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Fresh thinking: the carbon tax that would leave households better off



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The UNSW climate dividend proposal will be launched on Wednesday by the Member for Wentworth Kerryn Phelps.
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Richard Holden, UNSW and Rosalind Dixon, UNSW

Today, as part of the UNSW Grand Challenge on Inequality, we release a study entitled A Climate Dividend for Australians that offers a practical solution to the twin problems of climate change and energy affordability.

It’s a serious, market-based approach to address climate change through a carbon tax, but it would also leave around three-quarters of Australians financially better off.

It is based on a carbon dividend plan formulated by the Washington-based Climate Leadership Council, which includes luminaries such as Larry Summers, George Schultz and James Baker. It is similar to a plan proposed by the US (and Australian) Citizens’ Climate Lobby.

How it would work

Carbon emissions would be taxed at A$50 per ton, with the proceeds returned to ordinary Australians as carbon dividends.

The dividends would be significant — a tax-free payment of about A$1,300 per adult.

The average household would be A$585 a year better off after taking account of price increases that would flow through from producers.




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If those households also cut their energy consumption as a result of the tax they would be even better off.

And the payment would be progressive, meaning the lowest-earning households would get the most. The lowest earning quarter would be A$1,305 a year better off.

Untaxed exports, fewer regulations

For energy and other producers making things to sell to Australians, the tax would do what all so-called Pigouvian taxes do — make them pay for the damage they do to others.

But Australian exporters to countries without such schemes would have their payments rebated.

Imports from countries without such schemes would be charged “fees” based on carbon content.




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This means Australian companies subjected to the tax wouldn’t be disadvantaged by imports from countries without it, and nor would importers from countries with such a tax.

The plan would permit the rollback of other restrictions on carbon emissions and expensive subsidies.

Our estimates suggest the rollbacks have the potential to save the Commonwealth A$2.5 billion per year.

It’s working overseas

Our plan is novel in the Australian context, but similar to one in the Canadian province of British Columbia which has a carbon tax that escalates until it reaches C$50 per ton, with proceeds returned to citizens via a dividends.




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Alaska also pays long-term dividends from common-property resources. The proceeds from its oil reserves have been distributed to citizens since 1982, totalling up to US$2,000 per person.

It could be phased in

We would be open to a gradual approach. One option we canvass in the report is beginning with a A$20 per metric ton tax and increasing it by A$5 a year until it reaches A$50 after six years.

The dividends would grow with the tax rate, but the bulk of households would immediately be better off in net terms and much better off over time.

And it would be simple

Our plan doesn’t create loopholes or incentives to get handouts from the government, as have previous plans that directed proceeds to polluters.

It will not satisfy climate-change deniers, but then no plan for action on climate change would do that — other than perhaps the governmment’s direct action policy, which provides a costly taxpayer-funded boondoggle to selected winners.




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But for those who understand that climate change is real, our plan balances the important benefits we gain from economic development and associated carbon emissions against the social cost of those emissions.

It does it in a way that provides compensation to all Australians, but on an equal basis, making the lowest-income Australians substantially better off.

It is the sort of policy that politicians who believe in both the realities of climate change as well as the power and benefits of markets ought to support.The Conversation

Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW and Rosalind Dixon, Professor of Law, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

China’s legalisation of rhino horn trade: disaster or opportunity?


Hubert Cheung, The University of Queensland; Duan Biggs, Griffith University, and Yifu Wang, University of Cambridge

The Chinese government will be reopening the nation’s domestic rhino horn trade, overturning a ban that has stood since 1993. An outcry since the announcement has led to the postponement of the lifting of the ban, which currently remains in place.




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The directive, if instituted, would require that rhino horn be sourced sustainably from farmed animals and that its use is limited to traditional Chinese medicine, scientific and medical research, preserving antique cultural artefacts, and as educational materials.

The announcement has been widely condemned. The United Nations Environmental Program called it “alarming”. But done carefully and correctly, and with necessary international consultation, it doesn’t have to add to the threat to rhinos. Indeed, it could even support rhino conservation.

