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Claims that we need a carbon tax to give investment certainty and so keep our electricity bills from rising are ludicrous (”Power price to rise unless carbon price is set soon”, October 30-31).
The mooted starting price for a carbon tax is about $25 a tonne of carbon dioxide. But a carbon tax would have to be about $150 a tonne to make baseload gas, intermittent solar and intermittent wind power generation economic. The carbon intensity of black coal is about 0.9 tonnes a megawatt/hour (gas 0.6 tonnes), so an effective carbon tax would quadruple wholesale electricity prices from the recent annual average of about $45 a megawatt/hour.
Of course a carbon tax of about $150 a tonne would be devastating for industry, and a big vote loser. So the government would start the tax at about $25 a tonne, but there would be incessant pressure from environmentalists to increase it to an effective level.
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It will be portrayed as a ‘’sin tax”, like taxes on alcohol and tobacco.
Each rise of $1 a tonne would raise about $300 million a year in tax. Would any government be able to keep its hands out of such an inviting lolly jar?
Once a carbon tax was applied at about $25 a tonne, would any business make large investments based on the purported certainty that the tax would stay at that level? In fact, boards would rightly be concerned that governments could easily find reasons to increase it. The proposition that imposing a carbon tax would provide businesses with investment certainty is so implausible it is laughable.