A report by the Climate Institute says that if Australia does not make a tax on carbon emissions it could lose up to $3.6 trillion in annual tax revenue, a “disaster”.
The report by climate and energy economist David Whiteford, published on Tuesday, argues that the “disincentive to emissions from existing businesses” and “incentive for emissions from non-renewable industries” would result in a “double whammy” for the country.
“The biggest losers in the carbon price system will be businesses and consumers who are already struggling to adapt to climate change,” Mr Whiteford said.
“[They will] have to cut costs, and consumers will have to spend more, which will cause them to spend less.
This will push up the cost of goods and services, and potentially the cost to society.”
“In return, businesses will likely invest more in renewable energy, and people will spend less on fuel.
The carbon price will make these costs less accessible, but they will still be high and it will put pressure on households to cut back on energy and food.”
The analysis was released ahead of a parliamentary committee hearing into the tax, due on November 25.
If Australia does make a “carbon tax”, Mr Whitefords research found that a tax of 10 per cent of emissions would raise $2.8 trillion over the life of the legislation.
Under the current rules, Australia has the lowest emissions-reduction target of 25 per cent.
A carbon tax would likely be higher, but the research found the revenue would still be less than the $3 trillion the Government hopes to raise from the measure.
Mr Whiteford warned that the current tax system would have to be modified to make the system more effective, noting that Australia already has a carbon price that is 20 per cent lower than the US.
It is not clear how Australia would pay for a tax, with some experts saying the Government should have a “public subsidy” to encourage businesses to increase emissions.
However, other experts have suggested a carbon rebate could be an option to encourage more business to switch to renewable energy.
In a statement on Tuesday afternoon, the Climate Council said the Climate Commission “should continue to work towards a comprehensive and fair carbon pricing system that takes into account the costs and benefits of emissions reduction”.
“Australia needs to move beyond its current carbon pricing regime and develop a sustainable and effective carbon market system, with a range of different taxes, fees and rebates that would be effective and fair,” the statement said.