Carbon Tax approach
Discuss about the Australia Carbon Pricing Strategies.
The transport sector is one of the highest emitters of the greenhouse gas emissions globally. In Australia, constant reforms put in place ensure that the industry responds to climate change effects appropriately (Sleveks, 2017). Through efficiency in energy use, sustainability and low cost plans, the sector develops strategies that reduce per ton emissions. Initial plans under the Carbon Tax initiative targeting the reduction of carbon gases proved ineffective calling for new commitments under the Direct Plan. The 2012 Carbon tax had a goal of fixing green energy release for the present and the future. This was a mitigating plan had implementation challenges. The failure of its response mechanism led to the Direct Action Plan with higher goals, new reduction targets, a national greenhouse gas inventory, and proposed reduction targets. A review of this shift in climate change policies indicates gaps in the projections with higher than expected increases in the magnitude of emissions (Department of Environment and Energy Resources, 2017). This case study presents policy changes in a high demand logistics industry featuring Kuenhe Nagel a globally recognized logistics company concerned with sea, air and land transport ( Kuenhe + Nagel, 2018).
Reiterating the words of Sir Nicholas Stern, climate change is a human risk depicted by negative effects such as abnormal increases in temperature, droughts, floods, reduced rainfall, extreme weather changes at sea levels (Elliot, and Stewart, 2013). These factors are on the increase raising concerns to be addressed by governments nationally and at the local level. In order to devise solutions, adaptation governments come up with adaptation strategies based on intent (deliberate policies), timing (appropriate observation), and agents of implementation. The Grantham Research Institute on Climate Change reports that reduction in carbon taxes have an incredible reduction on emissions than tradable permits because it reflects on the production cost of transport fuel, production margins and added excise tax (Anderson, 201). The institute further highlights that the behavioral response is critical in the control of consumption of fuel or carbon production rates. Effective adaptation is therefore productive and involves markets plus sound decision making processes. An Industry based strategy leads to a trickledown effect within the transport system featuring the aviation, road, maritime and railway industries capitalizes on this strategy. The image below shows a summary of this interaction.
In order to understand the difference between the Carbon Tax initiative and the Direct Action Plan it is important to grasp the depth of the increasing demands in the transport sector. An industry specific solution looks at a systems approach to the reduction of greenhouses for sustainable policies (Chu, Duncan, Papachristodoulou and Hepburn, 2013). Carbon Tax approaches in a logistics company like Kuenhe Nagel considers the performance strategies, implementation process, energy efficiency and the best design process. In this plan, its Corporate Social Responsibility would addresses innovative solutions such as the use of green fuel products. The carbon tax approach addresses problems such as an increment in fuel consumption hence increased greenhouse emissions.
- Government set fees per transport unit with signals reflecting across different sectors with relative stabilization of the C price. In this case, the total amount of emissions is uncontrollable
- Taxation in petrol prices for marginal damage lowers which means business companies were expected to lower their emissions to an affordable level. This stimulates technology advancement for lower emissions.
- Businesses engage in the scrutiny of the carbon tax emissions from its freight systems raising questions about the right amount of carbon tax with incentives that reduce bad emission while generating revenue. This becomes critical when setting the optimal tax elements.
- Opportunities for revenue increase through cost reduction and effective approaches
Impact of the Climate Change Policies
By considering emissions from the road and non-road industries Kuenhe devises competitive models that address greenhouse effects. This method causes variations in the targeted emissions and the predicted carbon plan targets climate change impacts through reduction of emissions from aggregate contributions hence its failure to meet global expectations (Smyth, 2014). The nationwide control emissions and clean energy based on tax per tonne carbon dioxide reduction was conducive for low and middle income households. Reduced pollution in a growing economy calls for market based solutions. The Carbon Act targeted the reduction of emissions through industries by supporting programs and stakeholder impacts. However, this plan culminated to further challenges such as deficiency in efficient technology and incentives for individual players (Spurr, Forsyth, and Dwyer, 2012). For example neutralizing greenhouse effects through commercial vehicles for Kuenhe requires invests in systems technology for fleet management hence the fee per transport would be expensive.
