[This is part three of a three part post on the Greens Eco-Tax Policy]
The basic promise of the Eco-Tax is to shift taxes away from traditional sources and tax the things that damage the environment. Taxing the "bads".
Taxing the bads suits Green philosophy well, and with AGW seemingly accepted by the bulk of the Western population, they now have some kind of justification to implement their policy.
The big question then is how effective will it be to shift taxes to pollution? What is the rationale? Firstly, the Greens believe increased pollution taxes reduces consumption of goods that have high pollution content. Secondly, pollution taxes provides incentives to save tax money by reducing pollution. Thirdly, pollution taxes generate direct revenue to fund environmental R&D and clean-up costs.
Finally, the overall effect of this taxation policy, in combination with other Green policy should aim to reduce pollution to the point where we no longer pollute at all.
The Eco-Tax Targets
What are these targets? A failing of their Eco-Tax submission is that the Greens do not quantify the results they expect to achieve in NZ for each of their tax policy suggestions. I'd characterize the submission as a "concept paper", suggesting the way forward must incorporate Eco-Tax as well as general tax reform. It does borrow a few examples from various EU countries, and uses their experiences as an implied guideline as well as an indicator of the results they expect.
The Greens talk about "shifting taxes" and they also talk about generating extra revenue for clean-up costs. What really hits home then with their entire Eco-Tax strategy is that they don't quantify exactly how many billions of dollars they ultimately expect to raise by Eco-Tax.
In the absence of stated targets in the Green's Eco-Tax submission, it is fair to assume the Kyoto targets would be a minimum standard. The Greens have stated full support Kyoto for phase one (period 2008-2012) and phase two commitments (period 2013-2018).
From my limited reading of what the EU is up to and Climate Change lobby groups want, the call is for a 20-30% reduction of greenhouse gases by 2020, and up to an 80% reduction by 2050. And these targets generally use a baseline of 1990 figures! As at 2005, I understand NZ has increased its CO2 emissions since 1990 by at least 10%, so our target would probably be higher.
Given the tax submission is dated 2001, I think it time they updated the document to acknowledge the revised goals of the various AGW groups and the messages in the Stern report.
So when we examine the Green's Eco-Tax policies, we would be expecting policies that are going to generate a reduction in CO2 and other greenhouse gases in NZ by at least 30% within the next 12 years. Just how easy would it be to reduce gases by this much? One thing is clear. If people think that all is required is using less shopping bags, installing solar heating units, insulating their home, using public transport "more" and investing in Wind Farms, they will have a nasty shock.
Eco-Tax Suggestions
Here's the policy suggestions I found in the Greens Eco-Tax submission:
* Setting up an Eco-Tax Commission to investigate more Eco-Tax sources
* Offset Eco-Taxes with a tax free threshold (initially, $5K phased in over 3 years)
* An increase in diesel excise (minimum 18.7 cents per litre)
* A low-level carbon charge of $10/tonne of CO2
* Taxes on waste to landfill
* Taxes on hazardous substances and pesticides (suggested three rates based on toxicity level; +3%, +25% and +54%)
* Natural Resource Rentals, eg fisheries and minerals (expected to at least double current quota rates)
* Taxes on non-renewable Energy production
* Targeted assistance for renewable energies
* Targeted assistance for organic farming
* Taxes on packaging
* Bio-security levy on agricultural imports.
* Extra taxes on imports produced in an environmentally unfriendly way.
Suggestions already discussed in Part II:
* Overhaul of the benefits system [pg 52]
* Introduce a Universal Income or Guaranteed Minimum Income (UI/GMI) [pg 52]
* Introduce a comprehensive capital gains tax [pg 54]
* Tax capital movements in and out of New Zealand (tobin tax)[pg 55]
* Restructuring the Govt Super fund to invest "in New Zealand" [brochure]
* Across the board tariffs on imports (+5 to 10% on all imports) [pg 56]
* An Arrival Levy to complement the current Departure Levy [pg 57]
* Increase in tax deductibility of donations to communities [pg 2]
My initial impression of this list is that the three year phase in period of a $975 tax rebate, in exchange for up to one billion dollars in Eco-Tax inputs will do next to nothing to curb emissions (see part I). Therefore, we need to look deeper into these policies and see what kind of tax levels and other actions would be required to effect change.
