Carbon pricing in Australia

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Financial year Price* ($)
2012–13 23.00
2013–14 24.15
2014–15 25.40a
1 July 2015 onwards set by market
Source: Clean Energy Regulator[1]

* per tonne of emitted CO2

A carbon pricing scheme in Australia, commonly referred to as a carbon tax, was introduced by the Gillard Government and became effective on 1 July 2012. The scheme requires entities which emit over 25,000 tonnes per year of Carbon dioxide equivalent greenhouse gases and which are not in the transport or agriculture sectors to surrender emissions permits.[clarification needed] The Department of Climate Change said there were 260 liable entities in June 2013.[2] When related parties are identified, there are approximately 185 discrete companies which have paid carbon tax in 2013. Permits are either purchased or issued free as part of industry assistance measures.

Australia generates 1.3% of global emissions; on a per capita basis Australia is the eleventh highest emitter of all countries, and second (after Luxembourg) of developed countries.[3][4][5] In September 2009, data from the United States Department of Energy showed the average output of carbon emissions was 20.00 tonnes for each Australian, higher than the average of 19.78 tonnes in the USA.[6] Greenhouse gases in Australia are primarily produced by electricity generation, petroleum refining and gas processing; these account for slightly less than half of all emissions.

The pricing is part of a broad energy reform package called the Clean Energy Plan, which aims to reduce greenhouse gas emissions in Australia by 5% below 2000 levels by 2020 and 80% below 2000 levels by 2050. The plan sets out to achieve to these targets by encouraging Australia's largest emitters to increase energy efficiency and invest in sustainable energy. The scheme is administered by the Clean Energy Regulator. Compensation to industry and households is being funded by the revenue derived from the charge. Initially the price of a permit for one tonne of carbon was fixed at $23 for the 2012–13 financial year, with unlimited permits being available from the Government. The fixed price has risen to $24.15 for 2013–14. The government has announced a transition to an emissions trading scheme in 2014–15, where the available permits will be limited in line with a pollution cap. The scheme primarily applies to electricity generators and industrial sectors. It does not apply to road transport and agriculture. Domestic aviation does not face the carbon tax per se, but is subject to an additional fuel excise levy of approximately 6 cents per litre.

The carbon tax has proved to be successful in reducing emissions[7] sectors subject to the pricing mechanism were 1.0% lower.[8] Nine months after the introduction of the pricing scheme, Australia's emissions of carbon dioxide from electricity generation have fallen to a 10-year low, with coal generation down 11% from 2008 to 2009.[9]

Frontier Economics said this was largely explained by 'factors unrelated to the carbon tax'.[10][11] Electricity demand continued to fall and is at the lowest level seen since 2006 in the National Electricity Market.[12]

Industrial processes emissions were up (+1.6%); fugitive emissions up (+16.8%) these not covered by the pricing mechanism.[13]

Australia's Greenhouse Gas Emissions Mt CO2 equiv
Sector
2012
Energy – Electricity
190.8
Stationary energy excluding electricity
94.2
Transport
91.5
Fugitive emissions
42.3
Industrial processes
32.3
Agriculture
88.0
Waste
12.8
Total
551.9
Excludes land use, land use change and forestry/

Source – Australia's National Greenhouse Inventory Dec 2012

History[edit]

Economy-wide pricing of carbon is the centre piece of any policy designed to reduce emissions at the lowest possible costs.

