing spend on high intensity products, some households will actually manage to come out in front.

(Image from http://www.mikejs.com/)

Oh dear, another climate change post

I had a bit of a vehement chat with a few people at work yesterday about climate change. You see, a colleague of mine was saying that “of course the climate is changing, it changes all the time! We only just had the little ice age. The change has certainly got nothing to do with us though, and what a great big waste of money all this business is. “

Another added: “besides, it’s all based on dubious modelling anyway, there’s no actual evidence that any of this is happening. We don’t have reliable temperature records and the satellites have only been up for the last 30 years or so. What about all that time before modern temperature recording?

Al Gore got it all wrong, and there’s been a cooling trend for the past 20 years. Europe and the US have just had some of the coldest winters on record!”

Meanwhile as you can see above, Arctic sea ice is at record lows this year. 2010 looks set to be one of the hottest years on record. As of the end of May, the previous 12 months to May 2009 are the hottest globally in the past 130 years. 2009 ends Australia’s hottest decade on record. Very few scientists with credentials still disagree with the notion of anthropogenic climate change. At least one of those remaining appears to have been caught cooking the books.

It’s time to ignore the popular debate, it’s chock full of misinformation. Look at the fundamentals. Go back to the basics, and read about climate. I’m so sick of strong opinions backed by nothing but talking points!

The Hunter Valley isn’t deep enough

Let’s dig until it’s deeper! I saw a documentary on the ABC a few weeks ago about how residents of the Hunter Valley were concerned about how dust from nearby coal mines might be affecting their health. There were a few aerial shots which showed just how much of the Hunter Valley is currently being dug up. Here, I took some screenshots from Google Maps to illustrate the same thing:

This shot shows all the mines in the Hunter

It’s a bit hard to get a sense of scale from this shot though; those mines are really, really freaking huge. See that medium-sized one on the upper left? Here’s a zoomed in shot which gives you a sense of scale. Look at the size of the buildings, or the trees compared to this upper section of the mine. Click the image for full-size.

The upper third of that mine. Click to enlarge.

The majority of Australia’s coal is found in NSW. The Australian Coal Industry estimates that Australia has another 180 years worth of identified reserves at today’s rate of consumption. Quite apart from what will be done with all the carbon dioxide produced by burning that coal, what’s our landscape going to look like in another 100 years?

Bloody hell. And some 85% of our power is produced by burning this stuff. I’ve gotta say, electricity windfarms are pretty ugly but … so are massive open cut coal mines.

Okay, I’ll take my hippie hat off now.