Australia passes carbon tax law, commended by EU

Updated On: Nov 10, 2011

Australia passed its controversial carbon tax on Tuesday in a historic step aimed at reducing carbon emissions responsible for climate change after years of acrimonious debate.

The Australian Senate approved the Clean Energy Act by 36 votes to 32, requiring Australia's coal-fired power stations and other major emitters to "pay to pollute".

The scheme will impose a price of A$23 (US$23.80) per tonne on carbon pollution on Australia’s top 500 polluters starting from July 2012, increasing 2.5% annually until 2015 when Australia implements a cap-and-trade scheme with a floating-rate price on carbon.

PM Gillard added that the reforms, which include investments in renewable energy sources, would result in Australia cutting its carbon emissions by 160 million tonnes in 2020 – the equivalent of removing 45 million cars off the road.

Mining-driven Australia is one of the world’s worst emitters per capita due to its heavy use of coal-fired power generators, which produces 75% of electricity.

Australian politics has been fraught with disagreements over measures to reduce carbon emissions. Former Prime Minister Kevin Rudd’s plans to ratify the Kyoto Protocol and take other green measures were blocked by entrenched conservative opposition, leading to the scrapping of Mr Rudd’s proposed emissions trading scheme.

During her election campaign, PM Gillard initially promised there would be no carbon tax, but later switched positions and said it was necessary to move towards a flexible carbon pricing scheme.

The vote comes ahead of the UN Climate Change Conference to be held in Durban, South Africa later this month, which is considered a critical juncture for pushing forward legally binding carbon emission reduction targets.

Report: Australia passes controversial carbon pollution tax (AFP, 8 Nov 2011)

Report: Australia's Carbon Tax Clears Final Hurdle (Wall Street Journal, 8 Nov 2011)

Carbon tax faces opposition; government attempts to compensate for higher costs

While members of the public applauded when the Australian Senate approved the carbon tax bill, opinion polls show that it is unpopular. Critics insist that Australian businesses will suffer as the carbon tax is too high. The Australian Financial Review newspaper reported that in Europe, where an emissions trading scheme is in place, businesses will pay between A$8.70 and A$12.6 per metric ton of carbon since carbon prices have crashed to four-year lows.

Other industry groups assert that the carbon tax will not reduce pollution, nor will it produce significant benefits to the economy. Business groups have argued that the tax will add to company expenses and do little to reduce global pollution because Australia exports much of its carbon in the form of coal, gas and minerals used for steel making.

To garner public support for the carbon tax, the Australian government is offering households generous tax breaks and pension increases to compensate for higher energy costs and utility bills.

Report: Australian Senate passes carbon tax on 500 largest polluters, breaking PM’s election-year vow (Washington Post, 8 Nov 2011)

Report: Australia's Carbon Tax Clears Final Hurdle (Wall Street Journal, 8 Nov 2011)

PM rejects calls to reduce carbon tax

PM Gillard also dismissed calls to lower the tax because of the uncertain and fragile global economy. In the context of low carbon prices in Europe, PM Gillard remarked that Europe was more volatile because of the sovereign debt crisis but Australia's carbon price would be fixed for the first three years until 2015 when carbon price will be set by the market.

Report: No shift on price of tax (Herald Sun, 10 Nov 2011)

EU applauds carbon tax

The carbon tax has also been commended by European nations, said the ambassador to the European Union, Brendan Nelson.

Mr Nelson said he has received "universally positive" feedback about the carbon tax from his Brussels-based peers. "The European Union has been universally positive about the decision made in Australia to introduce a price to carbon," he said in Brussels.

Report: Europe welcomes Aussie carbon tax (Herald Sun, 10 Nov 2011)

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