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How the carbon tax works

By: Paul Osborne
29 June, 2012

Carbon pricing is essentially about ensuring the economy can grow without emissions growing at the same time.

From July 1, just under 300 companies, and other entities such as councils with large landfill sites, will face a bill of $23 for every tonne of carbon dioxide they emit.
The emissions will be tracked by the Clean Energy Regulator.
The carbon price will rise by 2.5 per cent a year in real terms until an emissions trading scheme, with a floating price determined by the market, starts from July 1, 2015.
The price won't apply at the petrol bowser, light vehicle business transport and off-road fuel use by the agriculture, forestry and fishing industries.
An effective carbon price will be applied to domestic aviation, domestic shipping, rail transport, and non-transport use of fuels. Users of these fuels can opt-in to the mechanism under the Opt-in Scheme.
Companies liable for the carbon price, under the ETS, will be able to buy permits overseas or domestically to offset their emissions.
For the first three years of the ETS, a price ceiling will be set at $20 above the expected international price and will rise by 5 per cent in real terms each year.
The price floor will be $15, rising by 4 per cent each year in real terms.
The most emissions-intensive industries, which will face stiff competition from countries with no carbon price, will benefit from a $9.2 billion Jobs and Competitiveness Program to ensure industry, local communities and workers have a smooth transition and a strong incentive to reduce their carbon pollution.
To start the move to cleaner energy, an Energy Security Fund will allocate free carbon units and cash payments to strongly affected coal-fired electricity generators, conditional on them publishing Clean Energy Investment Plans, which show how they will reduce their pollution, and by meeting power system reliability standards.
They will also shut down 2000 megawatts of the worst-polluting power generation to make way for lower pollution generation.
A $1.2 billion Clean Technology Program, over and above the Jobs and Competitiveness Program, will help directly improve energy efficiency and reduce carbon pollution in manufacturing industries and support research and development in low pollution technologies.
The $300 million Steel Transformation Plan will support and assist the industry transition to a clean energy future, and recognises the pressures currently facing this industry.
The $1.3 billion Coal Sector Jobs Package will provide transitional assistance to help the coal industry to implement carbon abatement technologies for the mines that produce the most carbon pollution.
The amount of carbon pollution produced by coal mines varies greatly, so the fairest way to deliver assistance is to target assistance at those mines that are most impacted by the introduction of the carbon price.
The government acknowledges there will be flow-on costs to households and has begun to roll out assistance through tax cuts and increased payments.
A number of bodies have been set up.
The Climate Change Authority will advise on pollution caps, track Australia's pollution levels and progress towards meeting targets and undertaking reviews of the carbon pricing mechanism.
The Clean Energy Regulator will administer the carbon pricing mechanism, the existing regulatory functions for the National Greenhouse and Energy Reporting Scheme, the Renewable Energy Target and the Carbon Farming Initiative.
The Productivity Commission will review industry assistance, and carbon pollution reduction activities in other countries.
The Land Sector Carbon and Biodiversity Advisory Board will review and oversee land sector initiatives, providing advice to government and ensuring the effectiveness of assistance.
The Energy Security Council will advise the government on any emerging risks to energy security and may offer loans to coal-fired electricity generators for the refinancing of existing debt.
More than $13 billion will be invested in clean energy projects, including through the Clean Energy Finance Corporation.
In combination with the carbon price and Renewable Energy Target, this investment will drive the biggest expansion in the clean energy sector in Australia's history.
Clean Energy Finance Corporation will invest in the commercialisation and deployment of renewable and clean energy projects.
Australian Renewable Energy Agency will improve the competitiveness of renewable energy and related technologies through supporting renewable energy technology innovation.
Farmers will have opportunities to reduce carbon pollution and increase the amount of carbon stored on the land.
Source: AAP
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Mike | Tuesday, July 3, 2012, 6:08 AM
Like it or loath it - eh? The carbon tax is based on some wierd assumptions. Firstly there is man made impact on world climate. if you disagree here you're deemed to be a wierdo. So their first foundation argument for a carbon tax is on tenuous ground at best. Secondly, the economy will continue to grow, and therefore the carbon price will be covered in additoonal growth. Really?? We are currently in a boom time - in fact looking at the rest of the world, we've been propped up by one customer for our primary products - China. If China retracts, we've in trouble. But, hey, us brilliant Aussies will go on saving the planet because we have staked out the high moral ground so that the rest of the world can look at us in admiration. Let's get something straight - the rest of the world doesn't care about us they're too busy worrying about their own problems. I know from my overseas contacts that they are mystified as to why we're doing this at this point in time. Oh, has any body noticed that we have had reductions in carbon emissions already by industry? This is just due to downturns in economic activity along with (expensive) solar panel programs. How can we justify a tax on growth when we don't know if this growth will last?
graham | Tuesday, July 3, 2012, 2:06 PM
i wouldn't call you a wierdo but i find it hard to understand how , when presented with evidence supported by around 95% of the worlds climate scientists , some people choose to beleive the 5%.doesn't make sense to me.
Cerchier | Tuesday, July 3, 2012, 2:22 PM
Why are we doing this to our selves? Even if climate science was right; Firstly; if we stopped producing carbon altogether, like not even riding a bicycle because even making bicycles produces carbon, so just live on grass and forego all else, we will ever only make 1% difference to global carbon production. Secondly: Even if the grand plan does succeed in reducing Australia’s carbon production by 5 % by 2020, and that is now appearing unlikely, we will only reduce world carbon production by a 20th of 1%. Why are some of us so hell bent on trying to make such an economically small nation as this, lead the world for almost no gain, a negligible gain globally? Could it be for personal self aggrandisement? Talk about banging head on wall….why are we doing it? Can anybody answer that? .So much pain for so little gain. Why do we do it to ourselves, its madness.
