Land Rights and Responsibilities: The Carbon Tax Debate

Address to the Melbourne Unitarian Church, Sunday May 22, 2011

According to the best available scientific evidence the planet which we inhabit is 4.54 billion years old. In approximately 500 million years, inorganic carbon dioxide levels will fall due to increasing surface temperature which will destroy all plant life and, as a result, oxygen levels will plummet destroying all animal life. A billion years after that surface water will disappear and the average temperature will reach 70 degrees Celsius. In five billion years the sun will become a red giant, expanding to two hundred and fifty times its current size, throwing the planet initially out of orbit, but then with gravity dragging the planet onto the surface of the sun where it will be vapourised.

The human lifetime, according the famous biblical quotation, is a mere three score and ten years. With the advances of modern science we have managed to increase that by another decade or so. Perhaps the next generation will make the advances to gain even a few more years to our natural and augmented lifespan. But the point is this; the earth existed for billions of years before our birth and will, left to its own devices, exist for billions of years after our death. Our time on this pale blue dot, a single planet in a solar system, one star of a hundred billion in the galaxy, one galaxy within one hundred and seventy billion in the university, is a mere speck in the sheer immensity of existence.

This basic ontological fact has profound implications for morality, economics and perhaps surprisingly, the subject of today's address, the carbon tax. It is a blunt reminder that are recipients of the natural universe that far exceeds the species itself. Nature is not a product of labour or capital. The water that we drink, the flora and fauna from which we gain sustenance, the land in which we live, are not themselves artifacts of human endeavour, although we may improve that which is given by nature. We can take unimproved stone and we turn it into buildings. We can take ore and produce metal goods. We can take land and engage in tillage, cultivation and harvesting. The human contributed value is through labour and capital, and through that claims of relative ownership and return in wages and profit are met.

But nature itself is completely different. This gift of Providence has utility independent of human action, and a result, every single one of us is equally deserving of a share of that value. But it is not evenly allocated; a class of people, expropriates this natural value and takes for their own enrichment, without contributing anything. As Adam Smith pointed out: "As soon as land becomes private property, the landlord demands a share of almost all the produce which the labourer can either raise, or collect from it. His rent makes the first deduction from the produce of the labour which is employed upon the land." Let's express this in modern language; every dollar acquired through economic rent is a reduction in the wages of working people, a reduction in returns for those who invest in capital, and a reduction in welfare, a reduction in infrastructure.

When we speak of 'land rights', we often speak of indigenous people who, around the world, were forcibly dispossessed of title. Overcoming doctrines such as terra nullius and the re-establishment of customary tenure is a partial compensation for the grave injustices inflicted upon those populations. But the land rights referred in this context is something different. It is the right of every individual to a share of the value provided by nature. As Karl Marx explained: "Even an entire society, a nation, or all simultaneously existing societies taken together, are not owners of the earth. They are simply its possessors, its beneficiaries, and have to bequeath it in an improved state to succeeding generations."

So as Woody Guthrie sang in 1940, "This Land Is Your Land". These are our "land rights", our gifts from Providence, the bounty of nature and it is something that we must reclaim. But this, our great social right, also comes with an equally great social responsibility, that we must pay for whatever damage that is done to the earth, and those who are responsible should carry that cost. Because when that sectional responsibility is not given a general cost arises, a cost which we see in various forms of pollution such as human-generated greenhouse gas emissions, of which carbon dioxide is the most notable. According to the data from Vostok station ice-core data carbon dioxide in the atmosphere has been cyclical between roughly 180 and 280 parts per million for the last four hundred thousand years, with corresponding changes in temperature. Since the industrial period it has increased to almost 390 parts-per-million. In the past hundred years, global surface temperature increased by 0.74 degrees mostly due the burning of fossil fuel and deforestation. In the next hundred years current scientific knowledge indicates is an increase from anywhere between 1.1 to 6.4 degrees, the latter end of the scale due to runaway effects, such as the release of methane currently trapped in the ocean floor and carbon released through permafrost thaw. According to Mark Lynas' degree-by-degree study at five or six degrees the tropical and subtropical zones would be completely uninhabitable. This includes all of Australia except the southern half of Victoria and Tasmania.

At a temperature increase of five or six degrees all of Africa and almost all of South America is completely desolate and utterly uninhabitable. Severe flooding destroys most major islands, including most of Britain and Indonesia. Permafrost has long gone, releasing trapped carbon and methane. There is no ice in the polar regions. The atmosphere would be full of hydrogen sulphide and combustible methane resulting in firestorms. Human life would struggle at best, and billions of lives would probably be lost. Ocean life would be destroyed and the only natural life that could possibly survive would be fungi. This is the worst case scenario mapped out by the international scientific community - but it is well within the bounds of plausibility. When asked what life would be like for his own grandchildren and others at the end of the 21st century with an such a temperature increase, the former Prime Minister John Howard responded "Well, it would be less comfortable for some".

Because there is a price attached to activity the emit greenhouse gases, then there needs to be a mechanism to set that price. The great insight of economics is that is something has a cost, it must cost something - and determining that level is something which arbitrary legislation cannot entirely achieve. To quote Malcom Turnbull's devastating critique of Tony Abbot's policy in in 2009, "You cannot cut emissions without a cost. To replace dirty coal fired power stations with cleaner gas fired ones, or renewables like wind let alone nuclear power or even coal fired power with carbon capture and storage is all going to cost money". The three main alternatives of pricing are subsidy systems, a emissions trading scheme or a carbon tax.