Another Government Department
As one would expect with the Greens, they suggest the creation of a new government department (perhaps "the Eco-Tax Commission" or ETC?) to work out the details around an Eco-Tax foundation, and to find more Eco-Tax policies.
Looking through the Green website, they unfailingly suggest more study, more analysis and more reviews for just about everything. It leaves me with the impression that they think they know what they want, but they aren't really sure they know how they'll do it, other than this broad-brush approach to taxing the "bads".
Small Change Policies
Several of their policies amount to small change in terms of revenue raising. I don't see them as providing realistic tax replacements, and the Eco-Tax Submission doesn't do a good job of changing my view. Having a 3%,25%,54% tax on pesticides and toxic items for example, or charging more for waste to landfill seem to be a mild effort to encourage alternatives. But are these rates enough? If the rates go too high (such as landfill waste charges, we might simply find illegal dumping skyrockets, and even a small percentage of illegal dumping could be enough to do a disproportionate amount of environmental damage. We might spend more money than we are collecting to provide better recycling options.
Price Increases Compounded
Some of these policies in themselves may be OK, but some compound to increase costs considerably. I presume the Greens realise this. For example, putting a default 10% import tax on foreign goods will raise the price of imports like computers, which are not economical to produce in NZ anyway. Then taxing currency movements will mean paying for the goods pushes the price up further. Then taxing the computer boxes with Styrofoam cushioning to survive freight will increase the price again, and then taxing the goods based on the fact they were made in a "polluting process" adds further cost, and the freight miles tax and increased diesel road charges adds yet more cost. This would happen across the board. Will companies simply downsize their NZ head offices and move offshore to manage the NZ operations?
Eco-Tax and Kyoto: Climate Change Strategy
Additionally, there is no indication within their Eco-Tax document on how they also meet our Kyoto payments (currently estimated at 1.5 billion??). Do the Kyoto payments come out of the surplus, or via a new petrol tax? The Eco-Tax document states that the Greens see carbon credit trading compatible with their Eco-Tax policy. In other words, we can do it both at the same time. Are we sure?
The Greens climate change combat strategy is (briefly):
* Support the Kyoto Protocol targets (2008-2012 targets and 2013-2018 targets)
* Move freight from trucks to rail and coastal shipping
* Move personal transport from cars to public transport, cycling, car pooling and walking.
* Introduce, and progressively increase, fuel efficiency standards for motor vehicles entering the country.
* Oppose any additional use of coal
* Support the establishment of permanent forests
* Support a carbon tax as part of a system of ecological tax reform
* Ban or cost out trade in low value goods sourced from overseas
* Abandon Free Trade Agreements and only buy what we need
* Reduce food imports
* More training courses on low energy sustainable farming
* Increased use of wood, including as a fuel source from locally grown timber
* Reduce tourism volume but "persuade" them to spend more on the visit
Some of these initiatives may be driven by more than taxing the activity out of existence, but you have to wonder how they will convince people to bike to work, or move closer to their job without law changes or excessive tax. What are the things that are in the category "buy only what we need"?
They are convinced oil prices will rise steadily anyway, but it hardly seems a major world saver to "double the efficiency of our car fleet over the next ten years". Although I'm not sure if they mean the government fleet, or all the cars in NZ.
I note also that the Greens do not support nuclear power, and barely tolerate hydro power. This reduces options for renewable energy generation. Currently, that would just be natural gas and wind power. Further down the track, perhaps Solar and Tidal. Coupled with proposed higher taxes on non-renewable energy sources, this could hit industry pretty hard.
Greenhouse Gases
Looking at the table above (source:UIC), whatever the plan is, it looks 80% of the problem is going to be resolved by serious cuts to CO2 and methane. Any plans have to show how we could seriously curtail both of these gases to have any impact on total output.
