Australia introduces carbon tax, emissions trading


Australia's minority Labor government passed that country's first nationwide carbon tax this week.  The tax will go to the Australian senate for approval next month.

The details of the plan are extremely complicated and represent a compromise among a number of different plans and interests, as well as a compromise between the governing Labor party and the Greens.

The initial price for carbon, commencing in 2012, will be $A23 per tonne (equivalent to $C24 per tonne), and increase at 2.5% per year.  The tax will only be applied to 500 of Australia's largest polluters.

The proceeds of the program will be used to provide individual income tax relief.  Many commentators have speculated that the subsidies and tax relief were necessary to gain some measure of popular support for the carbon tax bill.

Commencing in 2015, an emissions trading (cap-and-trade) scheme will come into force, allowing the price of carbon to float.   Free permits representing 94.5% of industry's carbon costs will be issued to industry.  International trading will be permitted, linking the Australian carbon price to world prices.  

Farming and agriculture are exempt, as is motor fuel - except rail and shipping companies which will pay the tax on diesel.   And the tax doesn't apply to the export of coal (which represents approximately 25% of Australia's exports, primarily to China).  In fact, it has been estimated that emissions in other countries from exported Australian coal exceed emissions from all sources within Australia.

Australian opposition leaders remain opposed to the plan, and have warned industry not to make long-term investments based on the plan as they plan to repeal it should they form the next government.

The Business Council of Australia, which opposes the carbon tax, has noted that the level of the tax is significantly higher than in other jurisdictions (50% higher than in Europe), putting Australia at a competitive disadvantage. 

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