I thought I hadn't heard straight at first. Was it true that the government is applying a tax on carbon where the compensation will be worth more than the income from the tax?

I just checked the internet, and my ears were as accurate as usual. Peter Hartcher lays it out in the SMH http://www.smh.com.au/opinion/politics/payouts-help-shield-labor-from-political-heat-20110710-1h8jv.html. (Just the first reference I got to). I was right - the carbon tax actually raises less money than the compensation package costs.

Like most of the population I think I've moved from being prepared to at least give the government the benefit of the doubt in 2007 to outright contempt.

The maths says two things to me. The first is that the government puts a negative value on its ability to sell any policy. The second is that the tax is bound to rise in the future, because no-one ever applied a tax for nothing. Quite how they claw the tax back through the ETS I'm not sure, but there must be a way.

Otherwise this is just a redistribution of income, not an environmental measure at all.

Gillard et al must think we're all mugs.

I agree Graham. I still don't see how this tax will help the environment at all, but I am willing to learn if someone else out there can explain it to me?

From what I can see, the Government will tax some 'big polluters', but not ALL big polluters, and they will then use some of the money raised by these taxes to 'compensate' us commoners for the increased prices on the goods and services provided to us by these big polluters, so they can pay the increased taxes to the Government?

Am I missing something here?

Just how will there ultimately be less carbon produced from this mad re-routing of funds?

One commentator recently reported that the outcome is likely to be a Clayton's Tax and so it is.

The reasoning in part is that people who gain under the compensation package may decide to try harder to cut their emissions thus keeping some of the largesse for other purposes. If prices rise considerably even reducing energy consumption may only mean a break-even. Will it really be a disincentive to cut emissions?

I am not convinced that a market mechanism or a carbon based economy will go far in reducing pollution (regardless of one's beliefs about AGW).

Direct action, foresight and better policies around building and planning would be preferable and more effective in reducing dependency on coal. There has not been much reported on whether direct action options were explored ie. around renewables, forestation, coal sequestration, sustainable populations and globally improving the wellbeing of developing nations with fairer and more equitable foreign/economic policies.

"Problems cannot be solved by the same level of thinking that created them." - Einstein

PS: The Greens managed to secure a large amount of funding for renewables so that is a positive step.

The tax is not a deal breaker for me per se as let's face it taxes come and go all the time but the level of taxation tends to hover within a static 'range' no matter what name you put to it. It is just the guff and fuzzy thinking that goes with this approach that makes it less palatable.

Where is the encouragement to reduce emissions? That is the crux of the failing in this approach unless I am missing some big piece of the puzzle.

My understanding is that the so-called compensation package is supposed to compensate pensioners and others for whom significantly reducing their emissions is not a viable option. However, if it goes beyond their actual expenditure it then becomes little more than a bribe, which I suspect will backfire on the Gillard government. Correct or otherwise, I think that voters have become cynical as to the government's integrity, and this will be seen as the last desperate gasp of a discredited government.

If the purpose of the carbon tax is to induce behavioural change - i.e. reduced non-renewable energy consumption - rather than simply income redistribution, then I agree that it's hard to see how sham 'compensation' is going to achieve that aim. The tax should have been set at a much higher level (say 40%) and fuel should have been included. For the carbon tax to succeed as a precursor to a cap and trade system, emitters need to be motivated to either reduce their emissions or trade carbon credits.

This tax has been compromised out of existence, and probably seals the government's fate.

I assume that the hope is that the extra cost on carbon emissions will reduce the price gap between fuel sources which emit lot's of carbon and those that don't. If it's increased it enough to bridge the gap remains to be seen, also I have my doubts that an industry compensation plan can actually stop the shift offshore of yet more manufacture and processing unless they are being overcompensated as well.

I can't see that business will shoulder the cost in reduced profit's. Not if they can find any way around it. That means that they pass the costs down, initially to that portion of the population who are not "fully compensated" who will no doubt raise prices to ensure that they don't carry the cost alone.

Expect a visit to the doctor or from your plumber and others to go up in price. Seems likely to be nasty inflation hit for a while, then of course the Reserve can lift interest rates to combat inflation.

If we do reduce energy consumption will suppliers be allowed to increase prices to make up for the reduced income?

R0bert