Has the flood levy damaged the carbon price?

The unknown extent of altruism in the hearts and pockets of Australian voters must be playing heavily on the minds of major political players right now.

They will carefully be examining taxpayers’ response to the flood levy to assess whether individuals truly are willing to pay more for the collective good.

This willingness has implications much broader than flood reconstruction – it goes directly to public acceptance of the carbon price that is now at the heart of the government’s climate change response.

Australian governments have been watching taxpayers for quite some time to gauge their willingness to take a little monetary pain for a broader public gain.

Evidence so far suggests that Australians are generally prepared to be altruistic when they can see tangible benefits delivered within a relatively short space of time.

Australians were happy enough to pay a levy to buy back guns or assist East Timor* because the “results” were depicted often and compellingly on our television screens. The twinge in our hip pocket nerve was ameliorated by the images of guns being turned into scrap and Diggers playing footy with smiling East Timorese children. In fact, we took pleasure from bearing a small cost which contributed to the mitigation of a much bigger problem.

The challenge facing Julia Gillard is that there is no similar way to depict how climate action costs which affect individuals will deliver community benefits. There is no tangible way to show how paying more for carbon-based goods and services today will reduce the effects of climate change in the future.

The Prime Minister needs to find a compelling analogue to help Australians feel directly connected with climate change solutions in order to be prepared to pay for them.

State governments have over the past decade been exploring this concept with their water restriction regimes.

Despite households consuming only one sixth (11%) of the water used by agriculture, the introduction of domestic water restrictions created the impression that individual members of the public were directly responsible for the success of their state’s response to the nation’s seven-year drought.

By drawing a link between climate change, the drought and dwindling water resources, state governments gave their constituents a way to see the tangible benefits of their water parsimony; whether they changed their water consumption behaviour, paid to install water tanks, or let their turf die.

The altruistic “payback” for these actions was the daily progress reports on roadside electronic billboards showing the results of the previous day’s efforts in terms of water used, targets reached and dam levels achieved.

Australians were happy enough to comply with water restrictions because they felt they were doing their bit for the collective good, and in reality the required change in behavior was not overly costly or inconvenient.

Compare the relatively benign stance on sharing this burden with that taken by the very same Australians on the flood levy. The levy is much less of an impost than water restrictions, the community benefit that it will deliver is undoubtedly tangible and compelling, but still barely half the Australian community supports it.

How can this be? Is it because we resent being forced to pay more when so much has already been given voluntarily? Or is it because the levy is seen as another tax grab that will be subsumed into consolidated revenue and never seen again? A poll taken by The Drum suggests it is a combination of these two complaints.

Let’s shift focus then to the carbon price. Australia’s economy is built upon an electricity supply system that is around 80% coal-fuelled. As a consequence, households and businesses currently enjoy some of the cheapest electricity prices in the world. A carbon price will increase the price of electricity as well as those goods and services that require electricity to be produced.

Will Australians resent being forced to pay more when they have already invested time and money in taking voluntary greenhouse actions? Or will they see the carbon price as another tax grab that will be subsumed into consolidated revenue and never seen again? Perhaps, yet again, it will be a combination of the two.

This is the conundrum facing the Prime Minister and her government right now.

If they don’t get the sales pitch right for the carbon price, if they don’t counteract the “I’ve already given at the office” mentality and dispel concerns about fiscal prudence, then the carbon price will sound the death knell for Gillard just as the scrapping of the carbon tax did for her predecessor.

*The East Timor levy was never actually imposed, being scrapped just before it came into effect.

An updated version of this post was written for Crikey.com

Author: Drag0nista

Political columnist at The New Daily | Editor of Despatches & AusVotes 2019 | Author of On Merit, a book on the Liberals' *women problem*. Former Liberal staffer and industry lobbyist. Studying the entrails of federal politics since 1989.

6 thoughts on “Has the flood levy damaged the carbon price?”

  1. There’s also the fact that the Prime Minister said before the election ‘There will be no carbon tax under a government I lead’
    and then you’ve got people who don’t believe a carbon tax will do anything to curb emissions. The only way a carbon tax would work is if it increases non-green energy by 30% and then you would need to give huge subsidies to genuinely green, efficient power generators but try getting the population to agree to that.

