Prime Minister Julia Gillard launched the government’s carbon tax initiative this week, which featured on the Prime Minister’s website amidst a wave of other commentary. OBT looks at the initial personal and business implications of the announcement.
Around 500 businesses will be required to pay for their pollution under the carbon pricing mechanism, with more than half of this revenue used to assist households with tax cuts, increased family payments and higher pensions, benefits and allowances. Carbon price revenue will also be used to support jobs and to invest in clean energy and climate change programs. The Government’s carbon pricing mechanism would be implemented in two stages:
- For the first three years, the carbon price will be $23 for each tonne of pollution beginning on 1 July 2012. The price will rise by 2.5 per cent a year in real terms during a three-year fixed price period until 1 July 2015.
- From 1 July 2015, the carbon price mechanism will then transition to an emissions trading scheme where the price will be determined by the market.
The main points of the carbon tax at this time are:
- Lowest income households are going to get the benefit of a 20 per cent buffer; the Government says price impacts will be modest with a 0.7 per cent increase in the cost of living.
- An increase in average household costs by $9.90 per week and, on average, tax cuts, higher Family Tax Benefits and increases in pensions and allowances of $10.10 per week in 2012/13.
- Nine out of ten Australian households will get tax cuts, or payment increases, or a combination of the two from the $24.5 billion extra in revenue.
- Trebling the level of the tax-free threshold to $18,200 in 2012/13 to coincide with the introduction of a carbon price. Lifting this threshold will mean that people will have to earn an income of $20,542 before they are eligible to pay tax.
- The Government will help businesses improve their energy efficiency through a range of measures including the $1.2 billion Clean Technology Program. Under the scheme, industry will have a financial incentive to reduce pollution, which can be achieved through energy efficiency, buying abatement from overseas or cutting emissions.
- Petrol for cars and light vehicles is exempt from the carbon price, however the heavy transport industry will be charged $510 million a year from 2014 through a change in fuel excise.
- Agriculture won’t come under the carbon price; farmers will be exempt from a carbon price on fuel, and will be paid to plant trees and invest in new technologies.
With a short-term aim of cutting emissions by 160 million tonnes by 2020, the Prime Minister said the carbon price was a central element of the Government’s plan to move Australia to a clean energy future, “A carbon price will create economic incentives for the biggest polluters to reduce their emissions of greenhouse gases.”
More information about the Government’s announcement of a carbon price and mechanism is available at www.cleanenergyfuture.gov.au.