On Sunday the Australian government announced a much anticipated and debated plan to install a carbon tax of AU$23 (US$24.78) a tonne on carbon. Australia will only be taxing its 500 biggest polluting companies from mid 2012, which produce 80 percent of Australia’s emissions.
The carbon price will rise by 2.5 percent a year for three years, and then be replaced by an emissions trading (or cap-and-trade) scheme from July 1, 2015. From then on, the market will set the price.
Tax cuts for voters
The announcement included compensation to voters in the form of tax cuts. The proposed carbon tax has been unpopular with many voters, and the federal Opposition has been warning voters of higher power bills and rising costs of other staple products bought by households.
The minority government now has the job of convincing voters of the benefits of the carbon price package by the next election. It is expected the package will pass through the Senate and into law, as the government should have the numbers to do so.
Under the new package, the tax free threshold for voters will nearly triple to $18,200 from mid 2012, and then increase to $19,500 3 years later. Every taxpayer with income below $80,000 will get a tax cut of some kind.
The cost of the carbon pricing plan to the average household is expected to be and additional $9.90 per week, and the average household assistance from a “clean energy supplement” will be $10.10 a week.
The government hopes to cut emissions by 159 million tonnes by 2020, or 5% from 2000 levels. A new target of cutting greenhouse gas emissions by 80 percent by 2050 has also been set.
$10 billion for clean energy
A $10 billion Clean Energy Finance Corporation will be set up to make major investments in clean technologies. $3.2 billion has been slated for the Australian Renewable Energy Agency. $200 million will be invested in a Clean Technology Innovation Program.
The Clean Energy Finance Corporation will be headed by a independent yet government appointed chair and the board will include banking, investment management and renewable energy experts.
The $10 billion will be invested in renewable and clean energy projects over five years. The Clean Energy Finance Corporation will not invest in carbon capture and storage (CCS) technologies, as these are being funded through existing programs.
The government has a target of 20 percent of energy from renewable sources by 2020.
$9.2 billion in compensation for big polluters
The plan includes spending $9.2 billion to compensate, by way of free carbon permits, carbon intensive industries such as steel, aluminium and many pulp and paper manufacturers. The government also wants to shut down the dirtiest, ageing coal-fired power plants. The permits will be given to companies that create 80 percent of Australia’s emissions.
Polluters with lower emissions, such as plastics and chemical manufacturing, and ethanol production will be able to receive permits for 66 percent of their carbon costs. Natural gas projects will be able to receive 50 percent.
The government has said that most small business will not be affected by the pricing package.
Agriculture will not be subject to the carbon price, and farmers will be able to benefit from “carbon farming”. Fuel for transport has been excluded, but heavy transport will be included from 2014.
What do you think of Australia’s carbon pricing plan? Is it a plan you think voters will accept, and do you think it will work to reduce emissions?
Image CC licensed by MystifyMe Concert Photography: Australian Prime Minister Julia Gillard