Page 1744 - Week 05 - Tuesday, 1 May 2012
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The carbon price is supported by the commonwealth framework requiring greenhouse gas reporting from Australia’s largest polluting businesses. All of the revenue generated, and more, will be returned to households and to industry. It will be invested into renewable energy research and development, used to secure electricity supply and spent on land and biodiversity measures. Countries around the world are taking action on climate change and investing in renewable energy. The ACT government supports putting a price on carbon pollution.
It was Sir Nicholas Stern’s 2006 report that stated, “Climate change is the greatest and widest reaching market failure ever seen.” The report indicated that the cost to global GDP of addressing climate change might be as high as one per cent by 2050. This amounts to trillions of dollars globally. But it is appropriate, in the language of economics, to price the externality. The carbon price is an effective and efficient means to transform Australia’s energy and transport sectors. It will also encourage investment in renewable energy power sources. The carbon price provides incentives for businesses and consumers to reduce consumption of carbon intensive goods and services.
There will be increased energy costs for households and businesses. Commonwealth modelling forecasts electricity prices to rise by 10 per cent in the 2012-13 fiscal year due to the carbon price. The ACT may experience a slightly higher percentage increase in electricity prices compared to the national average. This is because wholesale prices play a greater role in our retail price than in other jurisdictions.
The Independent Competition and Regulatory Commission’s draft price direction for the supply of electricity to franchise customers for 2012-14 indicates that the national carbon price will be largely responsible for an increase in wholesale electricity costs. The ICRC indicated there would be an increase of around 17 per cent in the regulated retail electricity price. Of that increase, around 13 percentage points would be due to the carbon price.
The ICRC has taken the unusual step of taking issue with some claims that were put forward by the opposition on this matter. The senior commissioner indicated, through the media, disappointment about the opposition’s political point scoring over utility costs and he rejected the opposition’s negative critique. He noted that the opposition’s analysis was incorrect, given that the average ACT household size is 2.6 persons, not five persons.
The commonwealth, in its midyear economic and fiscal outlook, forecast a one-off increase of three-quarters of a percentage point in the consumer price index in 2012-13 due to the introduction of the carbon price. There will be increased input costs for factors of production, experienced through a generalised increase in consumer prices. The important point, though, is that households and businesses have real choices to shift to less intensive energy use and ultimately the costs of a carbon price may be offset, absorbed or passed through by business, depending on the market.
Through the commonwealth’s tax and transfer system there is a package of assistance for households and businesses to adjust to a national carbon price. More than half the
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