Eco-Tax dangers
The dangers in an Eco-Tax approach are that the costs will fall harder on the low income earners. Energy consumption and car costs use up a higher proportion of the low income earner's pay packet. Food costs are affected by freight charges. Not everyone lives right next door to an organic farmers market. This is why the Greens are suggesting a zero tax threshold and a Universal Income. However, is the threshold enough and is the reality a further increase in tax rates for the middle and higher income brackets?
It is a question of how much "polluting" services and goods charges increase on items that are considered essential. If a car is essential to get to a job or because the person lives outside of public transport areas, or due to physical disability etc then doubling the petrol costs and banning cars older than 10 years is going to hurt these people considerably.
Another danger is that certain industries and types of work simply move offshore, where it is cheaper to pollute, or cheaper to operate. This has an effect on jobs and the economy and transitioning NZ to a "new economy" may be overly painful with this approach. Their Eco-Tax policy did not seem to have any counter-balancing carrots on offer to businesses.
So what is enough?
I'm left unconvinced that what the Greens are proposing is enough to cut CO2 emissions, based on the Eco-Tax figures they outline. For example, I'd expect they would have better flexibility to offer a zero amount of tax on the first $20,000 and set up Eco-Taxes to shift the 4 billion or so hole this would create. They could then put some kind of price estimates to review against a more sizable figure.
I'm also a bit wary that their various policies will not by deliverable without further cost. As they cut back on road building, in favour of rail, they deny the possibility the roads could all be overfilled in 30 years time with personal vehicles powered by zero-pollution energy.
If they really want to halve CO2 pollution, does it mean a tripling in petrol prices, and forcing carless days or distance quotas per week based on the fuel efficiency ratings of the vehicle? If they are encouraging car pooling, is that simply by taxing petrol at the pump or by passing laws that single driver trips are illegal?
Their idea is easily understood, but their policies don't clearly explain to me how their plan takes NZ from 75 million tonnes of C02 per year to NIL.
And meanwhile, there is every chance we will continue to innovate, cleanse, recycle our way into the future just as we have been, with or without the Greens. If the issue is as urgent as they claim, and it is important for NZ to lead the way in spite of the fact that our contribution will be as nothing compared to India, China , the EU and the USA, then I would really like to see their ideas developed further. The winds of change are indeed blowing, but at this point, the Greens Eco-Tax policy is just a bit of hot air.
Related Links:
The Green's Eco-Tax Reform Policy Overview
The Green's Ecological Tax Reform Policy Submission [PDF]
State of the Planet 2005
Greens Eco-Tax: Part I - The Sweetener
Greens Eco-Tax: Part II - It's about the environment
Global Warming - The Science
Note: I realise that their various policy documents may promise fundamental changes to the way we go about business and life in NZ. They may discuss the implied costs and the funding requirements in each of those policies, without reference to their tax policy. I haven't read them all yet. Greenies are welcome to extend the debate so we can look at the proposals as a whole.
[Reprinted from a Sir Humphrey's post Jan 2007]
Update 2008: It seems the old submission documents are no longer available, so the links don't work. I will look for alternate copies. However, I have located a Greens Business Tax Review (Sep 2006) that may update some of this information, and I'll review this soon (Perhaps end of Jan 2008)
The basic promise of the Eco-Tax is to shift taxes away from traditional sources and tax the things that damage the environment. Taxing the "bads".
Taxing the bads suits Green philosophy well, and with AGW seemingly accepted by the bulk of the Western population, they now have some kind of justification to implement their policy.
The big question then is how effective will it be to shift taxes to pollution? What is the rationale? Firstly, the Greens believe increased pollution taxes reduces consumption of goods that have high pollution content. Secondly, pollution taxes provides incentives to save tax money by reducing pollution. Thirdly, pollution taxes generate direct revenue to fund environmental R&D and clean-up costs.
Finally, the overall effect of this taxation policy, in combination with other Green policy should aim to reduce pollution to the point where we no longer pollute at all.
The Eco-Tax Targets
What are these targets? A failing of their Eco-Tax submission is that the Greens do not quantify the results they expect to achieve in NZ for each of their tax policy suggestions. I'd characterize the submission as a "concept paper", suggesting the way forward must incorporate Eco-Tax as well as general tax reform. It does borrow a few examples from various EU countries, and uses their experiences as an implied guideline as well as an indicator of the results they expect.
