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Summary overview of Australia's Carbon Tax policy

The Australian government has unveiled its new plan to cut emissions and boost renewables.

The government will start pricing one ton of carbon at Aus$23 (US$24.74) in mid-2012 for the nation's biggest emitters, and steadily raise the price by 2.5 percent per year until 2015. Only the European Union's emissions-trading scheme will be of comparable size, and industry has criticized Canberra for pursuing the policy in the absence of similar action from the country's biggest trading partners, such as China and the U.S.


To ease the impact of the carbon price, the worst-affected power companies will receive a mix of cash compensation and free permits and will also be offered short-term loans to buy permits and to refinance existing debt. Under the policy, the government intends to negotiate the closure of some of the biggest coal-fired power plants, or biggest emitters—2,000 megawatts worth by 2020.


To offset competition from countries that don't operate a carbon scheme, the government has pledged A$9.2 billion (US$9.9 billion) in compensation, in the form of free permits, to some energy-intensive businesses: Steel works, aluminum smelters and pulp manufacturers will be among those eligible for 95% to get their carbon permits free, while plastics and chemical manufacturers will be in the 60% group and liquefied-natural-gas producers in the 50% group. Steel works will also receive an additional A$300 million in compensation, a four-year package called the Steel Transformation Plan that would provide transitional support.


By 2020, the government wants to cut pollution levels to 5% below their 2000 levels—a reduction of 159 million tons a year of carbon pollution—and implement a 20% renewable-energy target. A new A$10-billion Clean Energy Finance Corp. would be set up, in addition to a A$1.2-billion clean technology fund and a new Climate Change Authority, headed by former central bank chief Bernie Fraser. That body would make recommendations to the government on pollution targets, emissions reductions and how the carbon price is affecting industry.


Households, too, will be compensated, with more than half of revenue raised from the policy going toward tax cuts, pension increases and other payments.

Carbon emissions by motorists and agriculture have been excluded from the plan, though existing fuel-tax credits for business will be wound back.


High on the priority list for the new policy is the establishment of a new, independent Climate Change Authority (CCA) with the main responsibility for establishing, measuring, policing and managing the carbon pricing and payment process. To be chaired by former Secretary of Treasury, Bernie Fraser, the CCA will also recommend caps to be set on carbon pollution, advise the Government on the performance of the carbon price and other climate change initiatives and track progress towards the nation’s pollution reduction targets.
The CCA will also conduct regular reviews and issue public reports, the first of which will be due in February 2014.

In addition to the CCA, a new Energy Security Council is to be appointed to advise the Government on support measures to address energy security risks. The Council will be supported by an Energy Security Fund which will meet the costs of closing the worst polluting plants and assist in the upgrade of others as well as offer loans to industry when commercial lenders won’t.

A new Australian Renewable Energy Agency is also to be established within Resources, Energy and Tourism to fund the development and marketing of renewable energy technologies and a Clean Energy Finance Corporation will be set up in Treasury or Finance and Deregulation to back clean energy proposals and technologies.

A Clean Technology Innovation Program is also be set up in the Department of Innovation, Industry, Science and Research.

A new Biodiversity Fund will be created to manage almost a billion dollars over six years for initiatives that protect biodiversity by supporting farmers, community groups and natural resource management bodies develop on-ground carbon storage initiatives and achieve other biodiversity outcomes.

Among the existing programs to be expanded or upgraded are the LivingGreener website (www.livinggreener.gov.au), the Low Carbon Communities program, the Energy Efficiency Opportunities program and others.

Further work is to be undertaken on the national energy saving initiative, or ‘white certificate’ scheme and grants will be given to industry associations and non-government organisations to promote energy efficiency measures among small businesses and community groups.


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