Carbon Price legislation passes in Australian senate



In an historic move that is expected to usher in an era of investment in clean technology investment, the Australian senate has passed legislation to put a price on carbon pollution. The carbon tax will enter into effect from July of 2012.

Clean Energy Future plan’s future now secured

After a 26-hour debate, 18 bills were passed by a slim majority of 36-32, with Labour and Greens senators teaming up to support the bill despite vehement opposition from the Opposition, independent Nick Xenophon, and the DLP’s John Madigan. As the Clean Energy Future legislation had already passed in the House of Representatives back on 12 October, 2011, Prime Minister Julia Gillard’s flagship policy initiative is now set to become law.

The carbon tax is accused by detractors of being ‘the most expensive carbon tax in the world’. It has drawn the ire of Opposition politicians, who have vowed to have it repealed after the next election, saying that the changes will have a negative impact on the national economy. Proponents, on the other hand, see the suite of measures integral in securing a future for Australia that is not dependent on power generation through the use of fossil fuels such as coal, which is Australia’s main source of power generation as well as Australia’s most biggest export.

Although a big step, green groups such as Greenpeace point out that the carbon price is just one step taken in the direction that Australia needs to move in order to break the dependence on fossil fuels and cut other forms of pollution.

Who gets taxed? A price on carbon for businesses, investment for renewables, and assistance for households

For the first 3 years of the scheme, a price of $23 per tonne of carbon dioxide (CO2) will be levied upon the nation’s 500 most heavily polluting industries, including electricity generators and steel smelting plants, in order to create a financial incentive for innovation, especially in terms of renewable energy and energy efficiency. After year 3, the price will be determined on a market, much as the price of the Federal Government’s Renewable Energy Certificates (RECs) are.

Revenues from the tax will eventually be funnelled into investment in emerging technologies and financing for renewable energy projects, but the government will make an initial investment of $10b, which will be handled by the Clean Energy Finance Corporation, an independent government body to be be established for this purpose. Measures will also be taken to assist those of socioeconomic backgrounds most likely to be adversely affected by the changes; pensioners and low-income families. Payments will come 2 months in advance of implementation of the carbon price itself. 7.5 million people will also receive tax relief to offset expected rises in household expenses, such as the cost of electricity.

How will a price on carbon affect the solar PV industry throughout the nation?

Solar Choice has written previously about the possible impacts of a carbon price on the uptake of renewable energy, including solar power, and the points made previously remain relevant. The ultimate goal of a carbon tax is to reduce carbon emissions, either by forcing the adoption of energy efficiency measures, or making the adoption of renewable energy systems financially sensible. This is indeed a trend that is underway in many areas across Australia–most notably in remote areas where the cost of grid-connect electricity is especially expensive.

The costs added to coal-fired electricity generation, which will be subject to the tax, will likely be passed on to those who use electricity–both residences and businesses. Even without the carbon tax, electricity prices have been rising, and are expected to continue to rise, while the cost of installing solar systems currently stands at an all-time low. The carbon price will ad further incentive for almost anyone who uses electricity to consider having solar power installed at home. John Grimes, CEO of the Australian Solar Energy Society, commented in a statement, “We are finally penalising pollution and rewarding clean energy. This will deliver substantial investment in solar power and position Australia as a solar nation.”

The carbon price at a glance

-Approximately 8 million households will receive some assistance

-Average household costs will rise by $9.90 per week, to be offset by compensation of $10.10 per week.

-Price will start at $23/tonne for Australia’s 500 largest polluters for the first 3 years, after which point the price will be determined by market mechanisms

-Only about 60% of carbon pollution will be covered: the scheme will not apply to petrol, light road vehicles, or agriculture. (There will, however be incentives for farmers to generate carbon credits to sell by undertaking to store CO2 or reduce emissions on the land.)

-More than $9b set aside for big polluters to save jobs

-Small businesses will not have to pay the tax directly, and will get tax concessions

-Carbon emissions are expected to be cut by 159m tonnes per year. (In context, Australia emitted nearly 600m tonnes in 2007, according to the Australian Bureau of Statistics.)

-Seniors will get up to $338 in additional payments per year for singles, up to $510 for couples

-Tax thresholds will be changed, with part-timers and low-income individuals reaping the greatest benefits

Resources and links: “Carbon Clincher: Senate passes controversial carbon price law

Sydney Morning Herald: “Carbon tax bill passes

Sydney Morning Herald: “Climate action groups welcome carbon tax

Top image via ABC

James Martin II