Carbon Tax on Tourism

Topics: Kyoto Protocol, Emissions trading, Carbon credit Pages: 5 (1712 words) Published: May 29, 2013

The tax levied on the carbon content of fuels is known as the carbon tax. Carbon tax is a type of carbon pricing. Fuels like coal, petroleum and natural gas release carbon dioxide (CO2) when they are burnt. This tax has been introduced to reduce the greenhouse gas emissions. These taxes can be regressive tax, in which they may affect low income groups directly or indirectly. This regressive impact on carbon taxes can be addressed by using the tax revenues to help the low income groups. The government sets a price per ton of carbon in the fuels. Carbon taxes are introduced on the 1st of July 2012 to reduce the greenhouse gas emissions. But from economic perspective, carbon taxes are having negative effect. Current charge of carbon tax in Australia is 23$ per ton. Rate of the price is scheduled to increase by 2.5% over the next 2 years, before moving to market base Emissions Trading Scheme (ETS) in 2015.

In Australian Tourism, accommodation is a key sector. After education, tourism is the largest export sector in Australia. In 2010-11 the accommodation industry contributed $6.2 billion which is 1.3% of GDP. There are many small tourism companies operating in Australia with very low margins. Any slight rise in cost of operations can result in closing their business for many people. Due to carbon tax the cost of accommodation increased by 0.5%-0.9%. If we calculate this tax for average hotel with 200 rooms, the impact of carbon tax can reduce the margin from 7.2% to 6.4%.This results in reduction of profits by 6.6% to 11.8%. Due to this 6400 people have lose their jobs as the cost reduction ideas of tourism industry so far. Tourism industry suffered from weak demand since Global Financial Crisis (GFC) which also effected employment, cost structure and establishment costs due to high Australian dollar. The direct affect of this tax has been resulting in electricity and energy prices. Due to carbon taxes expenditures of electricity, gas and, water has increased by 3.7%. Food cost increased by 5.5% and laundry and cleaning services increased by 2.5%. Due to carbon taxes total burden on accommodation sector is 12%. The Australian accommodation has become expensive for both domestic and international tourists as the Australian dollar has gone up, increased raw materials and utility costs, high labour costs for international standards. Electricity is used 24hours in this industry in different areas like hotel lobby, food and beverages, spa, gym and business lounge etc, and also for electronic goods which we use most of the time in every day like air conditioning, water geysers, televisions and cooking facilities and many more. These are the areas where this sector is losing its income. Electricity has expected to increase by 10% in 2013. The Australian tourism industry is famous throughout the globe, it deserve some subsidies, benefits or compensation same as some other industries which are getting benefits from government. Australian tourism is facing trouble because of high dollar, increased prices from carbon taxes and the declining domestic tourism. Individual operators can determine their own prices, still they need to increase in room rates to overcome the loss from carbon taxes and run their business. They even need to compensate for the hike in electricity prices. All these costs are added on the tourists so this is affecting the industry.

Carbon tax will rise in price and application in future. Commonwealth Treasury (2011) has estimated the carbon prices up to year 2050 and applied within the cost structure to estimate 2013 impacts. 2.5% per annum inflation is expected by 2013 and also the implementation of carbon taxes on road transport will be applied from 2015.

Even the transportation charges went up because of the carbon taxes on fuels. Flight tickets...
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