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Carbon Tax Australia | HI5003

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Holmes Institute Sydney

   

HI5003 Economics for Business (HI5003)

   

Added on  2020-03-01

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The assignment is centered on Australia's Carbon Tax, and we will explore some relevant topics such as climate change as a market failure, what is a carbon tax, and what are Emission Trading Schemes. The report also shows how to value environmental damages and how to reduce them. And it gave some light on carbon taxation's popularity.

Carbon Tax Australia | HI5003

   

Holmes Institute Sydney

   

HI5003 Economics for Business (HI5003)

   Added on 2020-03-01

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CARBON TAX/ETS DEBATE IN AUSTRALIAStudent Name
Carbon Tax Australia | HI5003_1
Carbon Tax AustraliaContents1.Introduction.........................................................................................................................................12.Climate Change as a Market Failure....................................................................................................23.What is a Carbon tax and What are Emission Trading Schemes..........................................................34.Valuing Damages to the Environment and Abatement.......................................................................65.The popularity of carbon taxation.......................................................................................................96.Sources of GHG Emissions in Australia................................................................................................97.Conclusion.........................................................................................................................................13Bibliography...............................................................................................................................................141
Carbon Tax Australia | HI5003_2
Carbon Tax Australia1.IntroductionClimate change can be described as a ‘market failure’ since the current measure of measuring economic growth do not account for the negative externalities to the environment and consequently, the cost of these externalities to the society. This is simply due to the fact that policy intervention is required to correct the possible harmful effects of climate change. If countries had to face the effects of climate change proportional to their emissions, then there would have been a market driven response to the problem and countries would have acted to reduce their emissions. Some of these policy interventions include ‘carbon taxation’ and ‘emissions trading’. The prime reason for the existence of policy levers such as carbon pricing is that they provide an impetus to technological innovations to reduce the social costs of climate change. Australia has one of the highest amounts of Green House Emissions in the world. Climate and these policy interventions drive the market to pay for the social costs or impose checks (caps) on the negative externalities that result from economic activity. Additionally, they provide structures so that those responsible for social ‘diseconomies’ or negative externalities would compensate for it.Australia has a target of a reduction of emissions that are 5% of the 2000 levels. [ CITATION Dep16\l 1033 ]. This reduction is a percentage and “The expected effect of the tax is to reduce overall domestic emissions below projected ‘business as usual’ levels, rather than reducing the absolute level of emissions.” [ CITATION Rob14 \l 1033 ]Emissions reduction policies in Australia have been subject to much debate in the last decade since efforts to reduce Green House Gas Emissions are in direct juxtaposition with the economic growth of the country. The Carbon Tax was implemented in Australia was introduced in July 2011 with details on a ‘Carbon Tax’ and “Emission Trading Scheme” and was effective from July 2012. [ CITATION Eri11 \l 1033 ]The absence of such policy measures implies that there will be no efforts for adaptation and mitigation of climate change and emissions would be allowed in a ‘business as usual scenario’.There would no effort to combat and reduce effects of climate change such as floods, 2
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Carbon Tax Australiadroughts etc. which could have serious impact on growth and GDP. Thus, the consequences of this market failure would be borne by the society. These costs could include direct damages caused changing climatic patterns, increased health care costs due to the effects of global warming and lack of clean air, the amount of impact on the life and livelihoods of vulnerable communities such as fishing communities, loss of future growth due to diminishing availability of natural resources, disruptions caused in the economy due to extreme temperatures etc.[ CITATION Vin17 \l 1033 ]. At the time of its introduction, the carbon pricing system received support from experts being labeled as good although it did not receive wide support from the public. [ CITATION Eri11 \l 1033 ][ CITATION Royge \l 1033 ]. The Carbon Tax was scrapped in 2014 following much debate.[ CITATION Tay14 \l 1033 ]2.Climate Change as a Market FailureClimate change, as mentioned above is a market failure since the market does not provide valuation and a pricing mechanism for some critical natural resources like clean air, water etc. but provides for subsidization of fossil fuels. Additionally, the negative externalities of GHG emissions are not taken into account by the market.A diseconomy or a ‘negative externality’ mathematically implies the difference between the ‘Marginal Private Cost’ and the ‘Marginal Social Costs’ i.e when the society incurs the cost for agood that is not paid by the producer of an economic good. MPC refers to the private cost of the producing the last unit of economic good or service to the last consumer. The ‘Marginal Social Cost’ is a dollar valuation of the impact that the society must bearfor the production of the last unit of good or services. Negative externalities imply that the production of a good or servicehas a malevolent effect on the society or cause inconvenience to the public. [ CITATION Ric \l 1033 ]3
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