    All it will do is make lower income earners poorer than they are. The pensioners across the road from me can’t afford to have their air conditioner on because of the price rises we’ve already seen, thanks to privatisation. What are they going to do if prices go up more.

    Middle/high income earners will still use as much electricity but have less money to spend on other items. Electricity is essential in our modern lifestyles. So after you pay your income tax, you pay your ever increasing electricity, water, rates bills then you buy your groceries and put petrol in your car, pay your rent or mortgage, pay your insurances, all of which have GST and then IF you have any money left you get to enjoy your life.

    Is it any wonder that some people are worried about another tax.

    And then you have an ever increasing part of the population who think that man made climate change is BS. You don’t get to hear from them much because the minute someone questions the science they get blasted as a denier! That’s a great way to convince someone that just had a question.

    I have to admit, I don’t totally buy it either but I’m willing to make changes if I think they will actually make a difference.

    1. “And then you have an ever increasing part of the population who think that man made climate change is BS”

      Or those of us who do think that human-influenced climate change exists, but that it’s also a natural process that is irreversible and our time and money would be better served by devoting resources to ensuring that WHEN sea levels rise, we can still enjoy a fairly decent quality of life.

      RE: the East Timor levy. Wasn’t that scrapped before it came into effect? Admittedly, it doesn’t disprove your point (Australians, as I remember, were pretty happy about our efforts in East Timor), it’s probably just best not to use it as an example without the caveat.

      I’m inclined to agree with the gist of the post. People aren’t going to like a carbon price (unless we go with a market based system, in which case, hedge fund managers will love it – whilst they line their pockets) which has been foisted on them by a government. But, despite Tony Abbott’s rhetoric, IF the Gillard Gov’t introduce one, and subsequently get rolled in an election, no gov’t is really going to turn down a nice little revenue stream like a tax on everything (again).

      1. ‘Or those of us who do think that human-influenced climate change exists, but that it’s also a natural process that is irreversible and our time and money would be better served by devoting resources to ensuring that WHEN sea levels rise, we can still enjoy a fairly decent quality of life.’

        That’s pretty much where I stand. Obviously humans have an influence on our environment and climate but by how much? Like you, I think we are better off doing things that WILL make a difference like stopping deforestation or building dams where it makes sense, rather than taxing people because it MIGHT make a difference.

        I think it is naive to think that we can have any significant positive affect on our Climate without going back to living like we did before the industrial revolution and that just isn’t going to happen.

        My other issue with the Carbon Tax or ETS schemes is that they plan to give money to poorer countries to help them but most of the time these countries are poorer because their governments are corrupt, so what good is giving their government money.

        It’s all well and good for people to say we should share our wealth but not if it’s going to go in to the pockets of corupt politicians or business people.

        The other issue that I meant to mention in my first post is that IF we end up at a point where the majority of our power comes from sustainable/green/low emission technology, you would then have to scrap any subsides those companies get and then watch our power bills skyrocket.

        I believe we can generate cleaner energy given enough time but aside from nuclear(which the greens are against), what is suitable for base load power generation. Solar and wind power are good for suplementing our power needs but both are dependant on the weather and cost a fortune to implement.

        On the levy, I’m not a fan of any levies including the ones the Howard government lumped on us. Levies are an excuse for poor fiscal management. If you can’t manage a $350 billion dollar economy and have some money left for emergencies then you’re doing it wrong. At the same time, I’m not going to cry foul over paying about $5 a week for a year.

  2. Firstly, as usual, great post, D. I have a couple of points of contention, but I’ll return to them in a moment.

    Martin – I understand and to a degree share your concerns. Where you lose me is at: “And then you have an ever increasing part of the population who think that man made climate change is BS. You don’t get to hear from them much because the minute someone questions the science they get blasted as a denier! That’s a great way to convince someone that just had a question.”

    More and more people are questioning climate change because the Herculean polluters are gaining traction in their concerted campaign of disinformation and obfuscation of simple fact. All of the questions you may have, have already been answered comprehensively. The problem lies with the most base elements of the media who are willing to regurgitate tired but tested Gish gallops for subtle and untaxable financial gain. In short, to a man they are paid to lie to you and make you doubt science.

