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Garnautís carbon price plan
letter published in The Australian Financial Review, 21 March 2011

Laura Tingle acclaims  Garnaut’s “re-shaped” plan for offsetting the costs imposed by the imposition of a carbon price with tax cuts and compensation grants to trade exposed industries.

This, she suggests, could change the political debate because, if the Coalition rescinds the carbon price, it would lack the revenue to fund the tax cuts (“Challenge to pacify voters with money for reform”, Comment, March 18).

This seems a somewhat politically charged analysis. If the opposition rescinds the carbon price it would not need the revenue  for relief purposes because there would be no additional costs from the carbon price.  In short, if it does not impose a tax (which the government-imposed carbon price would be) it does not need for this purpose to cut taxes.

The more serious question Tingle might have addressed is this – if the government imposes a tax on carbon emissions and then uses the revenue to compensate households and businesses for the costs, what substantive reduction in emissions is likely to occur? No estimate has  been revealed by Canberra but one suspects it would be quite small. The reality is that Australians face the prospect of a tax to fund tax relief with little reduction in carbon emissions.

Des Moore
Institute for Private Enterprise
South Yarra Vic

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