Why a carbon tax is good for the hip pocket

by Richard Denniss and David Richardson

A price on carbon is widely regarded as an essential element of an efficient response to climate change, yet such an approach has been described as a ‘great big tax on everything’ by opponents. While there is no doubt that putting a price on greenhouse gas emissions will lead to an increase in the price of energy and, to a lesser extent, the price of other products there is also no doubt that if the revenue collected from such a scheme was given back to households, rather than used to compensate polluters, then individuals and families would be financially better off. This paper is based on the assumption that a carbon tax is a simpler and more efficient mechanism for introducing a carbon price than the proposed Carbon Pollution Reduction Scheme (CPRS). The paper presents evidence that directly contradicts the claim that a carbon tax will have a significant impact on the cost of living and, in turn, place undue pressure on Australian families. On the contrary, the paper presents clear evidence that the introduction of a simple carbon tax of $25 per tonne has the potential to raise $13 billion in new revenue and improve the financial position of an average family by more than $1,000 per year. The $13 billion in revenue should not be seen as a cost that is taken out of the economy but as a redistribution of $13 billion from polluters and towards other groups in society that are deemed to be most deserving of assistance.

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