Ross Garnaut[14]

In October 2006 the Stern Review on the effect of climate change on the world's economy was released for the British government. This report recommended a range of measures including ecotaxes to address the market failure represented by climate change with the least amount of economic and social disruption. In response to this report and subsequent pressure from the Kim Beazley lead Labor opposition, in December 2006 the Howard Government established the Prime Ministerial Task Group on Emissions Trading, chaired by Peter Shergold, to advise on the implementation of an emissions trading scheme (ETS) in Australia.[15] Following the release of the final report from this task group, the Howard government committed to introduce an ETS.[16][17]

Going into the 2007 federal election, the Labor opposition party presented itself as a "pro-climate" alternative to the Government, with Kevin Rudd, who had by then deposed Beazley as leader, famously describing climate change as "the great moral challenge of our generation". Labor differentiated itself from the government by promising an ETS with an earlier start date of 2010 rather than the 2012 timeframe advocated by Howard. It also promised ratification of the Kyoto Protocol, investment in clean coal and renewable energy, and slightly more aggressive targets for renewable energy.[15]

Labor won the 2007 election, and on 3 December 2007 the Rudd Government signed the ratification of the Kyoto Protocol at the 2007 United Nations Climate Change Conference. By ratifying the Kyoto Protocol, Australia was committed to keeping emissions to no more than 108% of its 1990 emissions level by 2012. Australia's ratification came into effect on 11 March 2008.[18]

In September 2008, the Garnaut Climate Change Review, commissioned in April 2007 by Kevin Rudd when he was leader of the opposition, released its final report. Garnaut recommended a price between $20 and $30 per tonne of carbon dioxide (CO2) equivalent with a rise of 4% each year.[14] On 16 July 2008, the Rudd Government released a green paper for its Carbon Pollution Reduction Scheme (CPRS), outlining the intended design of the scheme; a more detailed white paper was released on 15 December 2008.

The CPRS received criticism from both sides of the climate change debate. Environmental lobby groups protested that the emissions reductions targets were too low, and that the level of assistance to polluters was too high. Industry and business lobby groups however argued for more permits and assistance to offset the economic impacts of the scheme on many enterprises, particularly given the context of the global financial crisis.[15] The Malcolm Turnbull lead opposition supported the scheme in principle, although at times over 2009 they indicated disagreement with various details including the timing of implementation of the scheme, timing of the vote on the relevant legislation and on the level of assistance to be provided to polluting industries. The opposition was able to negotiate greater compensation for polluters affected by the scheme in November 2009.[15]

Shortly before the Senate was due to vote on the relevant bill, leadership tensions in the opposition came to a head.[19] On 1 December 2009 Tony Abbott defeated Malcolm Turnbull in a leadership challenge. Abbot immediately called a secret ballot on support for the ETS among coalition MPs, which was overwhelmingly rejected.[20] The Coalition then withdrew their support for the carbon pricing policy and joined the Greens and Independents in voting against the relevant legislation in the Parliament of Australia on 2 December 2009.[21] As the Rudd government required the support of either the Coalition or the Greens to secure passage of the bill, it was defeated in the Senate. In April 2010, the Government deferred the scheme to the post-2012 timeframe.

External video
Julia Gillard Interview, 2010
Tony Abbott interview, 2009

In June 2010, Julia Gillard defeated Rudd in a leadership challenge thus becoming Prime Minister of Australia. Shortly afterwards she called a federal election. During the election campaign Gillard stated that she supported a price on carbon emissions and that she would prosecute the case for action for as long as she needed to win community support.[22] However, she also indicated that she would not introduce carbon pricing until there was a sufficient consensus on the issue,[23] and she specifically ruled out the introduction of a "carbon tax".[22]

The result of the election left Australia with its first hung parliament in 70 years. To form a majority in the House of Representatives both of the major parties needed to acquire the support of cross-benchers, including the Greens. After two weeks of deliberation Julia Gillard had enough support to gain a majority including the support of the Greens and their single MP in the House, Adam Bandt. Julia Gillard, therefore, remained Prime Minister and Tony Abbott remained in opposition.

The Productivity Commission was asked by the Gillard Government to report on the steps taken to address climate change by eight major economies. The report found that more than 1,000 climate policies were already enacted across the globe.[24][25] It also supported a market-based carbon price as being the most cost-effective way to reduce emissions.[25] The report's findings were one of the major reasons that support for the carbon tax was provided by independent Tony Windsor.[25] Windsor made it clear that he would not support the clean energy legislation if it included a carbon tax on transport fuels.[26] He did not want to penalise people who lived in rural areas, where there was no public transport as an alternative to private vehicles.

