No pain, no gain: compensation ruins carbon tax

ANYONE who thinks the proposed carbon tax is mainly about the environment is mistaken. That may have been where the debate started. But due to political pressure on the minority government, it has morphed into an exercise in wealth redistribution, not environmental action. And Labor has many environmental groups and advocates fooled.

Because Labor can't afford to lose seats at the next election (in fact, it needs to win seats to gain a majority), but also has to be seen to be doing something as a government, it is trying to convince voters it is acting on the environment while also compensating them for that action to a point where the action itself becomes meaningless.

Cate Blanchett is a fine actor, and as Coalition MPs have said -- before launching scathing attacks on her -- she is certainly entitled to her opinion. Blanchett is also entitled to use her hard-earned fame to spruik ideas and policy positions that matter to her. And the third parties that have funded the pro-carbon-tax campaign Blanchett is part of -- GetUp, the ACTU and the Australian Conservation Foundation -- are entitled to approach her to help.

There is nothing wrong with such campaigns. After all, the miners campaigned against the super-profits tax, and retailers and the tobacco industry are campaigning against plain packaging of cigarettes. What's wrong with individuals doing the same?

What I question, however, is the value of Blanchett taking part in a campaign aimed at convincing ordinary voters of the carbon tax's merits. I am not sure an actor of her international standing is the best person to front a campaign that affects the cost of living. It contrasts sharply with the very impressive campaign against Work Choices the union movement organised with voices from real workers under threat from the Howard government's laws in the lead-up to the 2007 election.

For that matter, I wonder whether Blanchett has thought things through. Blanchett is no dummy. She completed a degree in economics before deciding acting was her calling.

However, the logical thinking necessary for an economics degree seems to have deserted Blanchett on this matter.

She has been blinded by her passion for environmental action on climate change. Consider the interview she gave yesterday to a rival newspaper.

Blanchett said "everyone will benefit if we protect the environment". Yes, but does a carbon tax do that? It won't if it causes no fiscal pain to consumers, because the whole point of a carbon tax is that it creates a price pressure on the use of dirty energy, thereby encouraging consumers and businesses to change their ways.

But Blanchett also wants to be the people's princess -- in the interview she said her support for a carbon tax was conditional on "generous assistance" for low- and middle-income earners. She has fallen for the trickery of the carbon tax and her own attempt to stay popular when advocating it.

Take with one hand (carbon tax), give with the other (compensation). The result? No price pressure or incentive for people to change their energy use.

Make no mistake, when the carbon tax is applied to businesses, they will pass on that cost to consumers to maintain their profitability. Consumers will tolerate that price rise if they are rich, and go on burning energy but simply pay more. Mainstream voters and the disadvantaged will secure generous compensation from the government (don't believe Tony Abbott when he says otherwise), which will allow them to keep consuming dirty energy without changing their ways.

The government may claim there is pricing pressure, regardless of compensation, because polluting companies will have to raise prices, but the carbon tax would have to be much higher to have a real effect.

What does all of this add up to: wealth redistribution with little impact on the environment unless the compensation is rescinded and consumers are thereby forced to change their ways -- or unless the price on carbon goes up quickly and the compensation packages don't.