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