One of the requirements for Green support was that the Gillard Government form a cross-party parliamentary committee to determine policy on climate change. Gillard honoured that agreement and on 27 September 2010 the Multi-Party Climate Change Committee (MPCCC) was formed, its terms of reference including that it was to report to Cabinet on ways to introduce a carbon price.[27][28]

The MPCCC agreed on the introduction of a fixed carbon price commencing 1 July 2012, transitioning to a flexible-price cap-and-trade ETS on 1 July 2015.[29] Initially the price of permits is fixed and the quantity unlimited i.e. there is no cap; the scheme thus functions similarly, and is popularly referred to as a tax. In February 2011, the government proposed the Clean Energy Bill,[30] which the opposition claimed to be a broken election promise.[31] The Liberal Party vowed to overturn the bill if it was elected.[32]

The Clean Energy Plan was released on 10 July 2011.[21] The Clean Energy Bill 2011 passed the Lower House in October 2011 and the Upper House in November 2011 and was thus brought into law.[33][34] The carbon price was brought into effect on 1 July 2012.

Scope & Covered Emissions[edit]

Australia's scheme applies to:

  • Direct emissions from a facility (scope-1 emissions) and does not include indirect scope 2 emissions;
  • Only to facilities which emit more than 25,000 t/yr; and
  • Does not apply to agriculture or transport.

In effect, this means Australia's small group of large electricity generators and larger industrial plants are subject to the carbon tax. Carbon tax is paid by surrendering carbon units, which have been either purchased ($20/t in 2012–13) or acquired free under an industry assistance program.

75% of each company's annual obligation must be paid by 15 June each year with the remaining 25% by the following 1 February.

A list of companies which have paid any carbon tax, and the amount which each has paid is published by the Clean Energy Regulator (CER).[35][36] This is called the Liable Entities Public Information Database or LEPID. The LEPID for 2012–13 was updated on 12 July 2013 and the companies which were the fifteen largest payers of carbon tax in 2012–13 are shown in the summary below (related companies are grouped together where identifiable).

The vast majority of Australia's carbon tax is paid by a small number of larger companies. The fifteen largest payers account for approximately 70% of carbon tax paid in 2012–13.

Australian's Top 15 Payers of Carbon Tax in 2012–13

(account for 70% of total carbon units lodged)

Company Activity Carbon units lodged

in 2012–13 (million)

GDF Suez Electricity generation
25.8
AGL Electricity generation
19.1
Macquarie Generation Electricity generation
16.0
Delta Electricity Electricity generation
13.3
Energy Australia Electricity generation
11.9
Origin Energy Electricity generation
11.6
Stanwell Corporation Electricity generation
11.0
CS Energy Electricity generation
7.4
Woodside Energy LNG production
6.6
Verve Energy Electricity generation
5.5
NRG Gladstone Electricity generation
4.8
BlueScope Steel Iron & steelmaking
4.7
Alcoa Alumina refining
4.6
Alinta Energy Electricity generation
4.6
Millmerran Electricity generation
4.4

Source – LEPID 12 July 2013

The LEPID list shows approximately 370 companies. However, once companies which have not paid any tax have been excluded, and related companies are grouped together, there are only approximately 185 discrete companies on the list.

Approximately 25 of those are electricity generators. That leaves another 160 companies with industrial operations. The total number of carbon units lodged for 2012–13 was 212 million, representing 75% payable before June 15. That suggests the 100% obligation would be 283 million units. This means the carbon tax covers just over 50% of Australia's 552 Mt/yr emissions.