Instead of a coalition plan, propagated by the Carbon Act the direct plan shows same level of emissions across a reduction point. This is beneficial for the urban centers which face adverse effects of climate change from the transport sector (Toffel and Jira, 2013). Large emissions from heavy engine vehicles used by Kuenhe call for permits that state the per tonne emissions. In this strategy, the government intervenes in lowering emissions through businesses. A scrutiny of company records fills in the gaps by monitoring emissions and auditing firms. It allows for variations in aggregate amount of carbon but fixes the emissions. This leads to a high level of emission reduction and a volatile price C. Direct Action supports has permit allocation which allows the company to manage its challenges through sustainability in:
- Project allocation like in the management of truck emissions determined by past emissions and emission for more permits. The government in this case targets a green approach to targets in the past, present and future strategies.
- The Emission reduction fund like free engines and freight transportation supply chains (Chu, Duncan, Papachristodoulou and Hepburn, 2013).
- Reversed auctioning through subsidies that encourage high bidders while rewarding the use of higher C technologies
- Lowering of incentives for market players means the industries could use efficient reduction plans for less pollution
The Melbourne Climate Change Adaptation Strategy (2017) highlights risk factors such as heat waves in climate change to point out adaptation strategies required for industries. Although ETS had flexibility and included banking and international credits, common price for countries and revenue recycling it had challenges like compliance, costs rebating and reduced technology. The new strategy recognizes leadership when addressing changes in climate change. Adopting the principles of direct action it applies innovation, knowledge sharing and specific solutions for the wider community as shown in the figure below.
ETS supports instability of the C price but the creation of a free market system allows firms to implement their own plans (Christoff, 2015). This gives companies in the transport sector a high level of emission reduction plans depending on their intention. Flexibility with the C permit means that the emitter determines their price but transparency in the MVR reporting system is advisable. This policy approach has potential for higher revenues and calls for changes in infrastructure. This plan encourages non-government partners’ participation in an economy wide scheme of greenhouse reduction activities.
The market plan is simplified and gives incentives to businesses because companies focus on paying for processes instead of overall costs. Market Based mechanisms to greenhouse gas emissions such as putting price on carbon, creating changes in behavioral factors and, redefining the C tax ETS is necessary for regulating climate change risks (Toffel and Jira, 2013, p. 4). Australia has reduction strategies with huge targets such as the 2030 plan which requires reduction of up to 28% of the 2005 level of emission. The country’s ambitious target plans call for cooperation in average carbon increases. Annual carbon pricing in Australia indicate gaps in reaching the target. At the moment Australia is achieving about 45% of this target reduction (Christoff 2015). A concerted effort is appropriate because all stakeholders participate. Renewable energy is a critical boost for the transport sector. Kuenhe as a global entity stands to gain through efficiency that reflects across its business units. Carbon pricing is preferable because of economic efficiency and environmental effectiveness. Improving carbon pricing through emission trading and taxation is a challenge because of the free market challenges such as lack of transparency.
Evidence of the carbon tax policy failure in regions like New Zealand raises questions about its effectiveness in taming emitters (Thomas, 2014). It also hinders effective participation (Anderson, 2017). Strengthening market based policy instruments supports stakeholder engagements through the reduction of emissions. Emulating a cost effective approach like the EU ‘cap and trade’ model works for the transport sector because of its fair application and flexibility (Ellerman, Marcantonini and Zakla, 2016). It has shown results in the aviation sector where industry installations have proven effective. The ETS has challenges because of costs, equity distribution and integrity questions. The emission trading scheme limits opportunities and incentives on tax reduction, efficient outcome. What’s more, the social cost of carbon is on the rise. Kuenhe is in the freight transport sector where profitability depends on reduced wastes in the supply chain and advanced technology. The direct action plan supports this agenda. There are structural challenges such as congestion and fuel efficiency which the Carbon Tax approach could address effectively. However, it needs a meaningful approach that involves behavior changes and individual participation. Fuel Consumption and Uncertainties within reduced vehicle operating costs create gaps.
Research points out the need to handle market forces and encourage renewable energy when addressing climate change issues (Elkington, 2013). The rationale and the theoretical underpinnings of the nationwide Carbon Tax compared to the Direct Action Plan reveals gaps. In it is the need for a national, and industry based involvement within a transparent framework. This complex supply chain requires a multi sectorial approach to strategies. In the global scene major challenges lie within the implementation plans. The logistics industry involves a high number of suppliers which calls for shared responsibilities. Accountability through responsibilities is one way to address adaptability challenges (Benn, Edwards and Williams, 2014). Shifting from private to public modes means incorporates collective change including a shift in consumer preference. Kuenhe Mahel as a global logistics company has to make use of vehicle technology but this is more effective for light vehicles. The use of fuel consumption labels, green vehicle strategies and fiscal measures may not be effective for commercial vehicles. The application of fuel tariffs on luxury cars is complicated because of performance challenges leading to indirect effects. Electric vehicles and alternative energy sources may not work in all transport and logistics businesses which further complicate the direct action plan (Sleveks, 2017). Command-control approaches in the ETS encourage efficient allocation of pollution factors but setting standards is a challenge. The emission charges in form of tax and controlled pollution leads to higher taxation but may not necessarily reduce pollution.
