Australia Sets Carbon Tax, Creating the Region's Biggest Emissions Trading Scheme

Australia Sets Carbon Tax to Fight Climate Change

July 10, 2011

AFP - Australia announced plans on Sunday to tax carbon pollution at Aus$23 (US$24.74) per tonne to help battle climate change, as it moved towards creating the region's biggest emissions trading scheme.

Prime Minister Julia Gillard said there would be a fixed price on carbon pollution, blamed for global warming, from next year before an emissions trading scheme was introduced in 2015.

"We have had a long debate about climate change in this country," Gillard said in a rare televised address to the nation.

"Most Australians now agree our climate is changing, this is caused by carbon pollution, this has harmful effects on our environment and on the economy -- and the government should act."

"But we've now had the debate, 2011 is the year we decide that as a nation we want a clean energy future. Now is the time to move from words to deeds."

Under the scheme to begin on July 1, 2012, about 500 of Australia's top polluters will pay a fixed price, starting at Aus$23 per tonne, for their carbon dioxide emissions for the first three years.

The mechanism would then shift into an emissions trading scheme, with a floating price set by the market. The government will set a floor price and an upper limit for at least the first three years to avoid price shocks.

Experts said Australia's emissions trading scheme would be the biggest and most systematic outside Europe, similar to but larger in scale than that adopted by neighbouring New Zealand.

"There's nothing really systematic in the rest of our region," Professor John Quiggin from the University of Queensland's school of economics said.

"Obviously China and India are doing things of all kinds on a very large scale... so there's certainly very serious action there; but in terms of a broad-based and systematic carbon price, this is really one of the biggest moves we've seen," he told AFP.

Tony Wood, of the independent economics-focused think-tank the Grattan Institute at Melbourne University, agreed that Australia's planned scheme would be "the only other really significant one" outside Europe.

Gillard said the reform would create economic incentives for the biggest polluters to reduce their emissions of greenhouse gases.

At the same time, the government will establish a $10 billion Clean Energy Finance Corporation to fund innovative projects in renewable energy, and the coal industry will receive some $1.3 billion to protect jobs and compensate for the tax over five years.

Much of the revenue raised from the tax in the first three years will provide for higher family payments, pension boosts and income tax cuts to offset the increased cost of living as businesses factor the carbon price into the cost of their goods and services.

The issue of a carbon tax has been hotly debated in Australia, among the world's worst per capita polluters due to its reliance on coal-fired power and mining exports.

The prime minister has the numbers in parliament to pass the legislation but her popularity has been sinking in opinion polls since she announced plans for the tax earlier this year.

The conservative opposition has led the attack, with opposition leader Tony Abbott Sunday describing the scheme as "socialism masquerading as environmentalism" and saying it would leave millions of Australians out of pocket and threaten jobs without reducing emissions.

The mining sector also criticised the plan, with Rio Tinto warning the tax would "inevitably hinder investment and jobs growth in Australia without reducing global carbon emissions."

Environmental organisations were broadly supportive of the tax.

"This package is not perfect, but it is absolutely essential Australia gets started," Australian Conservation Foundation director Don Henry said.

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