Climate Change Policies Essay Example


Climate Change Policies

Climate Change Policies

Executive Summary

Climate change is an environmental issue that is affecting various countries across the world. The detrimental effects that are associated with it are already being felt in the different parts of the globe which has resulted in countries establishing and implementing policies that will help in addressing these issues. Australia established the Carbon Tax Policy which was then repealed and the Direct Action Plan policy put in its place. The report has evaluated the motivation behind the formulation of these policies which was mainly to reduce greenhouse gas emissions and subsequently reduce the rate of global warming. The report has compared the two policies including the positive and negative aspects of the same. Also, the report has discussed why the Carbon Tax policy is the ‘best’ policy and has recommended the Climate Change Action Plan as an alternative policy that the Australian government can implement.

Table of Contents

2Executive Summary


4Motivation and Rationale

5Comparison between the Policies

5Carbon Tax Policy

6Direct Action Plan

8Best’ Policy‘

8Alternative Policy




Climate change is an issue that impacts various countries which are why most of these countries have been necessitated to act to establish ways in they can mitigate the climate change issue (Head et al., 2014). Australia is among the nations that have taken action on climate change mitigation through setting some policies which are intended to fulfill this objective. Among the climate change policies that have been introduced in Australia are the Carbon tax and the Direct Action Plan (Hughes, 2003). There have been constant debates on the effectiveness of implementing these policies as a way of mitigating climate change and which policy is better than the other. Following this, the paper will evaluate the motivation of applying the two strategies, the various theoretical underpinnings underlying the two, assess which one of the is the ‘best,’ as well as recommend an alternative policy which can help solve the same climate change problem.

Motivation and Rationale

Both the Carbon Tax and the Direct Action Plan were established as a means of mitigating the climate change through minimizing the greenhouse gas emissions in the air. The main objective of the carbon price was to reduce the emissions of greenhouse gas in Australia by approximately 5% by the year 2020 and reduce the same levels by 80% by the year 2050 (Head et al., 2014). Therefore, the Carbon Tax and the Direct Action Plan was intended to assist Australia to achieve this objective through encouraging the largest emitters of the greenhouse gases to enhance their energy efficiency as well as focus on investing in sustainable energy (Head et al., 2014). Although the two policies have been controversial and debatable over time, their implementation has largely assisted Australia to move closer to achieve the expected levels of emission reductions.

Comparison between the Policies

Carbon Tax Policy

A carbon tax is that tax that is imposed on the energy sources which usually release or emit carbon (IV) oxide or carbon dioxide. It is a pollution tax which is highly favored by various economists since they argue that it taxes the ‘bad’ as opposed to the ‘good’ (Meng, Siriwardana, and McNeill, 2013). This tax primarily addresses the negative externalities which come about when a particular consumption or production activities tends to impose various benefits or costs on other people. Therefore, through imposing a tax on the negative externalities, the carbon tax is, therefore, aiming at reducing the carbon dioxide emissions and therefore, slows the process of global warming good’ (Meng, Siriwardana, and McNeill, 2013) .

Various incentives have been associated with the implementation of the carbon tax. One of them is that they put a specific limit on the different costs of reducing emissions. Therefore, this means that if emission is reduced, then less tax will be employed and vice versa. This financial aspect is highly practical and effective as it helps to encourage the companies and various other parties to reduce their emissions so that they can pay fewer taxes in the long run (Humphreys and Humphreys, 2007). Another incentive is that the carbon tax is significantly predictable regarding their costs. These relative price signals that are stable will tend to assist the consumers and businesses in planning amicably on their energy spending and at the same time provide with high levels of certainty for greater investments concerning energy efficiency (Humphreys and Humphreys, 2007).

The carbon tax is an incentive that is permanent in their aim to reduce emissions. This means that the pollutant prices are stable. At the same time, the carbon tax is considered to be economically efficient because they are simple, transparent, and at the same time have extensive coverage (Siriwardana, Meng and McNeill, 2011). Additionally, the carbon tax is not vulnerable to the ‘strategic behavior’ of non-government organizations and companies which usually tend to distort the market following the trading emissions (Siriwardana, Meng and McNeill, 2011). Therefore, it provides a common ground for all organizations which means their universal cooperation in reducing the emissions will have a greater impact in their aim to lessen the emission of greenhouse gases.

On the flip side, the extent in which the carbon tax is intended to result in the best outcome is not clear and cannot be predicted in advance. This means that the carbon tax will need to undergo various changes before achieving the intended result or having the required impact on controlling greenhouse gas emissions (Meng, Siriwardana, and McNeill, 2013). Also, the effectiveness of the carbon tax can be jeopardized if various lobby groups succeed in acquiring some exemptions especially for the industries that are highly impacted by the taxes (Humphreys and Humphreys, 2007). Additionally, the carbon tax is considered to be potentially regressive with the effect of the flat carbon tax probably being highest on those households with the lowest income. This particular impact is offset by the higher levels of consumption of the wealthier households who typically utilizes more energy as compared low-income household who end up paying higher rate taxes (Siriwardana, Meng and McNeill, 2011).

