Why It Is Important to Reduce Emissions Caused by Carbon Dioxide

1 January 2017

Australia is considered to be the driest populated continent in the world and faces stern drought and water shortages. Reducing carbon emissions is challenging for Australia, although the Government realizes that meeting this challenge is important and commits to reducing the level of pollution caused by greenhouse gases in Australia, and voluntarily preparing for an altered climate in the near future. The Hon.

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Greg Combet (Assistant Minister for Climate Change and Energy Efficiency) stated in his speech that, “Australia is already the driest inhabited continent on earth, and is heavily exposed to the impacts of climate change and faces huge environmental and economic costs from climate change impacts including on water security, agriculture, energy supply, health, coastal communities and infrastructure” (The Hon. Greg Combet AM, 2010). 1. M. Harris: Analysis on Environmental Effects The discount rate is used as a measure to determine future costs and benefits from climate change.

However, according to M. Harris, there is uncertainty when using this method. He states that other methods that include ecological as well as economic costs and benefits should be chosen. M. Harris examined two studies, one by William Nordhaus and other by Cline. William Nordhaus said that the most favorable policy would be a minute reduction in greenhouse gas emission lower than recent estimations. Whereas, Cline focused on long-term effects and used a low discount rate of 1. 5% to level present and future cost. From these studies, M.

Harris concluded, “Even though costs of aggressive action appeared higher than benefits for several decades, the high potential long-term damages sway the balance in favor of aggressive action today”. Furthermore, M. Harris argued that stabilization of the global climate should be the target and not economic optimization of costs and benefits. According to M. Harris, the present rate of emissions from carbon dioxide and other gases will carry on to gather in the atmosphere. Also, in order to stabilize the gathering of greenhouse gases, it would require a major cut below current emission levels.

If actions are taken to prevent global climate change from happening, this will have an impact on the economy (M. Harris, 2002). GDP, consumption and employment will be affected and the government will take strict measures to lower emissions of carbon dioxide (M. Harris, 2002). 2. Policy tools Policies and plans are required to reduce carbon emissions in the coming centuries. These policies and plans can assist to deploy climate friendly energy production and use of technologies. There include tradable permits, carbon taxes, education and training, use of new technologies and research and development.

The realization of the severe effects of carbon emissions, happening due to the burning of fossil fuels, has led to the suggestion for non-market mechanisms such as regulation and market mechanisms such as tradable emissions permits and carbon taxes, to lower emissions (Cornwell. Antonia, 1996). In terms of efficiency, market methods are usually preferred and carbon tax is said to be the easiest policy to implement and monitor (Cornwell. Antonia, 1996). 2. 1Policy tools: Carbon Pollution Reduction Scheme The emission trading scheme, or ‘Carbon Pollution Reduction Scheme’, is a ‘cap and trade’ system.

A company purchases a permit from the government and only then they can emit greenhouse gases. The government caps the level of emissions by limiting the amount of permits obtainable. The plan of the government is to reduce the stock of permits little by little each year- boosting the competition for permits and pricing them at a higher rate eventually. (Anonymous, 2008). The Australian Government has set long term and medium term targets to reduce emissions. The Government aims to reduce emissions to 60% lower than 2000 levels by 2050, and its medium term target ranges between 5 and 15% below 2000 levels by 2020.

According to the government, Australia needs to reach an universal agreement so that atmospheric contents of greenhouse gases can be stabilized at around 450 parts per million of CO2E (Carbon Dioxide Equivalent). The government has realized that to achieve this global commitment with such action is going to be challenging in the future. The medium term targets set by Australia are quite similar to that of many other countries that have announced their targets. For example: the European Union (Pope, 2009).

The working of the ETS is mainly based on emitters of any six greenhouse gases who acquire a permit for each tonne of gas they emit. There is monitoring, reporting and auditing done on the total amount of emissions the industries produce. During the end of every financial year, each firm surrenders a permit for each tonne of emissions they produced during that year. Limited amounts of permits are issued by the Government every year and entities compete to buy the amount of permits they need. The permits are mostly auctioned or traded in the secondary market and firms who consider the permits of high value pay a lot for them.

