Australian Carbon Tax
A price on carbon pollution creates incentives for businesses to reduce pollution and invest in clean technologies and clean energy generation. The claim is a market based approach ensures that pollution is reduced at the lowest cost to the economy.
Under the pricing mechanism, around 500 of the country’s biggest polluters will be required to pay for each tonne of CO2 they emit into the atmosphere. Modelling by the Australian Government suggests that this will create economic incentives to reduce pollution in the cheapest possible way. The carbon charge will be revenue recycled into industries at risk, low income families (less than 150,000) and clean energy initiatives. This is intended to transform not only the tax system but the Australian economy triggering a ‘clean energy future’.
Australian Minister for Climate Change and Energy Efficiency, Greg Combet, stated the four key components of Australia’s policy to combat global warming:
- Establishment of a carbon price;
- Support for renewable Energy;
- Support improvements in energy efficiency; and
- Store carbon through changed land-use practices.
Key elements of the Australian Carbon Pricing Mechanism
The carbon pricing mechanism will commence on 1 July 2012 with a price that will be fixed for the first three years at AU$23 per tonne indexed to increase at 2.5% per annum.
The carbon tax will transition to an emissions trading scheme, with the price determined by the market.
There will be a price ceiling and floor that will apply for the first three years of the flexible price period. The price ceiling will be set at $20 above the expected international price and will rise by 5% each year. The price floor will be $15 rising annually by 4%.
There will be broad coverage from the commencement of the program encompassing approximately 60% of Australia’s emissions (360M t per annum) in the stationary energy sector, transport, industrial processes, non-legacy waste and fugitive emissions.
There will be international linking to credible international carbon markets and emissions trading schemes from the commencement of the flexible price period (i.e. 2015). At least 50% of a liable party’s compliance obligation must be met through the use of domestic permits or credits (i.e. Australian Carbon Credit Units – ACCUs).
Carbon Farming Initiative – CFI
Subject to a 5% limit during the fixed price period Kyoto-compliant Australian Carbon Credit Units (ACCUs) created under the CFI can be used to meet a compliance obligation under the carbon pricing mechanism.
Carbon Pricing at Work