Opposition Rakes PM Gillard Over the Coals as She Sets a Carbon Tax in Australia

Starting July 1, 2012, Australia will impose a carbon tax on polluters, Prime Minister Julia Gillard announced at a news conference in Canberra on July 10.

“Australia will cut 159 million tons a year of carbon pollution from our atmosphere by 2020,” Gillard said. “That is the equivalent of taking over 45 million cars off the road.” In 2010, Australia produced 577 million tons of carbon emissions, according to the Department of Climate Change.

The country – which relies on coal to generate about 80 percent of its electricity – will require about 500 businesses to pay for their pollution under the plan.

Australia expects to raise some $30 billion in three years by making the 500 companies that are the worst offenders pay a price of $24.70 for each ton of carbon dioxide emitted starting next year; and increasing that amount by 2.5 percent annually, before shifting to a cap-and-trade system in 2015. From then on, the market will set the price.

The announcement included compensation to voters in the form of tax cuts. The proposed carbon tax has been unpopular with the electorate, and the federal Opposition has been warning voters of higher power bills and rising costs of other staple products bought by households.

 Australian households will be handed more than $15 billion in compensation to help offset the impact of the new carbon tax, Prime Minister Julia Gillard has confirmed. The cost of the carbon pricing plan to the average household is expected to be an additional $10.63 per week, and the average household assistance from a Clean Energy Supplement will be $10.85 a week.

The scheme also includes $9.8 billion over three years for trade-exposed industry, with emissions-intensive industries such as aluminum, zinc, and steel manufacturing getting more than 94 percent of their carbon permits for free. The government also will allocate $322 million to steelmakers to encourage investment and innovation, the government said.

Power generators facing losses in the value of their assets will receive about $6 billion in assistance, Gillard said. The government also said it will provide loan support to electricity suppliers and payment for the closure of coal-fired plants to remove as much as 2,000 MW of capacity by 2020. The government has not named which stations it wants to close but the Hazelwood power station, in the Latrobe Valley, is expected to be the first to go.

The move came just two days after the Australian government agreed to a Greens plan to create a new, independent body that will fund more than $3.2 billion worth of renewable energy projects. The Australian Renewable Energy Agency (ARENA) will take over the roles of 10 current renewable programs and R&D projects in solar, geothermal, and biofuel energy. In addition, The Greens were able to negotiate significant support for renewable energy programs, including a $10.7 billion Clean Energy Finance Corporation, which will provide loans for innovation when commercial banks are unwilling to fund projects.

The plan has some supporters.”This is an ambitious transition plan for the Australian economy -- it’s not just about greenhouse gas emissions,” Martijn Wilder, the head of the Climate Change Practice at law firm Baker & McKenzie, said today by phone to Bloomberg. “Australia has been working on this policy since the late 1990s. It’s about time.”

The opposition Liberal Party Leader, Tony Abbott, gave an address, stating his reasons for disagreement: “This carbon tax is a bad idea because everything will cost more: At A$23 [US$24.70] a ton, power prices will immediately rise by 10 percent, and the cost of living of average households will rise by A$515 [US$543] a year that you can’t afford.  The Prime Minister says that most families will be compensated but you can’t compensate people who lose their jobs and the compensation won’t keep pace as the tax goes up and up and up. Even on the government’s own modeling, millions of Australians will be worse off – including a single income family with one child on just average weekly earnings,” he said.

Abbott continued, “The Prime Minister says that the tax won’t hurt you but why should we trust her now when we couldn’t before the election? Why should we trust the Prime Minister to stand up to the Greens in the future when she can’t stand up to them now? Why should we trust this government with a new tax when we know where it will all end: with more spending, more waste, and more spin... So I say ‘no’ to a carbon tax because I say ‘yes’ to manufacturing in Australia, and ‘yes’ to affordable electricity and transport.”

Gillard’s plan now goes to Parliament, where it is expected to pass.

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