David | Tuesday, July 3, 2012, 2:37 PM
To Mike, I agree entirely with your comments. We are unluckily the only country in the world who are taxing their own power generation. This is the big killer, other than the bombastic way in which the 'çurrent' Government has introduced this tax on Carbon Dioxide. To Graham, not one of your supposed 95% of the worlds Climate Scientists have been able to provide factual scientific data and evidence (therefore proof) that C02causes global temperature rises. Show me the proof..
Chas | Tuesday, July 3, 2012, 3:05 PM
I feel almost certain that in the coming decades we will begin to see 'carbon neutral' brandng on goods as being as quaint and anachronistic as 'empire' is on old crockery. Debates as to whether there is an effect upon climate are mostly irrelevant. Carbon dioxide has a trivial effect in that regard. What is totally lost however is that we simply must wean our economies off fossil fuels. We do this for strategic military reasons, we do this for food scurity and we do it so that wealthy and socially progressive nations do not have to ruin their economies by being beholden to various unlikeable regimes and corporations elsewhere in the world. True - of developed nations Australia has the least to gain in the short term and true - the carbon tax is initially trivial to most of us (albeit heavily damaging to some sectors) but this does not mean we should not do it. This needs to be done - like it or not. It is just a shame that ignorant activists, ignorant skeptics and dishonests governments can't quit their games and get on with it.
emmelless | Tuesday, July 3, 2012, 4:39 PM
After hearing Garnaut saying Aussies have a higher per capita emmission than any other developed country I got thiking. Garnaut mentioned USA, Europe and Japan (at least) as countries with a lower per capita emmission than us. Then the thought occurred to me; all those countries have significant nuclear generation producing little carbon emmissions, so of course their per capita emmissions are lower as we have no such zero emmission generation. I wonder then if our carbon tax can be seen as the price of us staying nuclear free? If it is, as Garnaut at least says and we are prepared to stay nuke free then we have to accept that our emmissions per capita will stay higher than any other developed and developing country that continues to use and grow their nuclear generation capacity. The disadvantage should at least be recognised and declared for what it is and why it is.
JENNIFER WARD | Tuesday, July 3, 2012, 5:31 PM
Too right Cerchier, some scientists in the UK worked out that by the time a bicycle is manufactured and with all the extra fluids and food the rider needs, it will take 86 years for it to become carbon neutral. Thinking things through isn't a strong point of the Greens. :)
Bill Johnston | Thursday, July 5, 2012, 11:11 AM
Ok, we have a carbon tax, can someone tell me why it's priced at $23 per tonne? Why do we not start at say $2 per tonne and if the big polluters do not reduce or at least not increase their emissions, then we can turn on the increase tap. Just a thought.
Cerchier | Thursday, July 5, 2012, 6:22 PM
emmelless.That per capita rate is nothing but a red herring merely to cloud the issue in an attempt to shore up the argument. It is a scale effect issue, a nation like ours with such a small population will of course be high per head, but as our population increases, our usage will not increase in proportion to our population, but as our population increases say to 300m alongside say USA, we would approximate their per capita usage, be careful not to get side tracked by that issue. the real issue is what carbon we produce by what we do as a country and economy as a component of the globe we live on.
Mike | Saturday, July 7, 2012, 10:33 AM
Some good comments above from thinking people - good to see! Graham, I'm an environmental engineer, working in clean air and water issues in many parts of the world. Trust me, the disengenuous notion propagated by supporters of Carbon Taxes, ETSs, etc., that only 5% of my colleagues are 'deniers' of climate change is something we have to continually refute. There's a lot of my colleagues out there who are not part of government funded programs into research into climate change and who have to work in the real world of problem solving for clients, who will readily acknoledge that climate change is a natural and worthy phenomenon to study but doubt the significant impact human activity is really having on the world's climate. There will be some impact, but the fact that the science cannot produce irrefutable evidence to back up their modelling is a major problem for climate scientists. Now... my work in looking at problems in pollution of waterways, etc., that is an environmental issue that MUST be solved. The fact is, we're generally too busy working on these problems rather than wander up and down the streets waving placards in front of TV cameras.
JustMEinT | Monday, July 9, 2012, 9:00 AM
Not one government payee (scientist) has been able to show conclusively that we are causing the temperature to rise due to carbon emissions, nor can they show - other than by computer generated ouija boards (simulations) that by reducing carbon emissions we will lower the temperature either. Gillard and cronies may have fooled themselves that the dumbed down masses in Australia will have accepted or even forgotten the NO Carbon Tax lies by the next election, but people like myself and millions of others in the blog sphere won't allow that to happen. Good Bye Gillard and crew!
JustMEinT | Monday, July 9, 2012, 9:07 AM
Not one government payee (scientist) has been able to show conclusively that we are causing the temperature to rise due to carbon emissions, nor can they show - other than by computer generated ouija boards (simulations) that by reducing carbon emissions we will lower the temperature either. Gillard and cronies may have fooled themselves that the dumbed down masses in Australia will have accepted or even forgotten the NO Carbon Tax lies by the next election, but people like myself and millions of others in the blog sphere won't allow that to happen. Good Bye Gillard and crew!
Garth | Monday, July 16, 2012, 4:01 PM
I agree with Bill Johnston why pay $23 per tonne that does seem very high considering how little we affect global emmissions
john stedman | Wednesday, August 1, 2012, 6:57 PM
Where is the "Carbon Tax meter", what or who guages the amount of Carbon by anything or anyone.How is it measured by the gram or Tonne, also Gillard's mouth produces "bullsh*t" measure the carbon tax "Hello". I demand a precise measurement system. Js