Conclusion
Addressing climate change issues through policy mechanisms calls for effective strategies. Policies require proven record to stand. The introduction of the Carbon Act in 2012 targeted the reduction of carbon emissions and increased use of renewable energy. The transport sector is one of the highest emitters. International commitment to reduced climate change effects call for stakeholder participation and cooperation. Although the Carbon Tax policy started off well it had deficits like missed targets. However, its replacement, the Direct Action plan designed for low cost and greater reduction of emissions shows no major changes. Challenges such as uncontrollable consumption rates and politics in the market system are hard to control. Climate research brings out the need to handle market forces and encourage renewable energy use when addressing climate change issues. Compared to carbon tax, the Direct Action Plan shows improvement in environmental effects. However, failure to address this issue effectively means the policy has gaps. Further developments to focus on the exiting gaps present implementation challenges, especially when the stakeholders in the industry show unwillingness to make adjustments.
References
Anderson, J., (2017, March). Cars, carbon taxes and Co2 Emissions. Grantham Institute on Climate Change and the Environment. Working Paper 21
Ben, S., Edwards, M., Williams, T., 2014. Organizational change for corporate sustainability. Routledge
Christoff, P., 2015. Australia’s climate targets still out of reach after second emissions auction. The Conversation. Available at<https://theconversation.com/australias-climate-targets-still-out-of-reach-after-second-emissions-auction-50519>
Chu, B., Duncan, S., Papachristoulou, A., Hepburn, C., (2013). Analysis and control of sustainable policies for greenhouse gas emissions. Applied Thermal Engineering. Available at <https://www.sciencedirect.com/science/article/pii/S1359431112002657>
City of Melbourne, 2017. Climate Change Adaptation Strategy. Melbourne City Available at <https://www.melbourne.vic.gov.au/about-council/vision-goals/eco-city/Pages/climate-change-adaptation-strategy.aspx>
Department of Climate Change and Energy Resources. (2017). Greenhouse gas emissions from Australian Transport: Projections to 2020. Bureau of Information, Transport and Regional Economics, Working Paper 73. Available at<https://www.environment.gov.au/climate-change/publications/final-report-review-of-climate-change-policies-2017
Ellerman, A., Marcantonini, C., and Zaklan. A., 2016. The European Union emissions trading system: ten years and counting. Review of Environmental Economics and Policy, 10 (1), pp., 89-107
Elliott, L., Stewart, H. (2013). Nicholas Stern: ‘I got it wrong on climate change-its far worse’. The Guardian, Available at < https://www.theguardian.com/environment/2013/jan/27/nicholas-stern-climate-change-davos>
Elkington, J., 2013. Enter the triple bottom line. In, The triple bottom line (pp. 23-38). Routledge
Kuenhe +Carbon Tax approachNagel, 2018. Kuenhe + Nagel. Available at <https://home.kuehne-nagel.com/
Miller, D., (2014). What is the coalition’s direct action climate change policy? ABC News Available at <https://www.abc.net.au/news/2013-12-20/coalition-climate-change-direct-action-policy-explained/5067188>
Sleveks, M. (2017, Dec 10). Australia’s greenhouse gas emissions highest on record. The Guardian, Available at<https://www.theguardian.com/environment/2017/dec/11/australias-transport-emissions-in-past-year-the-highest-on-record>
Smyth, J., (2014, July 17). Australia abolishes tax on carbon emissions. Financial Times. Available at <https://www.ft.com/content/d852822a-0d67-11e4-bcb2-00144feabdc0>
Spurr, R., Forsyth, P., Dwyer, L., 2012. Economic Impacts of a Carbon tax on the Australian Tourism Industry. Journal of Travel Research. Vol 52 (2), pp., 152-155
Thomas, S. (August 5, 2014). Carbon Pricing is still the best way to cut emissions, if we get it right. The Conversation. Available athttps://theconversation.com/carbon-pricing-is-still-the-best-way-to-cut-emissions-if-we-get-it-right-29894
Toffel, W, M., Jira, C, F., (2013). Engaging supply chain in climate change. Manufacturing & Service Operations Management, p, 1-19
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