The Greens talk about "shifting taxes" and they also talk about generating extra revenue for clean-up costs. What really hits home then with their entire Eco-Tax strategy is that they don't quantify exactly how many billions of dollars they ultimately expect to raise by Eco-Tax.
In the absence of stated targets in the Green's Eco-Tax submission, it is fair to assume the Kyoto targets would be a minimum standard. The Greens have stated full support Kyoto for phase one (period 2008-2012) and phase two commitments (period 2013-2018).
From my limited reading of what the EU is up to and Climate Change lobby groups want, the call is for a 20-30% reduction of greenhouse gases by 2020, and up to an 80% reduction by 2050. And these targets generally use a baseline of 1990 figures! As at 2005, I understand NZ has increased its CO2 emissions since 1990 by at least 10%, so our target would probably be higher.
Given the tax submission is dated 2001, I think it time they updated the document to acknowledge the revised goals of the various AGW groups and the messages in the Stern report.
So when we examine the Green's Eco-Tax policies, we would be expecting policies that are going to generate a reduction in CO2 and other greenhouse gases in NZ by at least 30% within the next 12 years. Just how easy would it be to reduce gases by this much? One thing is clear. If people think that all is required is using less shopping bags, installing solar heating units, insulating their home, using public transport "more" and investing in Wind Farms, they will have a nasty shock.
Eco-Tax Suggestions
Here's the policy suggestions I found in the Greens Eco-Tax submission:
* Setting up an Eco-Tax Commission to investigate more Eco-Tax sources
* Offset Eco-Taxes with a tax free threshold (initially, $5K phased in over 3 years)
* An increase in diesel excise (minimum 18.7 cents per litre)
* A low-level carbon charge of $10/tonne of CO2
* Taxes on waste to landfill
* Taxes on hazardous substances and pesticides (suggested three rates based on toxicity level; +3%, +25% and +54%)
* Natural Resource Rentals, eg fisheries and minerals (expected to at least double current quota rates)
* Taxes on non-renewable Energy production
* Targeted assistance for renewable energies
* Targeted assistance for organic farming
* Taxes on packaging
* Bio-security levy on agricultural imports.
* Extra taxes on imports produced in an environmentally unfriendly way.
Suggestions already discussed in Part II:
* Overhaul of the benefits system [pg 52]
* Introduce a Universal Income or Guaranteed Minimum Income (UI/GMI) [pg 52]
* Introduce a comprehensive capital gains tax [pg 54]
* Tax capital movements in and out of New Zealand (tobin tax)[pg 55]
* Restructuring the Govt Super fund to invest "in New Zealand" [brochure]
* Across the board tariffs on imports (+5 to 10% on all imports) [pg 56]
* An Arrival Levy to complement the current Departure Levy [pg 57]
* Increase in tax deductibility of donations to communities [pg 2]
My initial impression of this list is that the three year phase in period of a $975 tax rebate, in exchange for up to one billion dollars in Eco-Tax inputs will do next to nothing to curb emissions (see part I). Therefore, we need to look deeper into these policies and see what kind of tax levels and other actions would be required to effect change.
Another Government Department
As one would expect with the Greens, they suggest the creation of a new government department (perhaps "the Eco-Tax Commission" or ETC?) to work out the details around an Eco-Tax foundation, and to find more Eco-Tax policies.
Looking through the Green website, they unfailingly suggest more study, more analysis and more reviews for just about everything. It leaves me with the impression that they think they know what they want, but they aren't really sure they know how they'll do it, other than this broad-brush approach to taxing the "bads".
Small Change Policies
Several of their policies amount to small change in terms of revenue raising. I don't see them as providing realistic tax replacements, and the Eco-Tax Submission doesn't do a good job of changing my view. Having a 3%,25%,54% tax on pesticides and toxic items for example, or charging more for waste to landfill seem to be a mild effort to encourage alternatives. But are these rates enough? If the rates go too high (such as landfill waste charges, we might simply find illegal dumping skyrockets, and even a small percentage of illegal dumping could be enough to do a disproportionate amount of environmental damage. We might spend more money than we are collecting to provide better recycling options.
