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According to Rod Sims and Ross Garnaut, the implementation of a fossil fuel tax in Australia has the potential to generate $100 billion in its initial year.
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According to Rod Sims and Ross Garnaut, the implementation of a fossil fuel tax in Australia has the potential to generate $100 billion in its initial year.

Two experienced economists suggest that implementing a tax on fossil fuel production in Australia could provide financial support for the country’s shift towards carbon-free energy, reduce living expenses, and contribute to global efforts in reducing greenhouse gas emissions.

According to prominent economists Ross Garnaut and Rod Sims, implementing a carbon solution levy in 2030-31 at the average European price of $90/tonne of carbon dioxide equivalent could generate $100 billion in its first year. Garnaut was a key figure in the Hawke government, while Sims previously led the competition watchdog.

Australian officials will argue that implementing this tax, along with other measures such as using the funds to partially cover the expenses of building new carbon-neutral iron, aluminum, and fuel facilities, could help the country utilize its plentiful renewable energy sources and revitalize its struggling economy.

Australia has the chance to capitalize on the worldwide shift towards achieving net zero emissions, according to Garnaut, the creator of the Superpower Institute. In a speech to the National Press Club on Wednesday, he will assert, “This presents us with the opportunity to boost productivity and improve living standards following a period of stagnation.”

Following the example of the Albanese administration’s revision of the mandated third-stage tax reductions, Garnaut will suggest that evolving political dynamics may lead politicians to modify their direction and revise policies, such as reinstating a carbon tax that was eliminated ten years ago by the Abbott administration.

The speaker will acknowledge that the restrictions imposed by the climate conflicts make it unfeasible to put the carbon levy into effect. However, it is not as insurmountable as continuing to neglect our responsibility in the worldwide fight against worsening bushfires, cyclones, and beach erosion. It is also not as unattainable as being unable to fund our aging population and our submarine expenses.

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Sims, the head of the Superpower Institute, plans to address the National Press Club and acknowledge that some of the proposed concepts may be immediately dismissed. However, he stresses the importance of continuously cultivating these ideas, citing past examples such as reducing import tariffs that were initially met with resistance but ultimately proved beneficial.

Sims will state that adhering to basic economics requires factoring in the cost of damage caused by fossil carbon. Failing to do so would make it extremely difficult for environmentally-friendly products to compete with cheaper fossil fuel products.

Garnaut believes that there is a strong chance for bipartisan support for effective energy and climate policies in all states, which could lay the groundwork for a nationwide transition. He will state that the main issue lies in the parliament at the national level.

“In the economy focused on reducing carbon emissions, Australia is the most suitable location for producing a significant portion of the products that are currently manufactured in Northeast Asia and Europe with high levels of carbon emissions,” he will state in his speech. “By prioritizing the prosperity of Australians, we are also increasing the chances of successfully addressing the issue of climate change on a global scale.”

Garnaut rejects the belief that implementing a fee on the financial activities of the fossil fuel sector poses a threat to the investments.

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“Did the removal of carbon pricing, influenced by the financial contributions of the coal and gas industry, constitute a form of sovereign risk?” Garnaut will pose this question. “This significant alteration in policy greatly impacted the business outlook for numerous investments made with the assumption that the existing arrangements would remain in place.”

For 23 years, there has been anticipation of limitations on the release of carbon dioxide.

If someone is unable to foresee the value or importance of a certain policy, it shows that they have not fully understood their surroundings.

Ultimately, decisions of a political nature will need to be made regarding the prioritization of restoring increasing income levels, promoting productivity growth, and ensuring prosperity for the citizens of Australia over maintaining the profitability of oil and gas corporations.

On Wednesday, the speech will also urge the federal government to modify its recently proposed capital investment program, which aims to aid in the development of 23 gigawatts of fresh solar and wind energy projects, as well as 9GW of extra storage options like batteries.

The proposed auction plan aims to attract investors with a guaranteed minimum price for energy generation. However, this could have significant financial consequences and lead to central planning, according to the speaker. Alternatively, the government could cover 80% of a project’s expenses and receive 40% of the profits after the investor has recouped their initial investment.

Source: theguardian.com