The pricing mechanism was expected to cover 60% of Australia's carbon emissions.[1]

The scheme will not apply to agriculture in Australia or to transport fuels. Agriculture emissions are exempt because tracking their emissions is difficult and administering a scheme would be too complex.[37] Households and business use of light vehicles will not incur a carbon price. However there will be changes to the current fuel tax regime which will effectively impose a carbon tax on businesses' liquid and gaseous fuel emissions. There are plans for heavy on-road vehicles to pay from 1 July 2014.[38]

The Climate Change Authority is a new statutory agency that began operations on 1 July 2012. Its role is to advise the government on the setting of carbon pollution caps, to conduct periodic reviews of the carbon pricing process, and to report on progress towards meeting national targets.[39] These pollution caps will form the basis for the cap-and-trade structure to commence in 2015.

Industry Assistance Programs[edit]

The Government is running several major ‘Industry Assistance’ programs to reduce the Carbon Tax impact for these 185 affected companies.   These have the effect of significantly reducing the actual carbon tax raised.

Jobs & Competitiveness Program[edit]

The ‘Jobs and Competitiveness Program’ is for the non-electricity sector and is targeted at the ‘emissions-intensive trade-exposed’ activities – that is, companies who emit a lot of CO2 and are exposed to imports or who trade internationally. There is a list of 48 trade-exposed activities.  It includes business such as steel making, alumina refining, cement making and similar activities.

Depending on whether a company is ‘highly’ or ‘moderately’ emissions intensive, it receives 94.5% or 66% of ‘average industry carbon costs’ supplied as free carbon units.

Overall in 2012–13 under the ‘Jobs and Competitiveness Program’, there were 104 million free Carbon Units issued to 123 applicants.  That was valued at approximately $2.4 billion. The fifteen largest recipients of free carbon units in 2012–13 are shown in the summary below (related companies are grouped together where identifiable).

Top 15 Recipients of Free Carbon Units in 2012–13

(under Jobs & Competitiveness Program)

Company Activity Free carbon units

in 2012–13 (million)

Rio Tinto Alumina, aluminium
19.6
Alcoa Alumina, aluminium
12.5
Tomago Aluminium Alumina, aluminium
8.8
BlueScope Steel Iron & steelmaking
7.5
Woodside Energy LNG production
5.5
BHP Billiton Nickel, copper, alumina
5.1
Adelaide Brighton Cement & lime
2.9
OneSteel Iron & steelmaking
2.9
Cement Australia Cement & lime
2.6
Orica Ammonium nitrate
2.6
BP Petroleum refining
2.2
Caltex Petroleum refining
2.2
Alcan Alumina refining
2.0
Boral Cement
1.9
Wesfarmers Industrial Gases
1.6

Source – Clean Energy Regulator

To put this into context, the LEPID list indicated that the total amount of carbon units to be surrendered would be 283 million units for 2012–13. 37% of these were awarded for free under the Jobs and Competitiveness Program.

Coal Fired Generation Assistance[edit]

There is also the ‘Coal Fired Generation Assistance’ for coal based electricity generating companies.  Under this program, the Government is giving out 42 million (almost $5 billion worth) of free Carbon Units each year. These are only issued to the generators with the highest amount of CO2 emission intensity, above 1.0 tonne of CO2 per MWh of energy. These are primarily the brown coal fired generators in Victoria's La Trobe Valley

The free units were shared according to their size and the amount of CO2 produced compared to a more efficient black coal fired power station. The list of companies which receive those free units is published by the Clean Energy Regulator.[40]  Nine power stations qualified – the big four brown coal plants in Victoria, and five other much smaller plants. The four big brown coal plants in Victoria is receiving by the majority share of free Carbon Units, around 37 million of the 42 million free Carbon Units in September each year. 

With an average emissions intensity of 1.3, that effectively means there is no Carbon Tax on the first 20 TWh (or approximately 50%) they collectively produce each year.

Steel Transformation Plan package[edit]

The Steel Transformation Plan is a $500 million package for Australia's two steelmakers. Payments of $160 million have been made, $200 M to BlueScope and$70 M to OneSteel in 2012.

