Australian Carbon Tax Takes Effect

2 July 2012

Increased political bickering and intense public debate have marked the days leading up to the 1 July onset of Australia's first-ever carbon tax, a measure that will impose emissions costs on the country's largest polluters.

Australia's major political parties have amplified the debate surrounding the controversial measure, as opposition leader Tony Abbott - having committed to repeal the tax if the opposition wins power in the next election - attempted to issue a parliamentary censure of Prime Minister Julia Gillard for having "misled and lied to the Australian people."

Abbott's move was the latest in the ongoing struggle over Gillard's ambitious, yet divisive, introduction of regulations on carbon emissions in the developed world's largest per capita polluting country.

The carbon tax originates from the Clean Energy Agreement, a multi-party initiative designed to reduce carbon pollution that narrowly passed the Australian parliament last fall (see Bridges Trade BioRes, 17 Oct 2011). Beginning 1 July, the government will impose a tax of A$23 per tonne of carbon emitted from the country's 294 largest polluters. The tax is set to increase 2.5 percent annually until 2015, when an emissions trading scheme will replace the tax.

The measure aims to cut 160 million tonnes of carbon emissions by 2020, and proponents of the legislation believe that the tax will spur multi-billion dollar investment and innovation in newer, cleaner energy sources.

Opponents of the carbon tax, however, contend that it will lead to mine and factory closures, job loss, and increased cost of living for Australians as higher energy prices find their way to the consumer. The coal industry, which will shoulder a large portion of the new tax, is Australia's largest exporter, earning A$46 billion in exports in 2010. The Treasury has estimated that consumer prices will rise by 0.7 percent as a result of the new tax.

Prime Minister Gillard dismissed the opposition's claim that the tax would cripple the Australian economy. "None of those claims to try to induce fear in the Australian community are true, have ever been true or will ever be true," she said earlier in the week.

To offset the increase in energy prices, the prime minister has pledged A$7 billion in tax cuts and assistance to eight million households. More than A$1 billion was paid in the month of June to families, students, and pensioners in anticipation of the tax.

But the offset measures have not appeased the opposition.

"There is a deep and lasting consensus that this is a bad tax and we can't trust a single commitment that this prime minister gives," Abbott said. The opposition leader, who is neck-and-neck with Gillard in opinion polls for next year's federal election, has promised to repeal the carbon tax if he becomes prime minister.

ICTSD Reporting; "Abbott makes solemn pledge on carbon tax," THE AUSTRALIAN, 29 Jun 2012; "Abbott moves to censure PM on carbon tax," THE AUSTRALIAN, 28 Jun 2012; "Opposition carbon tax claims untrue: PM," THE SYDNEY MORNING HERALD, 25 June 2012; "Australians 'will accept' carbon tax," THE CANBERRA TIMES, 29 Jun 2012.

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