In the long run, the introduction of a on carbon, via either a carbon tax or an emissions scheme, should result in a reallocation of away from carbon intensive production methods and towards cleaner or greener production methods. To the extent that this helps to address change and the associated destruction to the nation’s productive assets in the future (via a reduced incidence of natural for example), the price of helps to protect the nation's productive (or aggregate supply) in the long run and preserve Australian living standards – living standards that would otherwise be compromised in the absence of environmental policies designed to address excessive carbon emissions (such as reduced access to goods and services and a more volatile natural environment). However, in the short term, the pricing of carbon will increase the of for those businesses relying on ‘carbon intensive’ production methods. This increases prices and inflation, which in turn leads to a reduction in AD, as Australia’s is eroded, and some businesses scale down investment and potentially relocate overseas. The reduced level of AD results in a lower level of GDP per capita, negatively impacting on living standards.