Effect of the Carbon Tax[edit]

Reduction in emissions of greenhouse gases[edit]

Because the Australian carbon tax does not apply to all fossil fuels usage, it only had an effect on some of the emitters of greenhouse gases. Among those emitters to which it applied, emissions were significantly lower after introduction of the tax. According to the Investor Group on Climate Change, emissions from companies subject to the tax went down 7% with the introduction of the tax, and the tax was "the major contributor" to this reduction.[41]

Continuing growth in greenhouse emissions[edit]

Australia’s total greenhouse gas emissions increased by 0.3% in the first six months of the Carbon Tax to December 2012 to 276.5 Mt CO2 equiv,[42] while Australia's gross domestic product grew at a rate of 2.5% per annum.

Greenhouse emissions from stationary energy (excluding electricity) and transport grew by 4% in the first six months of the carbon tax to December 2012.

However, there is a five-year trend for emissions from the electricity generation sector in Australia to decline.  Electricity emissions peaked at 38% of the national total in September quarter 2008, coinciding with the start of the Global Financial Crisis.  In December 2012, electricity emissions were just 33% of national emissions.  The decline is due partly to an almost 6% reduction in electricity demand in the National Electricity market since 2008.  This fall in electricity demand followed:·        

  • Retail electricity prices rising by approximately 80% over the past five years; ·        
  • Reduced economic activity and closure of the Kurri Kurri aluminium smelter in mid-2012; and·        
  • A burst in residential solar PV generation following generous State Government incentives, now all curtailed.

Other factors contributing to the five-year fall in greenhouse emissions from the electricity sector are:·        

  • An increase in wind generation supported by the Renewable Energy Target subsidies; and·        
  • Fuel switching from coal to gas.

The Australian Government said in July 2013 that the carbon tax was a factor in reducing the emissions intensity in the National Electricity Market from 0.92 t of CO2 per MWh to 0.87 in the 11 months following its introduction.[43] 

Since the carbon tax was introduced, wholesale electricity prices in the National Electricity market have increased significantly.  The Energy Users Association of Australia in its June 2013 paper said that electricity generators have been able to pass through more than 100% of the cost of the carbon tax. “If the outcomes observed in the spot market persist then it can be unequivocally concluded that both fossil fuel generators and renewable generators will have gained as a result of emission pricing, at users’ expense. Surely this is not what was intended."[44]

Alternative explanations of emissions reductions[edit]

  Frontier Economics said the reduction in emissions from the electricity sector in the first year of the carbon tax was 'largely explained by factors unrelated to the carbon tax'. [10][11]

The Energy Users Association of Australia (EUAA) said in June 2013 "we suggest that it cannot be said that pricing emissions has reduced emissions in stationary energy to any meaningful extent" [44]

Significant announcements which have, or may have, relevance to the carbon tax[edit]

AGL – In relation to its purchase of the Loy Yang brown coal fired power station in 2012, one of the single largest emitters of CO2 in Australia states  “On the supply side of the business, the most  significant strategic development was the decision to buy the Loy Yang A power station. …… The Board also recognised that coal fired generation would be required for decades to come if the demand from Australian households and businesses for electricity was to continue to be satisfied” [45] 

Adelaide Brighton (Australia’s second largest cement producer) “….AdelaideBrighton expects it will significantly mitigate the impact of the carbon tax over the next five years by:·        

  • Enhancing its import flexibility;·        
  • Reducing reliance on domestic manufacture; ·        
  • Increasing the use of alternative fuels and cementitious substitutes” [46]

BlueScope (Australia’s largest steelmaker) "When funds from the Steel Transformation Plan are taken into account, the Company does not expect to face a net carbon liability over the period”.[47]

Investments as a result of carbon tax[edit]

David Kassulke, the manager of AJ Bush & Sons, expressed grave concerns over the carbon tax during the lead up to its implementation. However, he now says the carbon tax has had a positive impact on the business. The company expects to cut carbon emissions from 85,000 to 30,000 tonnes per year with the construction of a new biogas plant in 2013.

