Australia presses on with wide-ranging carbon tax

A carbon pricing scheme, probably the world’s most comprehensive, is being implemented in Australia, despite continuing opposition from some business groups.

From 1 July, Australia’s most carbon-intensive companies are being charged a levy on their emissions in a programme more wide-ranging than even the EU’s emissions trading scheme.

All entities with carbon emissions of more than 25,000 tons annually will have to pay a tax. In a country that relies on coal-fired power stations for around three-quarters of its electricity, the levy is predicted to cut emissions by 160 million tons a year by 2020.

The government expects to impose the tax on around 330 organisations in the first year, mainly companies but also some local authorities that manage high emissions from methane-releasing landfill sites.

However, because Australia exports most of its carbon in the form of coal, gas and minerals used in making steel, businesses claim the tax will increase their expenses without cutting global pollution.

The mechanism comes in two parts: a carbon tax and an emissions trading scheme. The tax amounts to Aus$23 ($23.27, £14.80, €18.50) per ton of emissions, eventually payable by around 500 of Australia’s biggest emitters.

The trading scheme will be set at a fixed price, indexed at 2.5% per year for three years, after which it will become a market-based floating-price trading scheme.

The scheme covers the emission of CO2, methane, nitrous oxide and perfluorocarbons from stationary energy, industrial processing, fugitive emissions and emissions from landfill waste and waste water treatment. Natural gas retailers are liable for the carbon dioxide emissions from the gas they supply.

A transitional support package providing substantial compensation will benefit many of the most emissions-intensive industries. Notwithstanding the compensation, Australia’s heavy-polluting sectors, including the mining, steel and liquefied natural gas industries, have been highly critical of the proposals. Oil refiner Caltex is demanding 100% compensation, rather than the proffered 94.5%, to avoid damage to its competitiveness.

Similarly, the Australian Industry Group, which represents some large manufacturers, argues that the tax rate is too high and the compensation inadequate.

The proposals include the establishment of an Aus$10bn Clean Energy Finance Corporation to invest in technology producing renewable energy, low pollution and energy efficiency.

The government committed itself to reduce emissions to 80% of 2000 levels by 2050 when it passed the bill supporting the measure last year (EP, November 2011, p1). To help to achieve this, it aims to close approximately 2,000 megawatts of highly-polluting electricity generation capacity by 2020.