AUSTRALIAN CO2 TAX REGIME TO BEGIN THIS WEEKEND

Tamar Hallerman
GHG Monitor
06/29/12

Australia will implement one of the world’s largest taxes on carbon dioxide emissions beginning this weekend in a political gamble that is expected to define the future of the country’s current ruling party. A $23 per ton tax will be levied on Australia’s largest CO2 emitters beginning July 1, bringing to fruition a plan that has been fiercely debated within the country over the last year. Last summer, Labor Prime Minister Julia Gillard announced that the $23 fee would be levied on the country’s largest industrial emitters, but that many of the country’s most vulnerable industries would be shielded from economic backlash. Under the plan, the country’s agriculture, petroleum and most of the transportation sector would be exempt from paying the tax. The program, which was approved by the country’s Parliament last fall, would also help compensate some of the industries that are hit the hardest by the tax, like the steel sector.

Earlier this month, the Gillard government announced that it would be levying the fee on roughly half the number of emitters it initially said it would, in a move that tax proponents said could severely limit the economic impact of the plan. The government said that 294 of the country’s largest emitters—including utilities, steel makers and mining companies—will be liable to pay the tax on their emissions, a noticeably shorter list compared to the 500 companies that were initially listed as having to comply. This came following a wave of criticism from the plan’s opponents who have said that the scheme will cause higher electricity prices, hurt jobs and economic competitiveness in the country. Australia is the world’s largest coal exporter and has the highest CO2 emissions rate per capita.

Under Gillard’s plan, the carbon price will increase slightly on an annual basis through 2015, when the system will be transitioned into a full Emissions Trading Scheme, which will eventually be linked with New Zealand’s system. In order to get enough support in Parliament, Gillard agreed last summer to implement rebates for most low- and middle-income ratepayers to compensate for higher electricity bills and to establish a $10 billion fund for renewable projects to be paid for by the tax revenue. Last summer, Gillard said that the plan is indicative of an Australia that is “seizing a clean energy future.”

Opposition Leader Vows Repeal

The political stakes for the Gillard Administration are particularly high as the government aims to gain the support of a skeptical public. Opposition Leader Tony Abbott of the center-right Liberal Party has vehemently vowed to disassemble the scheme if he is to win office during the next election, which is expected in late 2013. He called the plan “socialism masquerading as environmentalism,” arguing that the ruling party vastly underestimated the impact of the tax on businesses, jobs and the economy. Last summer, he called for a national referendum on the issue, emphasizing that Gillard broke a campaign promise in order to more forward with the plan. Reports indicate that Gillard is currently behind in several public opinion polls.