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Economy Lab

Australia passes carbon tax laws Add to ...

Australia has joined the group of countries taxing carbon emissions after its senate on Tuesday approved legislation that for years had been highly controversial in a country where coal and other heavily polluting industries remain mainstays of the economy.



Beginning next July, the country’s 500 biggest polluters will pay $23 (Australian, $23.70 U.S.) per tonne of carbon they generate. By 2015, the tax on carbon will be flexibly priced under a market-based emissions trading scheme.



“After all of these years of debate and division, our nation has got the job done,” said prime minister Julia Gillard.



The measure passed the senate with a margin of just four votes, having won approval in the lower house of parliament last month by just two votes.



The European Union currently runs the world’s biggest emissions trading scheme, as do smaller nations such as New Zealand, but Australia would be one of the first large countries to enact similar measures.



The passing of the bill is a political victory for Ms. Gillard. An earlier proposed carbon tax contributed to the downfall of her predecessor, Kevin Rudd, and Ms. Gillard promised she would not pursue such a tax when she took over as head of the Labor party.



However, she backed the controversial measure to gain the support of the Green party, important allies in holding together her minority government.



Australia has one of the world’s highest per capita rates of carbon emissions, in part due to its reliance on coal for generating energy. The threat of job losses in the country’s large mining sector had rallied opposition to the tax, and the Australia Coal Association, an industry body, launched an advertising campaign warning that it could put 4,700 coal-related jobs at risk.



In response the government has promised $1.3-billlion in financial aid to support jobs in the coal sector, with an additional $70-million earmarked as grants for research into low-pollution technology.



An additional $300-million over four years will go to support the steel industry.



“This is a pragmatic solution to a complex problem,” said Paul O’Malley, the chief executive of BlueScope Steel. The support, he said in a filing to the stock exchange, “materially reduces the overall cost of the carbon tax on BlueScope”.



To win over individual voters, the government will cut taxes and increase pension and household payments to offset the higher cost of electricity. The revenue generated by the tax will fund those programmes.



The years of fierce political wrangling that led to Tuesday’s vote, however, are not over.



The opposition, led by Tony Abbott, has pledged to repeal the tax if his coalition comes to power in the next election, scheduled for 2013. While the opposition coalition’s popularity is low, its approval ratings are higher than those of the current Labor-led government.



“If the Australia Labor party thinks that this is a moment to have high fives to congratulate each other and to celebrate their active betrayal of the Australian people, so be it,” said Eric Abetz, a member of the Liberal party and leader of the opposition in the senate, after the bill’s passage.



The Gillard government has also backed a 30 per cent tax on profits made by coal and iron ore miners. Australia’s resource sector has been growing much faster than areas such as retail and tourism, and Labor ministers have defended the resource tax, introduced to parliament last week, as a way to balance the growth of the economy.

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