Price Increases Compounded
Some of these policies in themselves may be OK, but some compound to increase costs considerably. I presume the Greens realise this. For example, putting a default 10% import tax on foreign goods will raise the price of imports like computers, which are not economical to produce in NZ anyway. Then taxing currency movements will mean paying for the goods pushes the price up further. Then taxing the computer boxes with Styrofoam cushioning to survive freight will increase the price again, and then taxing the goods based on the fact they were made in a "polluting process" adds further cost, and the freight miles tax and increased diesel road charges adds yet more cost. This would happen across the board. Will companies simply downsize their NZ head offices and move offshore to manage the NZ operations?
Eco-Tax and Kyoto: Climate Change Strategy
Additionally, there is no indication within their Eco-Tax document on how they also meet our Kyoto payments (currently estimated at 1.5 billion??). Do the Kyoto payments come out of the surplus, or via a new petrol tax? The Eco-Tax document states that the Greens see carbon credit trading compatible with their Eco-Tax policy. In other words, we can do it both at the same time. Are we sure?
The Greens climate change combat strategy is (briefly):
* Support the Kyoto Protocol targets (2008-2012 targets and 2013-2018 targets)
* Move freight from trucks to rail and coastal shipping
* Move personal transport from cars to public transport, cycling, car pooling and walking.
* Introduce, and progressively increase, fuel efficiency standards for motor vehicles entering the country.
* Oppose any additional use of coal
* Support the establishment of permanent forests
* Support a carbon tax as part of a system of ecological tax reform
* Ban or cost out trade in low value goods sourced from overseas
* Abandon Free Trade Agreements and only buy what we need
* Reduce food imports
* More training courses on low energy sustainable farming
* Increased use of wood, including as a fuel source from locally grown timber
* Reduce tourism volume but "persuade" them to spend more on the visit
Some of these initiatives may be driven by more than taxing the activity out of existence, but you have to wonder how they will convince people to bike to work, or move closer to their job without law changes or excessive tax. What are the things that are in the category "buy only what we need"?
They are convinced oil prices will rise steadily anyway, but it hardly seems a major world saver to "double the efficiency of our car fleet over the next ten years". Although I'm not sure if they mean the government fleet, or all the cars in NZ.
I note also that the Greens do not support nuclear power, and barely tolerate hydro power. This reduces options for renewable energy generation. Currently, that would just be natural gas and wind power. Further down the track, perhaps Solar and Tidal. Coupled with proposed higher taxes on non-renewable energy sources, this could hit industry pretty hard.
Greenhouse Gases
| Gas Type | concentration 1800s-2000 | anthropogenic sources | GWP | proportion of total effect |
| carbon dioxide | 280 - 370 ppm | fossil fuel burning, deforestation | 1 | 60% |
| methane | 0.75 - 1.75 ppm | agriculture, fuel leakage | 21 | 20% |
| halocarbons | 0 - 0.7 ppb | refrigerants | 3400+ | 14% |
| nitrous oxide | 275 - 310 ppb | agriculture, combustion | 310 | 6% |
| ozone | 15? - 20-30 ppb | urban pollution | N/A | N/A |
Looking at the table above (source:UIC), whatever the plan is, it looks 80% of the problem is going to be resolved by serious cuts to CO2 and methane. Any plans have to show how we could seriously curtail both of these gases to have any impact on total output.
Eco-Tax dangers
The dangers in an Eco-Tax approach are that the costs will fall harder on the low income earners. Energy consumption and car costs use up a higher proportion of the low income earner's pay packet. Food costs are affected by freight charges. Not everyone lives right next door to an organic farmers market. This is why the Greens are suggesting a zero tax threshold and a Universal Income. However, is the threshold enough and is the reality a further increase in tax rates for the middle and higher income brackets?
It is a question of how much "polluting" services and goods charges increase on items that are considered essential. If a car is essential to get to a job or because the person lives outside of public transport areas, or due to physical disability etc then doubling the petrol costs and banning cars older than 10 years is going to hurt these people considerably.
