Environmental Solutions and their Impact on the Poor
THE St Vincent de Paul Society (Australia) is concerned at the suggestion of a $10 a tonne carbon levy as a way of tackling the important issue of climate change.
While much of the debate has focused on the impact a levy would have on business and the economy, our concerns relate to the financial impact on households, in particular those on low incomes or living in disadvantaged communities.
This lack of detail is all the more concerning given that such a levy is estimated to raise an extra $2 billion annually.
Governments, green groups and other proponents of a levy must acknowledge and present strategies that propose solutions to the significant social issues that arise, including:
Firstly, such a levy will impact disproportionately on pensioners. This occurs because this group consumes energy at a rate below average household consumption, but, conversely, as a proportion of their weekly spending, they pay almost double the amount.
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Secondly, governments must acknowledge that a 7 per cent increase in electricity bills will not result in a significant cut in demand. This is demonstrated by research into households’ demand responses to electricity price increases. This research consistently estimates that a 7 per cent price increase will only result in a 1.5 per cent cut in consumption. This not only serves to highlight the inability of many households to reduce consumption in response to price increases, but the bluntness of pricing as a way to change behaviour.
Thirdly, such a proposal effectively negates the $105.20 a year the Commonwealth Government gives to pensioners to meet the cost of utilities. Introducing a 7 per cent energy levy not only undermines the social objectives of this allowance, but creates inefficiencies in the welfare and tax transfer systems. Households will, in effect, be taxed and then refunded.
Secondly, governments must acknowledge that a 7 per cent increase in electricity bills will not result in a significant cut in demand. This is demonstrated by research into households’ demand responses to electricity price increases. This research consistently estimates that a 7 per cent price increase will only result in a 1.5 per cent cut in consumption. This not only serves to highlight the inability of many households to reduce consumption in response to price increases, but the bluntness of pricing as a way to change behaviour.
Thirdly, such a proposal effectively negates the $105.20 a year the Commonwealth Government gives to pensioners to meet the cost of utilities. Introducing a 7 per cent energy levy not only undermines the social objectives of this allowance, but creates inefficiencies in the welfare and tax transfer systems. Households will, in effect, be taxed and then refunded.
Tags: Environment, Poverty Analysis