The effect of carbon tax on the economy of Australia.

• Author: Wong, Shirley

1. INTRODUCTION

   In the past hundred years, the emission of greenhouse gases has been increasing causing significant damage to the environment. The Australian government has announced the plan to implement the fixed carbon pricing scheme to meet the emission targets of the Kyoto Protocol. The scheme will require the largest carbon dioxide producers to pay $23 for each ton of carbon produced from July 2012.

   Countries like India, Ireland, Costa Rica and cities like Quebec, Boulder have introduced carbon tax. The European Union has the emission trading scheme in place. China plans to carry out the emission trading scheme in 2015. Japan also pledges to reduce the emission by 25 per cent below the level of 1990. US has a similar claim that they will reduce the emission by 17 percent by 2020

2. LITERATURE REVIEW

   There is concern about the effect of global warming on the environment. An opinion poll in U.K. investigated into such concern and came to the conclusion that the issue of ozone layer topped above other issues such as poverty, nuclear war.

   In U.S. the Clean Air Act is implemented to reduce greenhouse gas. Ongoing discussions are in place to establish either a cap-and-trade program or the carbon tax.

   Canada will focus on setting regulations and investing in research and development to reduce carbon emission.

   China has adopted policies to reduce carbon emission including cutting subsidies on fuel that pollutes the environment, closing small power plants and encouraging the use of desulfurization equipment in manufacturing.

   India takes a sustainable approach towards protecting the environment. It has a carbon tax policy and sustainability measures such as stopping the use of fuels that damage the environment and using renewable energy such as solar and wind.

3. CONCEPTUAL FRAMEWORK

   Hypotheses on the relationship between pollution and economic growth are developed (Chua, 1999). The first hypothesis is that growth in economy will aggravate the problem of pollution. The second hypothesis concerns the economic growth slowed down by stricter regulation in environmental protection. The third hypothesis assumes that the process of liberalizing trade will cause damage to the environment, particularly that of the developing world which is less conscious of protecting the environment. The fourth hypothesis posits that countries with stricter environmental protection will be less competitive than those with lax regulation. The fifth hypothesis suggests that developed countries will redirect their investment to less developed countries with less stringent environmental regulation. These hypotheses lack sufficient evidence to prove that they are true arguments. They are also commented as to ignore the benefits of environmental protection which encourages innovation and cleaner and sustainable world.

4. METHODOLOGY

   A literature review is undertaken to look into the media release and academic research on the issue of carbon tax. A survey is conducted to collect the public opinions on the issue.

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