Current Australian Prime Minister Julia Gillard has announced that there will be a carbon tax established. Treasury documents have speculated that the carbon tax may be in the order of $30 or $40 per tonne of carbon emitted. The estimates show that this will result in the cost of living to increase by around $800 to $1000 per year per household.
However, some claim that this is misleading as the Gillard government will use the revenue raised from the carbon tax to mitigate cost-of-living pressures. Some even say that nobody will be worse off and that all increases in cost of living will be compensated for.
The government taking money away from households via the carbon tax and then giving it back again makes no sense. The whole point of a carbon tax is to increase prices. That is what makes people drive less, buy less, and pollute less. If Australians want a carbon tax, they must pay for it.
I fully understand if low-income people are compensated as an increase in cost of living may result in death for these people, but middle-income and high-income people should not be compensated at all. A rise in cost of living for these people will result in a change of behaviour (e.g. taking the train to work rather than driving to work as a result of rising petrol costs) towards more environmentally friendly activities.