• Internal Code :
  • Subject Code : MPE781
  • University : Deakin University
  • Subject Name : Business Economics

Carbon Emission

Table of Contents

Question – 1.

Question – 2.

Question – 3.

Question – 4.

Reference List

Question – 1

In your own words, summarize the article “Australia’s rising greenhouse gas emissions” by Greg Bourne, Andrew Stock, Will Steffen, Petra Stock, and Louis Brailsford. In particular, think about the following: What is Australia doing to tackle climate change? What is its emissions reduction target? What might help Australia to achieve its goal?

The article focuses on the Australia strategy to control climate change by 26-28% until 2030. The contribution of each sector will be a cost-effective means to control the emission. The Federal government has found to attempt to reduce the emission by 26% by 2030 (Bourne et al., 2018). The effort is to awaken each sector to join hand in a reduction in emission. Replacing fossil fuel activities within the agricultural sector needs to be implemented. The sustainability in the field of agriculture will be costly, and therefore, the use of energy needs to be replaced with electricity (Bourne et al., 2018). The country is still not capable of maintaining the carbon emission. The other sector needs to reduce waste production and attempt to use the recycling technique. The cost of the sectors will be reduced effectively. Energy efficiency technologies are to be used. There is a technical barrier to achieving sustainability and reduced emission in Australia. There are few chances of emission reduction in Australia. 

Australia is focusing on electricity, transport, stationary energy, agricultural, fugitive emissions, industrial process, and waste management sectors to handle the emission. It is found that the federal government is committed to the Paris Climate Agreement. The government has set a target to reduce climate change. The government enhanced the burden on sectors connected to the economy and assigned the task of reduction of emission (Ahmed and Ozturk, 2016). There is a special focus on the electricity sector which is responsible for the highest emission. There is a marked reduction in emissions from the electricity sector. A decrease of 6.4% emission has been noted. The reduction of emissions from the electricity sector has been done with the replacement of fossil fuel to renewable energy. 

The government is also focusing on the reduction of emissions in the transport sector. The companies are directed to manufacture the electric car, bushes, bikes, and trucks. The strong policy is to be used by the government to reduce the emission.

Stationary energy causes higher emission in the form of heater pressure. Stationary energy is known to be the world’s third-largest source of emission of greenhouse gas. In Australia, there is a 17% emission from greenhouse gas. The government is unable to control greenhouse emissions.

The target of Australia is to reduce the emission rate to 26-28% (from the data of 2005) till 2030. There is a very weak system of the government to achieve the target, and therefore, the industries and sectors have been asked to reduce the emission through the technological replacement and the using the alternative method to reduce the emission.

The best way that will help Australia is to focus on the sector which emits the greenhouse gas in higher quantity and affects the ecological balance effectively (Bourne et al., 2018). The effective use of the technology and the latest sustainable technology and replacement of fossil fuel will effectively provide the emission solution in all sectors. The four sectors out of eight are found to have excess emission. The focus on this sector will help in the reduction of emissions.

Question – 2

Many observers believe that the levels of greenhouse gas emissions in our economy are too high.

1. If society wants to reduce overall emission by a certain amount, why is it efficient to have different amounts of reduction at different firms?

If the society is able to reduce fossil fuel consumption and can reduce emissions at a great level, the large corporations are indeed capable of reduction of emissions. If a society can undertake an intuitive to control emission, a big form along with its good capital and sustainable approach can take the sustainable initiative by using the alternatives or replacing the technologies. The electricity sector has replaced fossil fuel with renewable energy. The automobile sector has started manufacturing cars and bikes that can use electricity. This initiative is sustainable, but the impact on the economy is inevitable as the growth of the sector will be reduced considerably. In the stationary sector, the rate of emission is growing continuously.

The emission has increased by 18.2% since 2005(Bourne et al., 2018). The Federal government attempts to reduce the emission from stationary by 40% until 2030. Few projects have been undertaken under the Clean Energy Regulator to reduce the emission from the sector. The emission can be reduced from building, manufacturing, and mining. The improvement of energy efficiency can help in the reduction of emissions (Bourne et al., 2018). The agriculture sector also affects the ecological balance with the production of methane, nitrous oxide, and carbon dioxide. In the drought session, the reduced agricultural activities will help in the reduction of the emission.

2. Economics usually prefer corrective taxes over regulations as a way to deal with greenhouse gas emissions. Can you explain why? (Hint: Can regulations target the firms that should undertake bigger reductions?)