Reducing emissions than buying permits is a convenient choice for smaller firms. Few other firms are allocated free permits, as a transitional assistance measure. These firms either use or sell the permits (Pope, 2009). The carbon pollution permits will be auctioned by the Government during the second year of action (2012-13). More ever, the government believes that an efficient way of assigning permits is by auction because only those who highly rate them will purchase it. Even then, some of the permits will be administratively allocated, so that transitional difficulties can be looked at.

All the money raised from this scheme will be used to support households and businesses for adjusting to the scheme and to invest in clean energy resources (Pope, 2009). Furthermore, the government will arrange assistance for emissions-intensive trade-exposed industries to lower the risk because of the relocation of their industries to offshore places due to competition from countries that don’t poses carbon constraints and deliver general transitional service towards a carbon constrained economy. Assistance will also be given to emissions-intensive coal-fired electricity sector.

The target is mainly on emissions-intensive generators as it is not possible for them to pass on the whole costs of the permits they purchase (Pope, 2009). The CPRS, carried out by the Australian Government is mainly revenue-neutral, and all the revenue generated will be used for lower and middle income household’s (mostly through transfer payments as an alternative to tax reductions) and businesses compensation, and stimulate behavioral change towards less carbon polluting goods and services, and output technologies, appropriately. The CPRS unfortunately is not tax neutral during a short period. Pope, 2009) 2. 2 Policy tools: Carbon Tax A carbon tax is a particular tax charged on an individual unit of carbon dioxide, or carbon equivalent of different other greenhouse gases, emitted into the earth’s atmosphere. The tax is usually charged at a price per tonne – e. g. , $20/tonne CO2. On the other hand, with emission trading, the main point of a carbon tax is to create a cost penalty on green house emissions. In order to reduce emissions, the introduction of a cost penalty may be one of the set preferences (Brian Dawson, 2009).

Economists usually assert that a tax on the carbon content of fossil fuels as a means of obtaining the low cost emission reductions across all fossil carbon resources. The tax can lower carbon dioxide emissions in two ways: It stimulates dynamic use of energy, and encourages the growth of zero-emission technologies by raising fossil fuel prices. This type of tax, steams up the change in consumption from coal and oil to other better burning fuels due to fluctuation of prices between fuels. Muller, 1996) There are benefits gained from a carbon tax. Firstly, this policy of imposing tax is frequently used and can be adopted through the present administration systems. Secondly, policymakers find the foreseeable economic impact of a tax very captivating. Lastly, tax incomes can provide capital for low income households vulnerable to high energy prices, adjustment assistance for fossil fuel production communities, and growth of lower emission technologies and infrastructure (Muller, 1996).

In application, then, a carbon tax can be accepted as one tool in a climate change policy kit that includes voluntary agreements, efficiency standards, technology-promoting policies, infrastructure investments, land use policies, and other measures (Muller, 1996). 2. 3 Policy tools: R&D, Technologies, Energy Production Australia’s support for research and development on carbon capture and storage from burning of fossil fuel is growing day by day. By expanding the commitment to increase funding for research and development and salability f low emissions technologies in which Australia has a national interest and conditional advantage has a logical place in the healing process. The increase of Australia’s effort on the latest technologies would grant Australia an important part to play in changes towards the required global commitments (Jubb, 2010). Policy tools can assist further technologies to reduce greenhouse gas emissions through alterations in the energy production sector and encouraging increased efficiency in energy use, thus transitioning to a lower carbon-intensive energy sector. Energy Production: There are many ways to reduce mission from energy production sector. Fuel source can be switched from coal to oil gas, increasing power plant efficiency, improving transmission, CO2 capture and storage, increasing the use of renewable energy technologies and nuclear power (Chopra, 2005). 3. Steps taken by the Commonwealth to reduce emissions Australian Greenhouse Office: Aimed to provide a whole-of-government approach to greenhouse matters, and to distribute the Commonwealth government’s $180 million climate change package (Australia, 2001).