"The end result of the introduction of the new biogas technology will not only be a saving of millions of dollars in energy and carbon costs, but also an opportunity for the company to be positioned at the cutting edge of renewable energy technology in the rendering industry, Mr Kassulke said."

“The (biogas technology) investment is a good way to modernise and will dramatically reduce our emissions."

“It will mean that we will reduce our emissions to the point where we will no longer be a big polluter any more."

“What the imposition of the carbon tax has done is make industry take stock of what it is currently doing and has forced it to look at doing things in a better way."

“It means companies are now looking at ways to use less energy which equates to less cost and a subsequent reduction in the tax that is being levied.“That has been the intention of the tax and clearly from that perspective it is working and working well.”[48]

Political and industry response[edit]

The introduction of a carbon price in Australia is controversial. The day before the 2010 Federal election, the then Prime Minister, Julia Gillard sent out a strong message regarding carbon pricing, stating "I don't rule out the possibility of legislating a Carbon Pollution Reduction Scheme, a market-based mechanism." She also stated that she would view an election victory as a mandate for a carbon price.[49] Despite this, the then Federal opposition accused the Government of breaking an election promise to not introduce a carbon tax.[50] Julia Gillard responded to these accusations by saying that circumstances changed following the 2010 election.[51][52] Then opposition leader Tony Abbott criticised the carbon pricing policy on economic grounds referring to it as "toxic" and likening it to an octopus embracing the whole of the economy.[53] He pledged to repeal the tax after the 18 clean energy bills passed through the House of Representatives and stated that the next election would be a referendum on the "carbon tax".[54][55]

The opposition (and since the 2013 election the Abbott government) proposed an alternative "direct-action" carbon emissions reduction scheme. Modelling produced by the Department of the Treasury indicated that this scheme would cost twice as much as the Clean Energy Plan.[56] Abbott was unable to find an Australian economist who supported his policy, although he did cite international economists who are supportive.[57] Tony Abbott's "Direct Action Plan" has been criticised because there is no disincentive to continue polluting at the same rate, meaning that emissions will increase rather than decrease by 2020. In addition, "under Direct Action it is the public, not polluters who pay."[58]

The Australian Renewable Energy Agency (ARENA) was established as part of the Clean Energy Fund, and commenced operations on 1 July 2012. It will consolidate existing renewable energy technology innovation programs. It has funds available to provide financial assistance to research, develop, demonstrate, deploy and commercialise renewable energy and related technologies.[59] The government-established but independent Clean Energy Finance Corporation (CEFC) will commence investment operations from 1 July 2013. The CEFC will focus on investments in renewable energy, low-emissions and energy efficiency technology and the manufacturing companies that produce materials used in such technologies.[60]

The majority of big emitters in Australia supported a price on carbon as at 2012 July.[61] However business groups and some big emitters, especially in the mining sector, are opposed to the pricing scheme.[62]

A protest at Hazelwood Power Station, The OECD's most polluting power station,[63] 2009

One criticism of the carbon pricing scheme has been that Australia should not proceed with its introduction ahead of other countries. However, according to the Department of Climate Change and Energy Efficiency, Australia will be one of around 50 jurisdictions implementing similar schemes worldwide.[64] The starting price of $23 per tonne has also been a point of contention.[64]

Emissions figures from the 2010–11 financial year suggest the electricity generation sector may be due to pay around $3.9 billion.[65] Loans have been made available so that electricity generators can purchase carbon permits. Macquarie Generation, a Government of New South Wales owned electricity generator, wrote down the value of its assets by about $1 billion as a result of the carbon tax.[66] Power generators in the La Trobe Valley also face substantial write-downs.

Modelling undertaken by the Virgin Australia airline calculated that the average increase per flight would be $3. They responded by implementing a surcharge of between $1.00 and $5.00 to a one-way flight starting in July 2012.[67] Qantas is raising its ticket prices by between $1.50 and $5.50.

