Institute of Public Affairs Study Says Average Aussies Household Worse Off Under Carbon Tax

With Australia's federal election fast approaching, the Opposition would have another campaign material to use against the Gillard government in its attempt to wrest power from Labor. It is the controversial carbon tax which was imposed by the administration in July 2012.

A report by the Institute of Public Affairs (IPA) claims the measure made the average Australian household worse off under the carbon tax.

In a briefing note, Tim Wilson, the institute's director of Climate Change Policy, explained that by the end of 2012, the household carbon tax over compensation was wiped out by changes to the global carbon accounting rules used to compute the environmental impact of greenhouse gases (GHG).

The changes boosted Australia's emissions profile by the equivalent of 22 million tonnes of carbon dioxide yearly, which in turn hiked the impact of the carbon tax by almost $230 million yearly. This increased the average carbon tax impost to Aussie households and negative the over compensation.

The changes in computation is based on the post-2012 Kyoto Protocol which required updating of calculations based on the Intergovernmental Panel on Climate Change's Fourth Assessment Report that Australia agreed to.

The bases of the changes are amendments to the methods used to assess the environmental impact of GHG since not all greenhouse gases are the same. Some gases, such as methane, capture more heat and stay in the atmosphere for 12 years and is 21 times more potent than carbon dioxide (CO2). Nitrous oxide stays for 120 years and 310 times more potent than C02, Mr Wilson explained.

With the IPCC recomputation, Australia's GHG profile will go up by 22 million tonnes year, which mainly comes from the upward revision of the impact of methane by about 20 per cent. Even if the agricultural emissions are removed, the country's emission profile would still go up by 10 million tonnes which will hike Australia's carbon tax bills between $227 million and $229 million yearly.

Under the initial carbon tax household assistance package, the average Aussie household will pay a carbon tax of $514.80 annually to be offset by a $525.20 yearly compensation which translates into an annual overcompensation of $10.40.

The country's carbon tax bill would go up by about $30 per household yearly and, in effect, negate the $10.40 per year overcompensation, Mr Wilson pointed out.

He added that only Australia, the European Union, Norway and Switzerland agreed to ratify Kyoto's second commitment period, with Australia making the most generous offer of emissions reduction pledge by 47 per cent cut, while Europe offered only 23 per cent.

A separate U.K. government report said that the country's GHG in 2011 went down 7 per cent to 552.6 million tonnes CO2 equivalent, lower than the 594 million tonnes logged in 2010.

The decline was due to lesser use of gas and electricity by British households due to a warmer than average year and greater use of nuclear power for energy generation.

Coalition leader Tony Abbott, who has vowed to repeal the carbon tax if the Opposition wins in the Sept 14 election, will likely cite the IPA study in his forthcoming campaign to justify his opposition to the measure.