Death, Taxes and Climate Change

Suchita shares her thoughts on climate change policy, for ARRCC's 2012 Youth Embassy

Suchita Pota is 20 years old, Hindu, and lives in Canberra.



It is an old adage that there are only two things certain in life: death and taxes; adverse effects of climate change, ranging from death and destruction to much milder predictions could all happen with some probability. Not knowing the probability of these possibly deadly outcomes is leading to confusion about how to allocate our tax dollars. For this reason, it is important to realistically capture the costs of climate change policy. In my opinion this should be the main consideration in an argument which can provide no incontrovertible benefits until we have reached a stage where there is no time for a remedy. I will hope to briefly discuss my views on the costs associated with investment in clean energy and policy which aims to create incentives to decrease the use of energy with high carbon emissions.

First let me give a brief idea of the framework I will use: my ultimate goal in life is to find the truth, and I can split this journey into two main areas: my spiritual self and my primary intellectual pursuit (of which I claim little expertise), economics. My limited understanding of economics leads me to believe that it is the science of positive analysis, trying to understand the incentives to which parties react and the aggregate effects these reactions may have. Underlying these seemingly scientific conclusions are the normative ideas about what we wish to achieve through various policies pursued by our Government. These normative ideas are derived from a range of sources and undeniably, religion is one of them. I cannot claim that I understand the role of religion in the derivation of our morality - there is no such algorithm. We can certainly hope to nominate the primary aims and find a realistic pathway to deal with our current environmental issues. This will demand an open and honest forum about our spiritual desires and their interaction with our positive conclusions about climate change policy. Each individual must decide their own ultimate truth with regards to the possibilities of climate change.

The Hindu religion is rife with symbolism linking the very idea of God to nature. The rivers of India are not merely the waters that have sustained our lives and civilisation but the personification of our deities here on this earth, our link to the heavens - the iridescent Ganga. The mountain ranges from where these life-giving rivers stem are the abode of our gods, and in the hearts of our religious poets. Our forests tell the stories of our most beloved Hindu characters and the very earth where they walked is said to be blessed. No religious ceremony could be carried out without the flowers, honey and milk given by nature. It is the dharma of every Hindu to uphold the integrity of Bhum? Mat?. In this sense I am somewhat biased and risk averse and would like to take action now to prevent possible harm to the planet in the future.

Investment in clean energy will have direct costs to taxpayers in the short run, as the funding for such large scale projects needs to flow from the Government through to our universities for research and development. A further cost to the Australian economy will be that due to our current reliance on coal exports, a cleaner energy future will definitely lead to the decline of the strongest sector of our economy. This is the basic idea put forward by those wishing to deny the feasibility of investment in clean energy. The consideration that needs to be made converse to this is what Australia would do in the future without developing new energy solutions. Being the only developed country in the world that relies on primary industry to drive its economy comes with some very serious risks. Let us assume that no country wants to be dependent on another for resources and also be cognisant of the fact that many countries, especially China, who we sell large amounts of coal to, are developing their own clean energy technology. From the perspective of all but those in the mining industry it makes little sense to do anything but invest now and guarantee our economic stability in the future.

Incentives to decrease use of carbon based fuel use such as the carbon trading scheme are facing retribution due to the increase in energy costs for households and small businesses. The main reason that most people take such offence at this suggestion is the belief that the highest carbon emitters are the ones who should be paying the tax, not the average Australian. The concept of tax share upon the consumer is a stylised fact not backed by basic economic theory. The share of the tax burden between those who are being taxed under the carbon emissions scheme and consumers has to do with the responsiveness of energy supply and energy demand with regards to the change in price. The party with less responsiveness pays the larger tax burden. My simple suggestion is that people should respond by demanding less energy if power companies choose to pass off their higher costs, in the form of taxation, to the consumer. This can be done simply by finding ways to minimise energy usage, something which should be of great importance to every Australian even without the carbon tax. It is hardly fair to say that all Australian households and business are working to minimise power usage, and I strongly feel that these changes can make a difference if this can occur on a large enough scale. This rise in costs further breaks down when we consider that many households will be receiving rebates due to the increase in prices predicted by the carbon tax, and a household which decreases energy demand in response to a carbon tax, then receives the benefit can in fact be better off. I would like to emphasise that this would be costly to the consumer in terms of making sacrifices to their lifestyle, such as less heating in homes, driving less, not relying heavily on non-essential appliances and hence is still a cost imposed.

The costs of policy combating climate change have been heavily overstated as they are often generalised claims that have not taken into account global economic trends. With my risk averse nature towards climate change I would be willing to change my behaviours in response to the new incentives from carbon taxation and pay the short term costs of switching to renewable energy.