In a survey conducted by the Economic Society of Australia, 60% of economists thought the carbon pricing proposal was sound economic policy, while 25% disagreed.[68] A number of public protests both in support of and against the carbon price (or tax) have been held in the run up to its introduction. These include the No Carbon Tax Climate Sceptics rallies and Say Yes demonstrations.

2013 Australian Federal Election[edit]

Heading into the 2013 Australian Federal election, the Liberal Party developed a campaign platform that included removing the 'Carbon Tax'. The Liberal Party claimed that the election was in effect a National Referendum on carbon pricing in Australia. Although the Liberal Party won the 2013 Federal election, it was unclear to what extent Australian voters had specifically voted Liberal due to this particular issue. The incoming Liberal Government placed removing the carbon pricing scheme at the head of its legislative programme.

However, due to the new Australian Senate not taking office until 1 July 2014, it remains unclear whether the Abbott Government could gain sufficient cross-bench support in the Australian Senate prior to 1 July 2014 to advance this legislative program. The Palmer United Party has threatened to attempt to block the legislation in the senate if the Abbott government links the proposed replacement policy, dubbed as the "direct action" carbon emissions reduction scheme to the Federal Budget.[69] The "direct action" scheme was described in a green paper issued in December 2013, to be developed as a white paper after February 2014.[70] The green paper has been criticized as an inadequate document.[71]

Effects and impacts[edit]

The carbon pricing scheme is designed to improve energy efficiency, convert electricity generation from coal to alternatives and shift economic activity towards a low carbon economy.[72] Its impact on business is expected to be only 0.1 – 0.2% lower than the business as usual scenario.[73] The scheme aims to reduce 160 million tonnes of carbon dioxide from entering the atmosphere by 2020.[74] It is expected to generate $24 billion over three years.[75]

In May 2012, the Australian Competition and Consumer Commission (ACCC) reported it was investigating about 100 cases where customers had possibly been misled into paying excessive price rises falsely claimed to be as a result of the carbon tax.[76] By the middle of June, the commission was investigating about 200 cases.[77] The consumer watchdog also set up a phone hotline and online form for complaints regarding excess pricing claimed to be due to the carbon tax. The ACCC had forecast that home construction costs would be at the lower end of the 0.7% to 1.8% range predicted by building companies.[78] The Housing Industry Association estimated an average new house will experience a price increase of between 0.8% and 1.7% due to the carbon price.[79] Housing construction was expected to be significantly impacted by the carbon tax because new homes require cement, bricks, aluminium and glass.[80] A forecast by the Centre for International Economics predicted the housing construction industry may decline by 12.6% as a result of the carbon price.[80]

The coal industry is expected to be impacted due to the emissions produced as coal is mined, however a similar expense is not expected to be incurred by Australia's coal exporting competitors.[72] According to the Institute of Public Affairs, the coal industry in Australia will lose jobs to overseas competitors and mines will be closed.[81] Despite the announcement of the scheme, spending on mineral exploration in the March quarter was the highest ever at $1.086 billion.[82] The impact on the LNG industry in Australia is expected to be minor to moderate.[83] No major projects are expected to be cancelled as a result of the introduction of the carbon pricing scheme. Dairy farmers will be impacted because of higher power costs for milk processing.[84]

Household bills are expected to rise by an average of around $5 per week.[85] According to energy retailer Synergy the carbon price will result in a 7.1% rise to power bills.[86] Coal-fired power stations in the Hunter Valley have been searching for a suitable geological storage site for carbon dioxide emissions.[87]

Compensation[edit]

To assist households expected to deal with higher costs of living from the introduction of carbon pricing, the government of Australia is providing household assistance measures.