Emission tax collection is the best approach to discourage carbon emission. Many countries have framed a policy to collect tax for carbon emission. The imposition of tax on the product of high carbon emission will its cost. The consumer will prefer to buy the product at a low cost. The economy not only wants the carbon reduction in emission but also the encouragement to the business. The Australian government has introduced the carbon price of AU$23 per ton (Bourne et al., 2018). The people of the society attempts to remove the carbon tax as it is evident from the election campaign in 2014.

The carbon emission tax will automatically reduce carbon emission. The consumer hardly prefers to buy products that are bought at a higher cost. The government needs to impose the correct tax measure to encourage the industry and discourage the products with high carbon emission. The public will prefer to buy products with less carbon emission at a lower cost. In Australia, the excess carbon emission has taken the country back to 20 years. Therefore, the Prime Minister of Australia imposed carbon tax as Australia becomes the country with the highest per capita carbon emission. 

3. Suppose there is a sharp development in the technology for controlling greenhouse gas emissions. Using a diagram for the market for emissions, illustrate the effect of this development on the demand for emissions rights. What is the effect of a carbon tax on the price and quantity of emissions? Explain.

image shows Share of sectors in carbon emission

Figure 1: Share of sectors in carbon emission

Source: (Bourne et al., 2018)

The diagram depicts the share of carbon emission in the industries and sectors. The industries and sectors which have rendered incredible service to the country from the side of revenue generation and improvement in GDP and help in sustainable growth seek the carbon emission rights which have not been permissible at this critical juncture. Electricity produces 35% carbon (Bourne et al., 2018). There is a considerable decrease in 2017 from what it produces in 2005 with the focus of the federal government. There is a sharp decrease in emissions with the transport sector using alternative technology for the transport system.

The effect of the carbon tax is found to be good enough in the environment. The effect of the imposition of the carbon tax on the companies is evident. After committing to the Paris agreement and imposition of taxes and price of carbon emission, the companies and firms are found to have reduced carbon immensely. There is an increased focus on the companies in Carbon emission (Bourne et al., 2018). From the emission rate of 2005, there is a considerable decrease in the emission rate after the imposition of carbon taxes. The firms and consumer are found to have preferred the products which emit less carbon as the high emission products become costlier after the addition of carbon tax. In an automobile, agriculture, electricity, and stationery sector, the rate of emission decreased to a great extent with the search for alternative medium, and the use of sustainable technology. The companies have to bear the initial cost, but the company tool the sustainable path well after the implementation.

4. The demand for emission rights depends on the time horizon. In the short term, the demand for emission rights is likely inelastic because firms may not have many alternatives. Over time, however, demand becomes more elastic because more alternatives are developed. Illustrate the effects of an increase in carbon tax on emissions in the short run and the long run. Explain.

There is a growing concern about the demand for the right to carbon emission. The rights for the carbon emission will be provided as per the necessity of time and moment. The rise in air pollution and the unbearable limit suggest the situation impose the strict restriction on the emission project. The carbon right can be provided to the people with a trace of the permissible limit of carbon emission in the environment (Collins, 2019). Though the increase in carbon tax encourages the sustainability approach, but with the rise of alternative products affects the existing products deeply as the products’ demand will decrease, and there will be a dying demand of the product.

The end of the product’s demand will affect the company deeply. The companies and firms continue to demand the rights of the carbon as it will keep the demand for the product alive. The emission of carbon in the electricity sector in Australia is on the rise. The impact of this emission on the environment is grave and unbearable. With the imposition of the carbon tax, the demand for electricity decreased by 3.8% in 2014 (Bourne et al., 2018). The combined impact of the imposition of carbon tax brought about the significant decrease was in the carbon tax by 6-9 million tones. There is evidence of short term impact on the rise of the carbon. In the short term, there is a grave impact on the industry as the revenue decline significantly. The carbon emission requires a long term policy framework for long term growth (Gorman and Jotzo, 2014).

Question – 3

A carbon tax makes the individuals and firms to pay for the full social cost of carbon pollution. Do you think the carbon tax is a good policy to reduce greenhouse gas emissions in Australia? Why or why not? Whenever appropriate, you should supplement your answers with suitable diagrams. (Hint: What are the pros and cons of a carbon tax?)

Carbon tax in recent times is a huge burden on the individuals and the firms. The carbon tax is an added cost to the firms. The firm adds the carbon tax to the product, and the added cost increases the cost of the product. The firms add the carbon tax to the product and collect the tax directly from the public. The tax collection from the public and firm is an added burden. it is an unexpected cost, and therefore, the firms lose the competitive ability, and the alternative product's approval decreases the demand for the product.

