Australia’s Parliament passed landmark laws to impose a price on carbon emissions on Tuesday in one of the biggest economic reforms in a decade, giving new impetus to December’s global climate talks in South Africa.
The scheme’s impact will be felt right across the economy, from miners to LNG producers, airlines and steel makers and is aimed at making companies more energy efficient and push power generation towards gas and renewables.
Australia accounts for just 1.5 per cent of global emissions, but is the developed world’s highest emitter per capita due to a reliance on coal to generate electricity.
The vote is a major victory for embattled Prime Minister Julia Gillard, who staked her government’s future on what will be the most comprehensive carbon price scheme outside of Europe despite deep hostility from voters and the political opposition.
The scheme is a central plank in the government’s fight against climate change and aims to halt the growth of the country’s growing greenhouse gas emissions from a resources-led boom and age-old reliance on coal for power generation.
It sets a fixed carbon tax of $23 ($24.12) a tonne on the top 500 polluters from July, 2012, then moves to an emissions trading scheme from July, 2015. Companies involved will need a permit for every tonne of carbon they emit.
“Today marks the beginning of Australia’s clean energy future. This is an historic moment, this is an historic reform, a reform that is long overdue,” Finance Minister Penny Wong told the upper house Senate as she wrapped up the marathon debate.
Australia has been debating a carbon price scheme for a decade and through 37 parliamentary inquiries, with the legislation instrumental in the 2007 fall of former conservative prime minister John Howard and Labor’s Kevin Rudd in 2010.
The laws will see Australia join the European Union and New Zealand with national emissions trading schemes. California’s starts in 2013, while China and South Korea are working on carbon trading programs. India has a coal tax, while South Africa plans to place carbon caps on its top polluters.
The government hopes securing the carbon price laws will help reignite the push for a global agreement to curb emissions and fight global warming ahead of a international talks in Durban in December.
The carbon price will impose a cost on every tonne of carbon emitted, giving companies a financial incentive to curb pollution, and will help Australia reach its goal to cut emissions by 5 per cent of year 2000 levels by 2020.
Farmers will be exempt from the scheme, but will be able to cash in by selling carbon offsets under separate laws for a carbon farming initiative.
The package of 18 new laws sets up the carbon price as well as billions in compensation for export-exposed industries and local steel makers, as well as personal tax cuts for 90 per cent of workers, worth an average A$300 a year.
Emissions-intensive industries such as steel making, aluminum and zinc refining will get 94.5 per cent of carbon permits for free for the first three years of the scheme.
The government expects the scheme to spur a multibillion-dollar investment rush in new cleaner energy sources including natural gas and renewable power stations to replace Australia’s aging coal-fired plants.
The government has committed more than $13-billion for renewable and low emissions projects, including a $10-billion independent Clean Energy Finance Corporation, with around $100-billion in renewables sector investment expected by 2050.
However, full introduction of the Australian scheme remains uncertain, with conservative opposition leader Tony Abbott promising to scrap the carbon price if he wins power and with Ms. Gillard’s minority government holding power by only one seat.
The next election is not due until late 2013, but opinion polls show Ms. Gillard’s government would be easily swept from office, and Mr. Abbott could potentially take office at any time in the event of a by-election in a government-held seat.
A poll on Tuesday showed the conservatives leading ruling Labor by 53 to 47 per cent, although the government’s popularity had improved slightly as voters warmed to Ms. Gillard’s handling of economic and industrial relations problems.
The carbon tax is one of the three key policies Ms. Gillard promised to finalize when she became prime minister, alongside a planned 30-per-cent tax on iron ore and coal mines and new measures to deter asylum seekers.
But dead-heat elections last August forced Gillard to negotiate details of the carbon price with the Greens and three independent lawmakers.
Climate Minister Greg Combet said the government would stick to its $23-a-tonne price, despite it being almost double the European cost of between $8.70 and $12.60 a tonne, which is a four-year-low on the back of global economic uncertainty.
“I’d certainly hope and anticipate that in the course of the next 3½ years, the crisis in Europe is overcome, markets will stabilize and recover and our carbon price will mesh well,” Mr. Combet told Australian radio.