Australia to Tax Carbon Emitters at $25 a Ton

Australia will set its carbon price at A$23 (US$24.70) per ton under carbon tax plans unveiled on Sunday.

Outlining a package of measures to tackle climate change, prime minister Julia Gillard said the carbon tax will be a fixed-price mechanism starting on July 1, 2012. The carbon price will rise by 2.5 percent a year in real terms until July 1, 2015.

The country will then move to an emissions trading scheme, under which a market mechanism will set the price of carbon.

As revealed earlier, the tax will apply to 500 of Australia’s biggest polluters, not 1,000 companies as originally planned.

Other measures Gillard outlined included a A$10 billion Clean Energy Finance Corporation, to get innovative clean tech proposals off the ground; an Australian Renewable Energy Agency, which will manage A$3.2 billion in government funding for research, development and implementation of technologies; and a A$200 million Clean Technology Innovation Program, to help businesses invest in renewable power and energy efficiency technology.

The carbon tax will reduce carbon pollution by 160 million tons by 2020, the equivalent of taking 45 million cars off the road, Gillard said. “Because something [companies] used to do for free now costs them money, they will innovate, they will change, they will find a way of reducing that bill and in doing so they will reduce their carbon pollution,” she said.

Gillard said the package offers support for important Australian industries, including coal, steel and manufacturing. And she said she was putting measures in place to reduce the impact on Australian families, using over 50 percent of the tax revenue to help households, with nine out of ten households getting a tax cut, benefit increase or both.

The prime minister’s office also released the results of financial modeling (pdf) showing that the country’s economy would continue to grow strongly, even as the carbon tax takes effect. The Gillard government said overall prices would increase 0.7 percent in 2012-13, with the price of most goods rising by less than half a cent. (See chart modeling emissions and gross national income, above.)

Sunday’s proposals have the support of the Greens Party and independent members of parliament in addition to Gillard’s minority Labor government, the Wall Street Journal said.

But the plans have been heavily criticized and have lost Gillard electoral support in the months that parties negotiated on the tax. And Sunday’s package was the subject of fresh, swift attacks, the WSJ reports.

“We are deeply concerned the proposed carbon tax fails to shield Australia’s export sector and leaves it at a disadvantage compared to international competitors,” said David Peever, Australia managing director at mining and natural resources giant Rio Tinto.

The Australian coal association ran ads in Australia’s biggest newspapers, which read, “No other major coal exporter has a carbon tax. Not One.”

Australia’s biggest airlines said that customers will bear the full impact of the tax on the aviation sector, The Age reported, with rises of $3 to $7 per round-trip ticket. Qantas and Virgin Australia both said they would not be able to absorb the higher cost of fuel under the program.