The rise of the carbon quantity in the air has increased the carbon concentration in the air. The recent analysis depicts that the ecological balance is to be deeply affected. The imposition of a carbon tax over the firms and individuals is the best way to discourage the products which emit a high quantity of carbon. The carbon tax in any country of the world promoted large corporations to adopt the policy to decrease a large number of carbon-related products. The added cost is the way to discourage consumer to buy the carbon-emitting products. The Australian population depicts an excellent result with the rise of carbon. The imposition of carbon tax coincided with the development of green technologies. With the execution of the carbon tax in Australia, there is a significant change in carbon emission. It is found that there is a 14% decrease in carbon. Within a year, 75,000 traders paid carbon tax. The product cost becomes higher with the imposition of the taxes.

But the imposition of the carbon tax affected many businesses and the product's demand. the product's demand went down considerably. The traders failed to find the proper business situation to distribute the products. The demand for many products went down with the introduction of the carbon tax in Australia. Many businesses have taken their last breath due to the imposition of the carbon tax that added some cost to the initial cost. The customer hardly bought the product of a higher cost. Much business failed and the growth potential of the economy is deeply affected.

image shows Change after carbon price introduction

Figure: Change after carbon price introduction

Source: (Gorman and Jotzo, 2014)

The introduction of the carbon tax made the company conscious of the price and penalties that may be caused due to the evasion of the taxes. The quantity of carbon emission as it is found in 2006 degraded after the carbon tax imposition. The carbon tax made the company and firms aware of the extra cost. The federal government also took steps to make the public aware of the emission. It has decreased the rate of emission in a great way. Carbon emission on 14th June 2014 seems to have shown a downward trend as the graph depicts (Volkova et al., 2019). It is said that 10 carbon emission decreases come from the carbon price, and the 15% decrease comes from the other connected factors. The price of the electricity supply rose since 2000, but the introduction of old emission laws have increased the electricity cost in a great way. 

Pros of the carbon tax

  • Carbon tax helps to maintain an ecological balance as the carbon tax discourages the carbon-emitting product's sale.

  • It helps to reduce climate change. The concentration of carbon in the air is reduced considerably with the imposition of the carbon tax as the company starts using less the technology that emits carbon.

  • It encourages sustainable development. The company adopts a sustainable policy to use the technology which emits less carbon.

  • It also promotes sustainable technologies as the government encourages sustainable technology and approves funds for it (Pettinger, 2019).

  • Carbon is known to be a source of global warming. Carbon tax helps to prevent the process of global warming.

  • Carbon tax gives incentive to the companies which promote environmentally friendly products. it supports technologies which help in the improvement

Cons of the carbon tax

  • There is no way to measure the quantity of carbon produced by the company, and therefore, it is difficult to determine the carbon cost (Pettinger, 2019).

  • it is also not possible to determine the cost of carbon and the impact it will have on the future generation.

  • The firms often attempt to hide the carbon emission to avoid carbon tax.

Question – 4

Find two countries other than Australia that have implemented a market-based approach to control emissions such as carbon taxes and cap-and-trade schemes. Give a brief description of the emissions controlling policies in these countries. (Hint: Did these policies effectively reduce emissions in these countries?) Provide your views or suggestions on the best policy to reduce greenhouse gas emissions in Australia.

New Zealand’s and the United States have undertaken a marked based approach to reduce emissions. These countries have followed the cap-and-trade scheme to reduce the impact of emissions. Eleven states of the United States have adopted the policy to control; the emission of greenhouse gas. The U.S focuses on the removal of gasoline to avoid acid rain and another thing like smog. In the United States, the market-based approach enables the states to fight against climate change. The United States is well aware of the cost of climate change. Climate change will affect the sea level with a constant rise in global warming. The federal government has imposed the cost of carbon emission on businessmen and also provides an incentive to the businessmen to reduce the emission.

The business is providing an approach and opportunity to choose the alternative and take a different way to earn in a sustainable way. (Center for Climate and Energy Solutions, 2020) It also encourages innovating. “The costs of climate impacts are not reflected in the price of goods and services that emit greenhouse gases. Putting a price on those emissions gives businesses an incentive to reduce them” (Center for Climate and Energy Solutions, 2020 para -3). Market-based trade is a significant policy in the United States. A program of Cap-and-Trade was organized for sulfur dioxide that is a cause of acid rain in the U.S. The country spread the policy in 11 States.

