Rhein on Energy and Climate

After years of controversial political debate, China has its carbon tax!

It has taken the courage of Julia Gillard, the socialist prime minister since 2010, to get there.

As of July 1. 2012, 294 companies and municipal councils will be subject to a A$ 23 tax per ton of C02. That is more than twice the level that EU greenhouse gas emitters presently have to pay under the prevailing cap-and trade system!

The tax rates will be lifted to A$ 24 in 2013 and A$ 25 in 2014. As of 2015 the system will be transformed into a cap-and trade system like the one in force in the EU.

The scheme will cover almost two thirds of Australian C02 emissions, especially those from coal power plants and heavy industries. Agriculture will be exempt, as it is in the EU. Transport will be covered by changes of the fuel tax regime and new provisions for heavy trucks from July 2014 onwards.

With per capita emissions exceeding 20 tons Australia is the biggest per capita C02 emitter among OECD countries and one of the seven biggest world-wide. Each Australian citizen emits twice as much C02 as the average EU citize

The decision taken by a coalition of Socialists and Greens has therefore been long overdue. For the EU it is reason to jubilate: one of the wealthiest countries on earth, whose 22 million people account for 1.5 per cent of global emissions, has decided to adopt a cap- and- trade regime à la EU!

Until 2050 Australia aims at reducing its C02 emissions by 80 per cent below 2000 levels, roughly comparable to EU targets.

The government wants to achieve this by boosting energy efficiency and switching to alternative energy sources:

  • Australian energy efficiency is low. People do not care about saving energy. Australia therefore has a huge potential for higher efficiency.
  • Coal constitutes the dominant input for power generation. Utilities will have to pay the bulk of the C02 taxation. This will induce them to switch to gas, wind and solar.

The Australian policy goes one big step further than the EU: it will start shifting from income to resources taxation.

To compensate for the extra burden on families resulting from higher energy prices the government will treble the thresholds for tax exemption from A$ 6000 presently to A$ 20.00.

The EU Commission should recommend governments to offer similar income tax relief to compensate for rising energy prices.

 

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