Another danger is that certain industries and types of work simply move offshore, where it is cheaper to pollute, or cheaper to operate. This has an effect on jobs and the economy and transitioning NZ to a "new economy" may be overly painful with this approach. Their Eco-Tax policy did not seem to have any counter-balancing carrots on offer to businesses.
So what is enough?
I'm left unconvinced that what the Greens are proposing is enough to cut CO2 emissions, based on the Eco-Tax figures they outline. For example, I'd expect they would have better flexibility to offer a zero amount of tax on the first $20,000 and set up Eco-Taxes to shift the 4 billion or so hole this would create. They could then put some kind of price estimates to review against a more sizable figure.
I'm also a bit wary that their various policies will not by deliverable without further cost. As they cut back on road building, in favour of rail, they deny the possibility the roads could all be overfilled in 30 years time with personal vehicles powered by zero-pollution energy.
If they really want to halve CO2 pollution, does it mean a tripling in petrol prices, and forcing carless days or distance quotas per week based on the fuel efficiency ratings of the vehicle? If they are encouraging car pooling, is that simply by taxing petrol at the pump or by passing laws that single driver trips are illegal?
Their idea is easily understood, but their policies don't clearly explain to me how their plan takes NZ from 75 million tonnes of C02 per year to NIL.
And meanwhile, there is every chance we will continue to innovate, cleanse, recycle our way into the future just as we have been, with or without the Greens. If the issue is as urgent as they claim, and it is important for NZ to lead the way in spite of the fact that our contribution will be as nothing compared to India, China , the EU and the USA, then I would really like to see their ideas developed further. The winds of change are indeed blowing, but at this point, the Greens Eco-Tax policy is just a bit of hot air.
Related Links:
The Green's Eco-Tax Reform Policy Overview
The Green's Ecological Tax Reform Policy Submission [PDF]
State of the Planet 2005
Greens Eco-Tax: Part I - The Sweetener
Greens Eco-Tax: Part II - It's about the environment
Global Warming - The Science
Note: I realise that their various policy documents may promise fundamental changes to the way we go about business and life in NZ. They may discuss the implied costs and the funding requirements in each of those policies, without reference to their tax policy. I haven't read them all yet. Greenies are welcome to extend the debate so we can look at the proposals as a whole.
[Reprinted from a Sir Humphrey's post Jan 2007]
Update 2008: It seems the old submission documents are no longer available, so the links don't work. I will look for alternate copies. However, I have located a Greens Business Tax Review (Sep 2006) that may update some of this information, and I'll review this soon (Perhaps end of Jan 2008)
"...AGW seemingly accepted by the bulk of the Western population..."
ReplyDeleteThat's cos the bulk of western population haven't started paying for the hysteria. Wait till people start paying more for lights and other such taxes and the weather doesn't change much, they won't be yearning to save some ice-cap, they've never seen and have no plans to see, then.
"..we might simply find illegal dumping skyrockets.."
Definitely, it has in the UK, people will start throwing stuff out the car at night and dumping in the rivers.
"...Greens Eco-Tax policy is just a bit of hot air."
Most Greens policies are hot air, they know they won't win government, so why spend the time and effort on detailed workable policy, they just utter the easy one-liners about saving the planet and hugging trees and a few morons listen and feel warm and fuzzy and think, oh these guys care for the planet, i'll vote for them.
Here's an example of a quote from one such Green voter, it's on the front page the Aussie Greenies - "Our commitment to social justice translated into everyday actions gives me comfort. I am proud to be Green!"
Here's a little gem that they throw out to fool the morons, from their website - "...universal health insurance scheme funded from progressive taxation." To the layman, 'progressive' sounds like, you know progress, improvement, getting better, that sort of thing. An improvement to taxation is perceived as less tax or better use of it, and who doesn't want to be taxed less. In reality what they mean is, when our merry scheme runs out of money, we'll keep taxing the tripe out of you, in bigger and bigger chunks.
It's all just airy fairy, fuzzy nonsense that petulant teenagers think off when they've had a few too many, they're big on comfort and feeling good, but not much else.