Editorial Feature

The Australian Carbon Tax: How Will It Affect You?

As many Australians will know, carbon pricing, or carbon ‘tax’ will come into effect on 1st July 2012. The carbon tax is set to affect around 500 companies that produce a large amount of CO2. The largest polluters will be initially charged about A$23 for each tonne of CO2 they produce and this price will continue to rise until 2015, after which the cost will be determined by the market.

Currently, there is no price put on the CO2 produced by companies in Australia and so there is no upper limit or restraint on how much pollution these companies can produce. The target of the pricing initiative is to reduce Australia’s carbon emissions into the atmosphere by 159 million tonnes by the year 2020.

Though in theory it appears to be a commendable initiative, it has in fact been extremely divisive, with many criticisms lobbied against it. This article hopes to briefly explain how it may affect both the general public and companies, and whether it is the best solution for Australia.

How Will It Affect the General Public?

The main knock-on effect of the carbon tax on day-to-day life in Australia will be the inevitable rise in cost of certain goods and services. Logically, the items with the biggest increases in price will be those that take the most energy to produce. Important examples include electricity and transport.

However, this rise in price is being offset for many by a reduction in taxes and increased pay, so overall it is hoped that few people will feel the pinch. The government has said that 9 in 10 houses will be eligible for assistance.

How Will It Affect Big Companies?

Every tonne of carbon that is produced will be priced, and so industrial companies will have to set aside a certain proportion of their costing in order to accommodate the new pricing system. It will hence be pragmatic for businesses to find new ways to reduce the amount of pollution they produce, whether this is through the adoption of alternative energy sources, or simply adopting greener business techniques with regards to recycling or reducing transportation emissions.

By 2015, the carbon tax will have morphed into a emissions trading scheme, so the price of a tonne of carbon will be determined by the market.

Who Supports the Carbon Tax?

Supporters of the carbon tax would argue that, as Australia is one of the world’s biggest producers of CO2, something had to be done to reduce emissions. Given that the whole world must eventually move towards more sustainable business practises, the carbon tax can be viewed as a ‘spoonful of medicine’, which may not taste good right now, but will have long-term benefits for the country. Given the increased cost of conventional energy methods, companies will be more inclined to look towards clearer, alternative energy, such as solar power or wave power.

Australia is blessed in terms of sustainable resources (especially solar power, as the amount of solar energy Australia receives per year could power the country 10 000 times over), and many feel that big companies just need the right kind of persuasion to move towards sustainability. The carbon tax could be the push they need.

Who Opposes the Carbon Tax?

Thousands of people have protested against the tax, with demonstrators claiming that the bill will lead to job losses and a higher cost of living.

The Clean Energy Bill, of which the carbon tax is a part, was passed in October 2011 by a very narrow margin. The bill passed with 74 votes to 72, which shows just how polarising the carbon tax is. Some are also angry at Prime Minister Ms Julia Gillard over the handling of the carbon tax, as during her election campaign she insisted that she would not implement a tax on emissions.

However, as the party failed to win an overall majority at the last election, a coalition government was formed with the Australian Greens and Gillard had to perform a dramatic U-turn with respect to the carbon pricing scheme.

The conservative party have pledged to scrap the tax if they come in to power in the next election, as they believe that 60% of people will be worse off because of the scheme.

Some observers also argue that carbon taxing is not the most pragmatic approach to reducing carbon emissions, with better options available, and has been introduced at a time of already rising fuel prices and will increase these further.

Do Other Countries Have a Carbon Tax?

Another reason that some Australians are opposed to the carbon tax is that they feel they should not have to suffer the negative consequences of a carbon tax when bigger polluters are not taking similar steps.

However in reality, almost all of Australia’s important trading partners are beginning to implement similar schemes, or have had them in place for several years.

The European Union (responsible for around 13% of global CO2 emissions) has had an emission trading scheme in place since 2005. The current aim for the EU is to reduce total emissions by 21% by 2025, with some countries, such as the UK, promising to cut emissions even further.

China, Australia’s most important trade partner, is looking to invest heavily in renewable energy in the near future. China is currently leading the world in terms of sustainable investment, with the UN noting that in 2010 the country invested $49.8billion into the cleantech sector. Other economically important nations, such as Japan, India and Korea, are also implementing carbon trading/taxing schemes.

Even the USA has a planned carbon trading scheme, which has only stalled due to large Republican gains in the mid-term US elections.

Sources and Further Reading

G.P. Thomas

Written by

G.P. Thomas

Gary graduated from the University of Manchester with a first-class honours degree in Geochemistry and a Masters in Earth Sciences. After working in the Australian mining industry, Gary decided to hang up his geology boots and turn his hand to writing. When he isn't developing topical and informative content, Gary can usually be found playing his beloved guitar, or watching Aston Villa FC snatch defeat from the jaws of victory.

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