Current governments in Australia subsidise fossil fuel use by an estimated $9 billion per annum - that was in 2003. In 2008, a study of direct subsidies by GetUp! noted that $4 billion was given out, including $1.1 billion in fringe benefits tax concessions for company cars, $800 million in aviation industry concessions and $600 million for the automotive industry. It would make sense, one would think, to shift these existing subsidies to public transport, to renewable energy sources such as wind and solar even if in the short-term these energy sources do not have the same productive capacity. Subsidies do have a significant effect on goods that have relatively inelastic consumption, such as electricity. Australia's consumption per capita in 2006 was 11,332 kWh, up from 9,072 ten years prior, and from 7,309 twenty years prior. Most increases in demand, seem largely due from the demand for other goods which require an electrical charge for work (i.e., derived demand).

The Federal Coalition currently supports a subsidy scheme, of sorts. They support an Emissions Reduction Fund which subsidises emission reducing activities funded by the taxpayer, whilst not penalising those industries that engage in "business as usual" activities. In other words, working people will be funding business to engage in emission reduction schemes whereas polluters will suffer no ill-effects. However as Malcom Turnbull pointed out this week this is not a sustainable proposition method. The Department of Climate Change has put the cost of the Coalition's policy at $30 billion. Penny Wong's pithy summary was " "...they'll take money from taxpayers, give it to polluters in the hope those polluters will reduce their pollution and they won't compensate for families at all." In reality, subsidies should be seen as one item in the toolbox that can be used to encourage particular forms of investment, however a pricing mechanism as well as a supply incentive.

Prior to the last Federal election, the government and the opposition both supported an Emissions Trading Scheme (ETS). An ETS model is often explained as "cap and trade". A limit on emissions is set (the "cap") with emission permits auctioned or sold by the government. If a producer wishes to emit more than is allowed by the cap, then they must purchase a permit, either from the government at the time of sale or auction, or from a holder of the permit. Permits can be carried out across the entire economy and even across borders. Emissions up to the level of the cap will not be affected in supply or demand, but those above the cap will have an additional cost of production which will be passed on to the consumer who will respond with lower demand for 'dirty' industries. The greatest problem with the proposal that went to the parliament from an environmental perspective was the level of permits offered over ten years to industry to engage in a "smooth transition" to the new scheme. In addition to the highly problematic free permits and exemptions, an emissions trading scheme is particularly slow for noticeable effects to be occur. Carried out at a business-to-business level, it feels distant to the average person, and is particularly prone to corruption; measuring, reporting, verification and enforcement is problematic at best.

An ETS was and is a political compromise. In natural reality, any industrial activity that engages in any emissions is creating negative externalities and such there should be no 'cap' and no permits; all damaging emissions should be subject to their total economic cost, internalising the external costs. Whilst the precise figure of what these external costs represent is subject to significant political pressure, a survey of expert opinion argues a value of approximately $40 per tonne of carbon. There are some significant advantages with a carbon tax which, perhaps surprisingly to some, have been pointed out by the CEO of Exxonmobil, Rex Tillerson, who described such a tax as "a more direct, more transparent and more effective approach" whereas an emissions trading scheme "inevitably introduces unnecessary cost and complexity."

Carbon taxes have been introduced in several, primarily European, countries since the early 1990s, however none of them have been able to introduce a uniform carbon tax for fuels in all sectors. It is notable with the proposal to introduce a carbon tax in Australia various industries have called for exemptions, and even some unions. It will be difficult, for example, to introduce the tax for petrol and agriculture under the current political conditions. One other fact is that it is undeniable that a carbon tax has a regressive effect. Because it is a flat-rate per tonne of carbon, it will impact on low-income earners worse than it will on high-income earners. The Federal Labor government's proposal is that from the monies raised from the revenues itself, a compensation package would end up resulting in 2.6 million low-income households better off and a further 1.7 million middle-income households no worse off through a a combination of tax and welfare measures.

Fair recompense for our natural and equal rights to the resources provided by nature are yet to arrive; the mining tax and indeed the Henry Review in general, was an initial attempt in that direction and we all know what happened there. Trying to encourage responsibility for the damage caused to nature is apparently equally as difficult, there are those with strong vested interest would apparently would prefer life on the planet to suffer possible destruction in the near future rather than make changes now. In pure economic terms, not only should there be no compensation to emitters and no exclusions. It seems that a emissions price - hopefully around the realistic figure of $40 per tonne - will be introduced with compensation to overcome the regressive elements from cost of living increases and subsidies for the adoption of renewable energy sources and consumption management. The problem is, as was illustrated earlier in this address, is that very radical changes to our technologies and lifestyle are needed is we are to avoid catastrophe and far moe than that which is being offered by politicians. There is no doubt that some are thoroughly aware of the very real issues that are confronting us, and there are others who are playing political games, albeit with a modicum of skill.

On the walls of our Church are the principles of the Unitarian-Universalist Association which provide the backbone of our religious community. One of those principles reads that there is an "inherent worth and dignity of every person". Another reads that we should have "respect for the interdependent web of all existence of which we are a part". Pray, give allowance for a rephrasing in the context of today's address. "In order to achieve dignity, every person has an inherent share of the earth's resources" and "In order to respect the interdependent web of existence, every act of pollution is must requires compensation and reparation equal to the damage that it caused". From those principles we can have both land rights for all, and a responsibility to our natural world that is both just and increasingly necessary for the survival of civilisation and of life itself.