Part of these measures are changes to income tax: the tax-free threshold increased from $6,000 to $18,200 on 1 July 2012 and it will rise again to $19,400 from 1 July 2015.[88] The changes mean all those earning less than $20,000 will receive a tax cut with those earning $5,000 or less receiving the greatest tax reduction.[89][90] The changes represent the biggest overhaul of taxation since the Goods and Services Tax was introduced in 2000.[89]

Other steps includes direct payments into bank accounts beginning in May 2012.[91] The payments have been called the Clean Energy Advance and have been targeted to help low and middle income households.[92]

Some industries which are heavily impacted by the carbon price will receive compensation. As part of the Energy Security Fund $1 billion worth of payments will be made to highly emissions-intensive coal-fired generators.[93] Most of that funding will be given to coal-fired power generators in Victoria.[94] Research by the Grattan Institute has indicated that without industry compensation no black coal mining and liquefied natural gas projects would be scrapped and that after the carbon price and compensation is implemented the steel industry will be better off.[95] The Australian steel industry is being compensated through a combination of free permits and a $30 million adjustment fund.[96]

Under the new Carbon Farming Initiative, farmers and graziers will be able to plant trees to earn carbon credits that they will be allowed to sell to companies that are liable to pay a carbon price.[97] The Clean Technology Investment Program will help the manufacturing sector to support investments in "energy-efficient capital equipment and low emission technologies, processes and products".[98] Companies in the food sector will be able to apply for grants to improve their energy efficiency.[99]

The Productivity Commission will assess the need for industry compensation in 2014–15.[96]

Emissions reduction[edit]

Six months after the introduction of carbon pricing the Department of Climate Change and Renewable Energy reported a 9% decrease in emissions from electricity generators.[100]

Nine months after the introduction of the pricing scheme, Australia's emissions of carbon dioxide due to electricity generation have reduced to a 10-year low, with coal generation down 6% from 2008 to 2009.[101]

A number of local government areas are expected to require emissions permits, especially those with a population greater than 20,000 and those that own landfills.[102] Landfills will have to pay a carbon price on new waste deposits from 1 July 2012 to encourage them to capture their methane emissions.[103] The Sunshine Coast Regional Council has been able to reduce methane emissions by 90% by implementing methane gas capture at landfill sites.[104] In June 2012, the CER announced that 33 local councils will be expected to purchase emissions permits or offsets.[105]

See also[edit]

Notes[edit]

References[edit]

  1. ^ a b "About the mechanism". Clean Energy Regulator. 14 May 2012. Retrieved 14 June 2012. 
  2. ^ Department of Climate Change. "Starting Emissions Trading on 1 July 2014 Policy Summary". Australian Government. Retrieved 25 July 2013. 
  3. ^ United Nations Statistics Division, Millennium Development Goals indicators: Carbon dioxide emissions (CO
    2
    ), thousand tonnes of CO
    2
    (collected by CDIAC) Human-produced, direct emissions of carbon dioxide only. Excludes other greenhouse gases; land-use, land-use-change and forestry (LULUCF); and natural background flows of CO
    2
    (See also: Carbon cycle)
  4. ^ "United Nations Statistics Division". United Nations Statistics Division. Retrieved 2012-09-27. 
  5. ^ Sarah Clarke (18 November 2009). "Australia leads world in carbon emissions". ABC News (Australian Broadcasting Corporation). Retrieved 18 June 2012. 
  6. ^ Simon Lauder (11 September 2009). "Australians the 'world's worst polluters'". ABC News (Australian Broadcasting Corporation). Retrieved 18 June 2012. 
  7. ^ "Big fall in electricity sector emissions since carbon tax". Sydney Morning Herald. Retrieved 31 March 2014. 
  8. ^ Quarterly Update of Australia’s National Greenhouse Gas Inventory, December Quarter 2012. The Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education. p. 2. ISSN 2201-8883. 
  9. ^ http://www.businessspectator.com.au/news/2013/4/12/renewable-energy/australian-co2-emissions-hit-10-year-low
  10. ^ a b "Post hoc ergo propter hoc". Frontier Economics. Retrieved 7 August 2013. 
  11. ^ a b "Overpowering". Frontier Economics. Retrieved 10 August 2013. 
  12. ^ "Quarterly Update of Australia’s National Greenhouse Gas Inventory December Quarter 2012". Australian Government. Retrieved 25 July 2013. 
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