Carbon Tax on Housing.

The Government’s Carbon Tax is causing varied debates regarding the impact on housing affordability, housing construction and the development industry.

Depending on who you talk to, you might have heard that; A price on carbon is the most environmentally effective and economically efficient way to reduce pollution. This means our economy can continue to prosper, without our pollution continuing to grow. You also might have heard; The Carbon Tax will have implications for the property sector that will show disturbing risks for the residential and commercial industry.

Concerns that the increased costs generated by the Carbon Tax will further erode housing affordability and may subsequently induce a sharp decline in land and housing demand.

If you are currently building or getting ready to build, make your home more energy efficient with solar energy and hot water, well-positioned window treatments and landscaping, and energy-efficient appliances and lighting.

Pros and Cons:

Carbon taxes have been said to have the following advantages:

  • They put a limit on the costs of emissions reduction.
  • They are predictable in their costs. Relatively stable price signals can help business and consumers plan energy spending and provide greater certainty for investments in energy efficiency that have large initial costs.
  • They are a permanent incentive to reduce emissions. The price of pollutants does not change, as with the operation of a market-based emission trading system.
  • They are economically efficient in that they are transparent, simple and can have a wide coverage.
  • They can be implemented across a wide variety of economies and therefore are a suitable instrument for coordinated international action on reducing greenhouse gas emissions.
  • They are a revenue source. They could result in other taxes being reduced, or the proceeds of the carbon tax could be redirected to those most affected to ensure that the introduction of a carbon tax remains revenue neutral.

For these reasons a number of prominent economists support the introduction of such taxes. However, carbon taxes as a means of controlling greenhouse gas emissions also have some disadvantages:

  • There are no guarantees that emissions will decline if consumption of the goods and services that produce carbon emissions remains unresponsive to price increases.
  • The level at which the tax is set to produce the best outcomes cannot be known in advance. Thus the tax may have to go through several changes before having the desired effect. 
  • If the tax is set at too high a level, activities that are particularly vulnerable to it may relocate to a location that does not have such imposts.
  • They are potentially regressive, with the impact of a flat carbon tax potentially highest on the lowest income households. This effect is offset by the higher consumption of wealthier households, that is, as they consume relatively more energy than low income households they may be paying a higher rate of tax.
  • A shrinking construction industry (compared to other major economic sectors)and the absence of any modelling on housing affordability – which is likely to decline as construction costs rise.

While a carbon tax might bring changes to how you live and work -try not to let the Carbon Tax deter you from investing in property and renovating or building a new home. Reducing the negative effects and maximising the benefits will definitely help your finances.

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July 2011
Source: http://bit.ly/pOqRRk