Carbon Pricing to Hurt the Poor

Ewin Hannan, March 26, 2007
Australian Science & Nature

THE jobless would be hardest hit by carbon pricing, with new research showing low-income households would have to pay about $600 a year to fight climate change.
The research by academic Peter Brain found carbon pricing would disproportionately affect people on low incomes, especially the unemployed.

The Brotherhood of St Laurence commissioned Dr Brain to analyse the impact of increasing the price of carbon for various types of Victorian households. He costed carbon as a component of all consumer goods, not just direct energy costs, with calculations based on household disposable income, including government subsidies and tax.

Dr Brain said the majority would be able to manage the impact associated with a $25 increase per tonne of carbon.

"After taking account of households' differing capacity to change their consumption patterns -- for example, by not using a second car or getting rid of a second fridge -- for most households the costs will average under $400," he said.

"This is equivalent to less than 1 per cent of these households' total expenditures.

"If applied uniformly across all household types, some groups of disadvantaged people will be particularly hard hit by the changes.

"Among the most affected are those on unemployment benefits. After taking account of the households' differing capacity to pay, these households will have to pay an additional amount of about $600, which is equivalent to an additional 1.6per cent of total expenditure, or be compensated by about $600 annually to remain in the same position as they are now."

The Brotherhood called on federal and state governments to address the "problem of disproportionate impact".

Executive director Tony Nicholson said low-income households would "need special assistance to deal with the costs and opportunities that will be inherent in our responses to climate change." He said carbon pricing was regressive when applied uniformly.

"While wealthier households have a much larger carbon footprint than unemployed households, they also have much more capacity to make adjustments to their spending," he said. "These groups of disadvantaged households have much less capacity to adjust to the changes in pricing because their level of discretionary spending is much lower.

"They cannot drive less or use less electricity or cut their consumption of other consumer goods because most of their spending is on essential items. A household with two wage earners and no children has more than four times the capacity to adjust to carbon pricing than an unemployed household."

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