Australia's carbon pollution tax to battle climate change

Reuters/Tim Wimborne

Australia is to introduce a tax on carbon pollution aimed at fighting climate change in a move that will create the region’s largest emissions trading scheme similar to one adopted by neighbouring New Zealand. 


Under the scheme to begin on July 1, 2012, about 500 of Australia's top polluters will pay a fixed price, starting at A23 (17 euros) per tonne, for their carbon dioxide emissions for the first three years.

The mechanism would then shift into an emissions trading scheme, with a floating price set by the market. The government will set a floor price and an upper limit for at least the first three years to avoid price shocks.

At the same time, the government will establish a 7 billion euro Clean Energy Finance Corporation to fund innovative products in renewable energy. The coal industry will also receive and extra 9.1 billion euro to protect jobs and compensate for the tax over five years.

Carbon tax is a sensitive issue in Australia, which is among the world’s worst polluters due to its reliance on coal-fired power and mining exports.

Prime Minister Julia Gillard’s popularity has taken a beating since she announced plans for the tax earlier this year.

In a rare televised address to the nation, Gillard said it is time to move from words to action.

“Most Australians now agree our climate is changing…this has harmful effects on our environment and on the economy and the government should act,” she said.

Much of the revenue raised from the tax in the first three years will be used for higher family payments, pension boosts and income tax cuts to offset the increased cost of living as businesses factor the carbon cost into their goods and services.

Experts say the emissions trading scheme will be the biggest and most systematic outside Europe.

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