Economics and the Governement Essay Example | Topics and Well Written Essays - 2500 words

Economics and the Governement - Essay Example The government has therefore developed a very extensive and comprehensive plan which seeks to achieve a clean energy future. In a way, the Bill is very clear and concise both from an environmental and economic perspective. The development of this bill was basically a response to the growing concern over climate change especially by international bodies. It is nevertheless realized that Australia is responsible for only 1.5% of the total Greenhouse gas (GHG) emissions in the world. However, on scientific grounds, this is not a justification for a slow approach in addressing climate change. In any case, the effects of global warming will be realized by all countries irrespective of their contributions to the whole problem. As such, governments across the world have been enacting such legislation to ensure a reduction in GHG emissions. Australia is one of the largest CHG per capita emitters which create an even greater need for the country to enact and implement a number of domestic leg islation geared towards mitigating emissions (Lockie, 2012). Carbon Price The bill established a fixed carbon price of $23 per ton which falls squarely on some of the largest GHG emitters from 2012 to 2015 after which the price of carbon will basically be flexible through a trading scheme with the market forces being the biggest price determinants. As a result of the increase in the price of carbon, there is a subsequent increase in the prices of carbon-intensive goods and services. Due to these increases, many producers and consumers will be compelled to seek for cheaper alternatives to the carbon-based products. Indeed, according to basic economic theory, there must be a great reduction in the consumption of carbon based products as long as substitutes are available. In a way, this scheme is very successful since the government sets a limit to the annual GHG emission which can always be achieved (Considine, 2012). Indeed, the Carbon Price Mechanism (CPM) is important in a number o f ways. Under the initial flexible price model, there is price certainty since most of the affected parties can accurately predict how much the carbon emissions will cost them for the three years period under operation. In the same way, all the parties down the supply chain of carbon consumption also have a three year period to determine the cost of their emissions. While the initial period focuses on price certainty, the second stage is basically geared towards addressing emission certainty. As such, from 1st July 2015, the government will actually regulate the number of permits given each year so as to cap the country’s net emission. More importantly, considering the few number of permits which shall be granted, they will be auctioned in the market and their prices will therefore be determined by the market forces. With a reduction in the number of permits, companies will definitely a have motivation to trade the excess permits for profits. Under the CPM, a liable entity is one who has an operational control of the facility which is emitting the gasses (Simon, 2011). It is presently estimated that much of the net national emissions results from electricity generation which accounts for 37 percent while industrial fuel consumption accounts for 17 percent. Agricultural and transport have a cumulative