The emission trading scheme of NZ has brought about significant changes in the trading policy of the country. The scheme seeks to reduce emissions. The businessmen are encouraged to adopt a sustainable policy. The landowners are provided incentives if they are planting trees on their lands. There is a policy in New Zealand that the foresters are provided with the unit their trees have absorbed. It is a policy in New Zealand that the business will report their emission directly to the government (Jones et al., 2018). The selected sectors that will report are agriculture, forestry, waste, synthetic and industrial process, stationary energy including industrial heating and electrical generation. The scheme has a wide impact on the firm and the individuals. it is also found that businesses will have to pay extra if it passes on the emission cost to the customers. There is an obligation placed on fossil fuels on those companies which import such fuels. The transportation cost becomes higher for companies without involving the millions of people.

The policies adopted by these companies focus on the reduction of emission, but despite the difficult norms of the countries have reported the rise of the emission in the world. There is a significant rise in emission throughout the world. The emission rise in these countries has affected the ecological balance in these countries. The air pollution in these countries is worse. In New Zealand, the emission rose to 19.6. The emission consists of methane (42.8%), CO2 (43.8), and nitrous oxide (11.6%) (Bourne et al., 2018). the rise of emission in the country depicts that policies adopted by these countries and ban imposes proved futile completely. it requires a strong policy to control air pollution and prevent global warming as the temperature is constantly rising. Though these countries have framed good policies to control air pollution, the impact of the policy seems to be ineffective in controlling the emission for a long time.

Climate has become a serious issue, and the authorities are required to take immediate action to effectively control emission and manage the emission to reduce the emission significantly. In order to reduce emission, some well standard policies are to be adopted:

  • The public awareness campaign is to be organized to control emissions. The awareness campaign will help to create an effective way to control emissions.

  • With the campaign, the individuals and firms will be able to set goals of emission. the firms and individuals will attempt constantly to reduce emission at regular intervals.

  • The individual and large corporation need to use fans and natural air rather than air condition. There need to reduce the number of refrigerators (Ministry for the Environment, 2020).

  • The electric vehicles industries need to be encouraged, and individual needs to encourage the use of electric vehicles.

  • The innovative strategy is to be used by the firms to use nuclear power (Pettinger, 2019).

  • Individuals need to use public transports. Policy is to be created for higher tax payment for using private vehicles. The Public transport system is promoted to encourage development.

  • Farming using sustainable technology needs to be encouraged and developed.

  • The Carbon tax policy needs to impose strictly. Green new deals are to be passed.

Reference List

Ahmed, K. and Ozturk, I., 2016. The emission abatement policy paradox in Australia: evidence from energy-emission nexus. Environmental Science and Pollution Research, 23(17), pp.17850-17856.

Volkova, L., Roxburgh, S.H., Surawski, N.C., Meyer, C.M. and Weston, C.J., 2019. Improving reporting of national greenhouse gas emissions from forest fires for emission reduction benefits: An example from Australia. Environmental science & policy, 94, pp.49-62.

Bourne, G., Stock, A., Steffen, W., Stock, P. and Brailsford, L., 2018. AUSTRALIA’S RISING GREENHOUSE GAS EMISSIONS. Australia: the Climate Council of Australia Limited, pp.5-34.

Center for Climate and Energy Solutions, 2020. Market-Based Strategies | Center For Climate And Energy Solutions. [online] Center for Climate and Energy Solutions. Available at: <https://www.c2es.org/content/market-based-strategies/> [Accessed 23 April 2020].

Collins, P., 2019. How Not To Introduce A Carbon Tax: The Australian Experience. [online] The Irish Times. Available at: <https://www.irishtimes.com/news/environment/how-not-to-introduce-a-carbon-tax-the-australian-experience-1.3746214> [Accessed 23 April 2020].

Ministry for the Environment, 2020. About The New Zealand Emissions Trading Scheme | Ministry For The Environment. [online] Mfe.govt.nz. Available at: <https://www.mfe.govt.nz/climate-change/new-zealand-emissions-trading-scheme/about-nz-ets> [Accessed 23 April 2020].

O'Gorman, M. and Jotzo, F., 2014. Impact of the carbon price on Australia's electricity demand, supply and emissions. Crawford School of Public Policy, The Australian National University CCEP Working Paper, (1411).

Pettinger, T., 2019. Carbon Tax- Advantages And Disadvantages - Economics Help. [online] Economics Help. Available at: <https://www.economicshelp.org/blog/glossary/carbon-tax/> [Accessed 23 April 2020].

Jones, G., Curran, M., Deschaseaux, E., Omori, Y., Tanimoto, H., Swan, H., Eyre, B., Ivey, J., McParland, E., Gabric, A. and Cropp, R., 2018. The flux and emission of dimethylsulfide from the Great Barrier Reef region and potential influence on the climate of NE Australia. Journal of Geophysical Research: Atmospheres, 123(24), pp.13-835.

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