Australian Carbon Tax – Facing the Uncertainty

Posted on December 6, 2011 by

As the Durban talks unfold, let us have a look at the recently announced Australian Carbon Tax. The Australian Carbon Tax had been in debate for about a decade now with many corporate lobbyist and public representatives constantly opposing to it arguing that such a tax would stunt economic growth and raise the cost of living. Its enactment has now fixed a A$23 per tonne for the top 500 most emission intensive companies from July 2012 and the scheme would eventually move on to a nationwide emission trading scheme from July 2015. Companies will need a permit for every tonne of carbon they emit. Moreover, the scheme seeks to integrate itself with the European trading scheme and the New Zealand trading scheme once the market reaches maturity to allow for meaningful economic benefit.

Announced through a package of 18 laws, the bill not only declared the carbon tax but also billions of dollars of compensation for export-exposed industries, aluminium, zinc refiners and local steel makers. These emission-intensive trade exposed industries will receive 94.5% of free carbon permits for the first three years. The scheme also announced 90% personal tax cut for workers which is worth about A$300 per worker, annually.

Analysts see the tax as a positive step towards spurning a multimillion dollar business in the clean energy sector. The act will drive investments into renewable energy including natural gas and in the process reduce the carbon intensity of the country.

However, with so much opposition to the Carbon tax, the future of a full fledge carbon scheme is very bleak. Julia Gillard’s government had staked its own future by passing this bill. As it is, Gillard’s government is holding on to power by a single seat. “The longer this tax is in place, the worse the consequences for the economy, jobs and families. It will drive up the cost of living, threaten jobs and do nothing for the environment,” said conservationist opposition leader Tony Abbott who promised to scrap the bill once in power. Even though elections would not be held until next year, a recent poll held in November had already indicated voters leaning towards the conservationist party.

Leaving the negatives aside, the carbon tax has managed to garner some support. Gillard’s government too has gained in popularity through Gillard’s handling of the economic and industrial relations problem. The Carbon Tax was greeted with much ecstasy by the carbon expo conference in Melbourne and similar entities that saw this as an opportunity for the country to start moving investments towards a much needed clean energy future.