Australia Passes Landmark Carbon Tax

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Parliament OKs plan to cut carbon to 5 percent below 2000 levels by 2020

Under a controversial plan passed today in the Australian parliament, Australia‘s 500 biggest greenhouse gas emitters will pay $23* for every ton of carbon they emit. The carbon pricing scheme, which will go into effect next July after the Senate’s likely nod in November, has been a political hot button for the Australian government and for prime minister Julia Gillard.

Even though packed with “sweeteners” that pull in political support but dampen its likely effect, the bill is considered by many as a huge step for Australia, the world’s largest exporter of coal and a top leader in greenhouse gas emissions per capita.

The Government estimates the carbon price will cost Australian households an additional $10 per week. But the bill passed today will also return more than half of the revenue raised to people via tax credits and direct payments, producing payments to individuals and households that should be more than enough to cover rising commodity and energy prices.

By making burning fossil fuels more expensive and thereby encouraging efficiency, efficient technologies and renewables, the bill, according to Labor estimates, will reduce Australia’s carbon emissions by 159 million tons by 2020, cutting at least 5 percent from the country’s emissions by 2020. By directly investing millions of dollars in renewable energy and energy efficiency research and development, the Government hopes those cuts could run even deeper as the clean tech sector develops and matures — a possibility that pleased environmentalists, industrialists and labor unions alike.

The legislation will “unleash $14.8 billion of opportunity,” said Australian Manufacturing Workers Union national secretary Dave Oliver.

A narrow margin

The issue of taxing carbon certainly has been a divisive and contentious one among the public and Australian politicians, as was exemplified by today’s 74-72 narrow passage of the 18-bill package. The bills are expected to pass in the Australian Senate next month, but not without the help of independent senators and the Australian Greens.

The plan is a political gamble for Gillard, whose popularity in public opinion polls fell precipitously after introducing the carbon tax in July. An ambitious carbon tax was previously considered in Australia under the Labor-led government of Kevin Rudd. But it never went anywhere. The biggest difference between the Rudd plan and the Gillard plan is that Rudd never brought his plan up for a vote, a move that infuriated many party loyalists and ultimately, many believe, led to his stepping down.

In the new plan, the Gillard government recognized the need to balance ambition with political practicality, including in it exemptions for agriculture, tax credits and direct payments to Australian households, and financial support to the tune of $9 billion to the heavy-polluting steel and aluminum industries, as well as the country’s booming liquified natural gas industry.

Conservatives vow repeal

Federal Opposition leader, Tony Abbott, has promised to ditch the tax if he wins office. “We can repeal the tax, we will repeal the tax, we must repeal the tax,” Abbott said after Wednesday’s final vote. “I am giving you the most definite commitment any politician can give that this tax will go,” Abbott promised, calling his words “a pledge in blood.”

After the first three years of the program—if Abbot and conservatives haven’t wrestled control of the government from Labor by then—the carbon tax will evolve into an emissions trading scheme: a policy mechanism once known in the U.S. as “cap and trade.”

*All $ figures are quoted in Australian dollars which are roughly equivalent to US dollars (AUS$1=US$0.99)

Article by Timothy Hurst, appearing courtesy ecopolitology.

About Author

Walter’s contributions to CleanTechies over the past 4 years have been instrumental in growing the publications social media channels via his ongoing editorial and data driven strategies. He is the founder and managing director of Sunflower Tax, a renewable energy tax and finance consultancy based in San Diego, California. Active in the San Diego clean technology community, participating in events sponsored by CleanTech San Diego, EcoTopics, and Cleantech Open San Diego, Walter has also been a presenter at numerous California Center for Sustainability (CCSE) programs. He currently serves as an adjunct professor at the University of San Diego School of Law where he teaches a course on energy taxation and policy.