A legal trade of rhino horns, as seen here, could ensure income goes to legitimate conservation efforts as opposed to criminals.
Paul Fleet/Shutterstock

Rhino horns regrow and can be sustainably and humanely harvested from live animals. Those arguing for legalisation say that a well-regulated trade could be a source of funding for expensive rhino conservation. It could also help reduce poverty and support development around protected areas.

A legal trade could also provide an alternative supply of horns, where income goes to legitimate conservation and development efforts, rather than to criminals, which is currently the case.

Rhino horn for medicinal use

The directive from Beijing stipulates that rhino horn for medicinal use must come from rhinos bred specifically outside of zoos (such as at dedicated horn-farming facilities). The ground-up horn powder would then be certified under a scheme developed by a coalition of Chinese regulatory agencies.

These agencies should draw from China’s experience regulating the medicinal use of pangolin scales to make sure poached horn does not infiltrate the legal marketplace. Though strictly controlled since 2008, illegal pangolin products continue to be seized frequently throughout China.

According to the directive, the medicinal use of rhino horn will be restricted to treating urgent, serious and rare diseases. This is consistent with what traditional Chinese medicine practitioners see as the appropriate application of rhino horn. Strict guides for clinical application will be needed to prevent misuse and overuse, particularly given the length of time that rhino horn has been unavailable to law-abiding clinicians.

Existing rhino horn stocks

Beyond medicine, the directive stipulates that people who already own horns will be able to declare their stocks. The government will then issue identification and certification records. After this, the horns must be sealed and stored safely, and not traded under any circumstances, barring gift-giving and inheritance.

This part of the directive is particularly concerning, as such a scheme will be complex, potentially giving owners of poached rhino horns smuggled into China a get-out-of-jail-free card. Lessons should be learned from the ivory trade in Hong Kong, where poached ivory has been laundered into legal stocks thanks to inadequate record-keeping and lax enforcement.

This section of the directive also raises concerns about the development of a socially accepted practice of gifting rhino horn akin to that of Vietnam. There, rhino horn has been found to be given as a gift for terminally ill family members and in business settings, where horns are offered as bribes to government officials. Strict enforcement will essential if China is to make sure illegal trading under the guise of gifts is not to spread.

China will have to work with countries where the rhinos live in Asia and Africa.
Kevin Folk/Unsplash

Working with China

China will have to work with countries where rhinos live, including range states in both Asia and in Africa, as well as other rhino conservation stakeholders around the world. Swaziland and South Africa have previously proposed legalising the international trade in horn as a mechanism to fund and bolster conservation efforts.

Domestic trade in horn is legal in South Africa, and China and South Africa will have to coordinate to make sure their domestic marketplaces support rhino conservation and don’t enable transnational laundering and trade.

Beijing’s decision has certainly attracted immediate and fierce criticism from some conservation and animal welfare organisations. This criticism is exacerbated by different moral perspectives. Some people see the sale and consumption of rhino horn to fund conservation as morally repulsive. For others, it is legitimate and pragmatic.

Whichever side of the debate you stand on, the priority should be conservation outcomes and making sure that China’s newly legalised domestic horn trade strengthens rather than dangerously undermines rhino protection efforts. Rhino conservationists will need to find common ground with Beijing. This requires an appreciation of different cultural and moral values, and the use of evidence on how to minimise risks to rhino under the directive.

Responding to the widespread criticism, Chinese officials clarified that the implementation of the directive will be postponed. The government has also launched a short-term enforcement drive against illegal trading of rhino horn, which will run until the end of the year.

While heightened enforcement actions are welcome, it indicates that China can do much more to tackle illegal wildlife trade. China must strictly enforce its own regulations once its domestic horn trade has been opened.




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Postponing implementation gives Beijing time to develop a detailed and robust set of regulations. Now is the time for rhino range states, conservation scientists and concerned groups around the world to work with Beijing so that the impending domestic horn trade in China can be a positive for rhino conservation.The Conversation

Hubert Cheung, PhD Candidate in Conservation Biology, The University of Queensland; Duan Biggs, Senior Research Fellow Social-Ecological Systems & Resilience, Griffith University, and Yifu Wang, PhD Candidate, Department of Geography, University of Cambridge

This article is republished from The Conversation under a Creative Commons license. Read the original article.