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No Doubt: The Coalition Will Scrap The Carbon Tax

No Doubt: The Coalition Will Scrap The Carbon Tax
From The Drum Website- 11 January 2013

Let me be clear from the start: there is no doubt that, contrary to David Forman’s claims on this page recently, a Coalition Government will abolish the carbon tax.

We will scrap the tax because it so utterly fails to achieve its objectives, and operates in such a damaging way, that to leave it in place would be economically and environmentally irresponsible.

The carbon tax must go simply because it doesn’t work. It is both an economic failure and an environmental failure. Removing this tax is the only responsible course of action available to an incoming government.

The carbon tax is a grand failure because while it is enormously expensive, it spectacularly fails to clean up our emissions. It is doomed because at its heart is an inefficient and ineffective electricity tax.

It is worth for a moment taking a closer look at the actual cost of the carbon tax.

First, there is $105 billion of taxes out to 2020/21 largely paid for in electricity, gas and diesel price rises.

Second, there is a further $15 billion in direct government expenditure. This includes $10 billion of unfunded expenditure to buy shares in speculative energy companies that the private sector will not support.

Third, there is a further $4 billion budget deficit in the tax and transfer payments associated with the package in just its first three years.

And fourth, there is the purchase of at least $8 billion in foreign carbon credits to 2020.

All up that makes at least $132 billion in expenditure out to 2020.

And the results of this mammoth expenditure? Incredibly, instead of reducing Australia’s carbon emissions, under the tax our annual domestic emissions will actually grow from 560 million tonnes to 637 million tonnes between now and 2020.

The carbon tax simply doesn’t do the job it’s supposed to do.

This is because much of the revenue comes directly from taxing electricity, which is the least efficient way to reduce emissions, as Nobel Economic laureates Finn Kydland, Thomas Schelling and Vernon Smith have concluded.

We are already beginning to see the impact of the carbon tax in skyrocketing power bills and rising prices and this will only get worse. The tax is designed to drive electricity prices higher each and every year.

The real issue though is whether lifting electricity prices is an effective mechanism to reduce emissions. Otherwise it is simply pain without gain.

The problem with an electricity tax is that it is ineffective on both the demand and supply sides.

On the demand side, the Government has acknowledged that power companies will simply pass higher electricity prices through to consumers. Electricity is however an essential service and therefore largely inelastic for consumers.

An example of this was the massive 50% price rise for NSW’s seven million residents over a recent five year period. This produced a bare 6% decrease in per capita consumption over that period.

Rather than radically re-crafting society, small businesses and families simply end up paying higher and higher electricity prices.

On the supply side, the tax is designed to lift the cost of the general energy supply rather than to reduce the cost of renewable energy in order to make it competitive.

However, the gap between the cost of general energy and renewable energy is so great that the tax doesn't do anything to change production.

That is why the carbon tax itself is not expected to close down a single power station between now and 2020.

Similarly, the tax itself is not expected to create one watt of additional renewable energy beyond the existing 20% Renewable Energy Target.

That is why the carbon tax is a monumental failure. It raises prices without reducing emissions. Indeed, under the carbon tax Australia’s domestic emissions will rise almost constantly for the next 40 years. That is why 100 million tonnes of carbon credits will have to be purchased overseas in 2020 alone.

Against that background there is really no other option but to repeal the carbon tax as soon as possible. And this can be done quickly and painlessly.

The Coalition has made it clear that the next election will be a referendum on repealing the carbon tax. If elected, a Coalition Government will have a contract with the community to honour that mandate.

We will issue instructions on day one for the bureaucracy to begin drafting legislation to repeal the carbon tax and will introduce that legislation in the first Parliamentary sitting week.

Thus the process of scrapping the carbon tax should be complete within six months.

We do not expect the Greens will ever honour a mandate given to the Coalition. However, if the ALP loses the election it is almost inconceivable that they would ignore such a clear mandate, especially given that they had no mandate to introduce the tax in the first place.

Therefore I do not believe a defeated ALP would stand in the way of repealing the carbon tax.

No matter what they say now, I expect that a defeated ALP under a new leader would not block the repeal of the carbon tax. Otherwise they would face an immediate double dissolution election.

The Australian people, by means of an election, have a right to determine the fundamental policies that will shape their future.

If the ALP were to block legislation to repeal the carbon tax, it would be acting in defiance of the express will of the Australian people. To do so would be an anti-democratic act of extreme political recklessness.

Ultimately, we believe the carbon tax is all pain for no gain and that genuine domestic emission reductions can be achieved without taxing electricity.

We can, we will and we must repeal the carbon tax and we will not stop until the job is done.
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