The AGO also directs the Commonwealth’s contribution to the 1998 National Greenhouse Strategy and is responsible for delivery of the Commonwealth government’s $796 million ‘Measures for a better environment’ package (Australia, 2001). National Carbon Accounting System: Established by the Australian Government to precisely review the contributors that land-based activities make to green house gas sources and sinks (Australia, 2001). The main components of the NCAS are land clearing, land use and management, biomass estimation and soil-carbon estimation.

Transport emissions: The commonwealth government looks at reducing greenhouse emissions from road transport through programs such as, the Environmental Strategy for the Motor Vehicle Industry, the broader National Greenhouse Strategy and measures to support and promote the increased use of alternative fuels (Australia, 2001). National Greenhouse Strategy (AGO1998): This strategy supplied the structure for Australia’s greenhouse response and is basically the primary means by which International commitments will be met (Australia, 2001).

The strategy provides the foundation of actions to be adopted by the governments, industry and the community. There are 3 main topics that were discussed: * Developing awareness and knowledge of greenhouse issues; * Reducing the increase of greenhouse emissions and improving Australia’s greenhouse sinks; * Creating methods to cope with likely climate changes. Greenhouse Challenge Program (1995): A voluntary program which engages in cooperation with Australian industry to lower greenhouse emissions (Australia, 2001). The reductions mostly are from developments in energy and process efficiency.

More than 500 firms have participated in this program and commit to reduce greenhouse emissions (Australia, 2001). Fugitive emissions: These are a by-product of industries. For example, loss of gas from pipelines and the evaporation of petrol from motor vehicles. Fugitive emissions are regulated, so that industries provide repairs to leaks and check fugitive emissions. 4. Costs of reducing greenhouse gas emissions When alleviating climate change, there are lots of costs involved. The series of these costs totally depends on the types of policies and methods used to reduce emissions.

Economists suggest that the costs of reducing emissions are much less when incentive based policies are implemented (Toman, 2001): For example, emission taxes and tradable emissions permit than under more straight regulations. Toman, 2001, suggested when taxes are imposed on income, employment level goes down and the demand for labor will fall because employers cannot meet the demand of workers, which is higher wages due to high tax incurred by the company. Furthermore, due to tax, employees will not get to enjoy most of their income (Toman, 2001) and this will discourage people from joining the workforce. Taxes on the income from capital lead to “too much” current consumption and “too little” investment and savings” (Toman, 2001). Likewise, certain regulations that raise producers output cost also lower employment opportunities and investment in the economy and these add to the alterations created by the tax policies (Toman, 2001): For example, when a tax in levied on the carbon content of fossil fuels drives up the electricity and gasoline production costs of entities, this leads to a slight fall in the whole level of economic activity and job opportunities. According to (Chopra, 2005), the predicted osts from climate change might have a little impact on world’s GDP: For example, percentage decreases in global average GDP over the subsequent 100 years for stimulation at 450 parts per million varies from about 0. 02% to 0. 1% each year, in comparison to yearly GDP growth averages rates of 2-3% each year. The Australian Government estimated using MEGABARE (climate change economic model which analyze the economic effect of greenhouse gas emission policy) that satisfying emission targets would severely damage the economy (Alexander Gillespie, 2000). From this model, the Government has identified high costs from the reduction of emissions.

For example, they declare that: * The wages in Australia will be reduced by 20% compared to the normal levels by 2020; * GDP will fall by 2% during 2020; * There will be a decline of $9000 in the savings accounts of each Australian; * Thousands of jobs will be lost; * Each Australian would incur 22 times more economic cost when compared to each European 5. Summary This research essay explains why it is important to reduce emissions caused by carbon dioxide and other greenhouse gases and avoid the costs originated by them in the near future. Australia is severely impacted by global climate change.

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