    I digress. Dragonista – it may or may not surprise you that I think the levy is an idiot idea. It’s not that I’m loathe to stick my hand in my pocket for the sake of others, it’s that I view this as a stupid ‘return to surplus’ tax. We can afford to rebuild – and rebuild better by simply extending our exceptionally modest international debt. The government has bought the opposition spin that Australia needs to be in surplus. I’m pretty stupid, but I don’t understand why a country with one of the top credit ratings in the world should impose any austerity measures whatsoever on the populace when our GDP continues to come well within cooee of our entire national debt. The country is fkn rich, yet we’re asking middle income earners to dig into their pockets to pay the equivalent of late video fees, and playing on our heartstrings in the hope of making a tune. If anything, a sensible government would be making concessions – not only to direct victims, but carrots to promote tourism back to the areas attempting to rebuild.

    Last point, and then I’ll shut up. Rudd wasn’t the star of the Australian night of the long knives because of the carbon tax. He’d already changed tack when he realised there was no workable international framework for such a creature. Is it right? Probably. But it was fucked up in the implementation, and the companies we needed on side lost money on it. So instead he went for the RSPT – which was SUPER PROFITS, and could have easily been regulated. The polluters hated that more than a carbon tax, because it was harder to pass on to consumers. The failure of Rudd to sell what was essentially a fkn good idea is something that will remain one of the great mysteries of the modern age.

    Julia now wants us to make up the non-existent shortfall by sparing overseas owned mineral giants by taxing the middle class. That’s fucking weak.

  3. A good post. There is no doubt that curbing pollution will require lower energy consumption. However you can also see why some progressive commentators are highly critical of the Carbon Tax and Tax Levy. For reasons by the way opposed to those of the Liberal Party.

    The trouble with both the Carbon Tax and the Levy is that they are defined in economist rationalist terms, which makes them inherently unable to deliver the systemic changes they seek to address.

    By putting tax levers on the “consumption” of the population the government positions this consumption at the core of its policies and intended reforms. Another avenue would be to mandate serious changes at the “production” level and to invest in reforming the polluting industrial infrastructure.

    The Flood Levy looks like a very good altruistic concept to ask people to participate and redistribute some wealth to the victims of a natural disaster. However whilst the idea of sharing the reconstruction burden is commendable, this tax actually tells a lot about the way we view our public finances: the neo-liberal way.

    Such critique of the Levy might seem counter intuitive given that it is positioned as a tax raised by the Commonwealth for the collective good. However it could be argued that those measures are neo-liberal policies in disguise, which keep pushing the same envelop: priority is given to keeping a lean state, tapping in the existing wealth generated by profitable industries is off limit, and any extra effort to finance the country is eventually pushed back to the mainstream population. (Gibbot’s point too)

    In other words it could be argued that the Levy is driven by the imperative to preserve the government budget and is actually a way for the State to outsource its duties back to the population. By putting this Levy in place the government is in effect saying that such a natural disaster is so exceptional that fixing it does not fall under its ‘regular’ remit. Can you imagine a scenario in continental Europe where a Flu pandemic would strike and the government would turn to its people and declare that in order to preserve its fiscal and budgetary orthodoxies it will launch a Flu Levy to pay for the vaccine? A complete negation of the concept of social security and the progress made in the last 100 years.

    In conclusion, both measures make me think of what happened in the Finance industry after the GFC. Lots of ‘smart’ technical tactical solutions: self regulation, banning short selling, more disclosure, fine tune interest rates, etc, etc “creating the impression” (your words) of change. However the necessary serious investments to reform the entire structure of the industry were not on the agenda. As a result, 3 years later Banks operate exactly the same as before the crisis.

    I fear the Levy and Carbon Tax will do the same: “create the impression” of change without even scratching the surface. To paraphrase Gibbot “asking middle income earners to dig into their pockets to pay the equivalent of late video fees” is a clear admission of the lack of ambition to seriously change anything.

  4. I’m happy to pay my share. No one needs to sell it to me. Just waiting for everyone to make up their mind. So many interest groups with agenders. No real leadership. So, ready when you are. If not. If its all goung to end, make sure you’ve got your best clothes on.

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