Direct Action Plan

Just like the carbon tax, the Direct Action Plan is a policy that is aimed at reducing greenhouse gas emissions which mainly carbon dioxide which will, in turn, reduce the rate of global warming. This plan stipulates that Australia requires a particular scheme which will work towards providing a given incentive for companies so that they can reduce their levels of emissions of greenhouse gases (Garnaut, 2011). At the same time, this will reduce the costs to the given industry that the firm belongs to and largely in the Australian economy. This Direct Action Plan consists of various components with the ‘centerpiece’ component being the Emissions Reduction Fund (ERF) (Garnaut, 2011). This plan stipulates that ERF will support the activities of reducing carbon dioxide emission directly by industry or business. At the same time, this Direct Action Plan typically identifies the various potential opportunities for abating carbon dioxide like re-vegetation projects, re-afforestation, and other energy efficiency projects (Garnaut, 2011).

It is argued that the Direct Action Plan will assist Australia to meet their carbon emission targets significantly and in a cost-effective way especially if the ERF component is implemented adequately (Durrant, 2010). As this plan was being implemented, as opposed to the Carbon tax which was essentially regulatory, the Direct Action Plan is regarded as being voluntary (Durrant, 2010). Therefore, it follows that the industries and firms that are producing the greenhouse gases will need to invest in cleaner energy use. In doing so, the ERF, a component of the Direct Action Plan, will provide them with an incentive for their reduction activities which will then, in the end, achieve the objective of reducing greenhouse gas all across Australia (Durrant, 2010).

However, the effectiveness and implementation of Direct Action Plan have been criticized widely because of various reasons. One of these critics is that there is the lack of a disincentive to keep on polluting the air at constant rates which then means that the greenhouse gas emissions will constantly be on the rise as opposed to decreasing by the year 2020 (Hawkins, 2013). Also, under this Action plan, the people who pay for the pollution is the public and not the polluters as it should be which should not be the case. Various other issues that have been brought forward regarding the effectiveness of implementing the Direct Action Plan are that the economy-wide incentives that are needed to reduce emissions are lacking (Durrant, 2010). Also, there will be the need for some complementary measures as opposed to the carbon tax policy which can be implemented solely. Additionally, since the plan is voluntary in nature unlike the carbon tax which is regulatory in nature, its efficiency in reducing the carbon dioxide emissions may not be adequate as is expected (Garnaut, 2011). Finally, under this Action Plan, there is the lack of instruments or caps which would then ensure that the polluters are reducing the rates of emitting the greenhouse gases, unlike the carbon tax which has these caps (Garnaut, 2011).

‘Best’ Policy

I believe that the Carbon Tax is a better policy as compared to the Direct Action Plan especially following the effectiveness in assisting companies and firms to act urgently regarding managing emissions. In the Carbon Tax, companies are given some incentives of acting towards reducing emissions because this tax will add some financial burden to them, it will increase the utility prices, and they will also be liable under this carbon tax (Siriwardana, Meng and McNeill, 2011). Additionally, the carbon tax is likely to achieve the emission reduction objectives within the timelines that are required because of the costs that are associated with the emissions where firms will likely strive to reduce them and in the process minimize emissions as well (Siriwardana, Meng and McNeill, 2011). Therefore, I think the financial pressure that was being exerted following the implementation of the carbon tax was an adequate and strong motivation for the polluting companies to act in managing their emissions. Thus, the Direct Action Plan presents a significant challenge to the Australian government regarding whether or not the policy incentives for the corporate constraint of carbon emission will be stable and efficient enough to deliver.

Alternative Policy

An alternative climate change policy that the Australian government could implement aside from the Direct Action Plan and the Carbon Tax policy would be the Climate Change Action Plan policy. This is a policy that has been implemented in various other countries including the United States and has proven to be effective. The Climate Change Action Plan policy will primarily focus on the various actions which will likely produce greenhouse gas emissions and at the same time support social equity, economic prosperity, as well as vibrant neighborhoods (Intergovernmental Panel on Climate Change, 2014). The actions in the policy will majorly concentrate on the specific areas and avenues that have the greatest impact and need like building waste and energy as well as transportation. This policy will also entail the actions which will enhance the resilience of the Australian community to the potential effects that climate change is likely to bring (Rosenzweig et al., 2010). Therefore, as opposed to the Direct Action Plan and the Carbon Tax policy, the Climate Change Action Plan policy is holistic, sustainable, and inclusive.


Climate change and its effects is an environmental issue which not only affects Australia but the world as a whole. Australia has implemented the Carbon Tax and the Direct Action Plan policies. Both of these policies were aimed at reducing the carbon dioxide emissions which will, in turn, reduce global warming. The carbon tax policy was regulatory, and the Direct Action plan was voluntary. The effectiveness and downturn of these two policies have been discussed in the paper. Out of the two, the ‘best’ policy, in my opinion, is the carbon tax. An alternative policy of the two policies can be the Climate Change Action Plan policy which is holistic, inclusive, and sustainable.


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