Carbon tax update

How will decisions made in parliament affect your electricity prices 171 60466 0 14094050 300

When elected in in September, Prime Minister Tony Abbott made it clear he planned to drop the carbon tax - so just what has happened with this promise since the elections, and what does it mean for electricity prices?

According to the International Centre for Trade and Sustainable Development (ICTSD), the Australian Government will be repealing the controversial tax by July when he new Senate takes office.

However, it is expected to face opposition from both the Labor and Greens parties who will vie to keep the tax in place.

What is the carbon tax and how does it work?

The tax targets the largest emitters of greenhouse gases in the country and charges them around $23 per metric tonne of carbon output in the first year. This amount is set to rise at rate of 2.5 per cent for every following year.

Australia is one of the world's top emitters per capita, according to the ICTSD, which states that most of the electricity used Down Under is provided by coal. This product is also one of the top exports.

Many government officials believe Australian businesses and consumers has seen a major rise in their electricity prices as a result of this tax, says the ICTSD.

Minister for the Environment Greg Hunt also believes prices have been on the rise. In a February 5 press release he said "the carbon tax is a $7 billion dollar hit on the economy every year. And it's all for nothing."

He said emissions were reduced by 0.3 per cent since the tax was enacted.

However, shadow Minister for the Environment, Mark Butler, told Fairfax media on February 15 that the purpose of the tax is to charge polluters for excess emissions.

"During the period since the carbon price's introduction, the economy has continued to grow, contradicting Tony Abbott's claim that it will have a catastrophic effect on Australia's economy."

The funds raised from the carbon tax were reinvested in clean energy technology, he told the Australian Financial Review on February 15.

CEO of the climate Institute, John Connor, said the carbon tax was projected to reduce carbon pollution by as much as 40 million tonnes by July 2014.

What do Australians want?

Roy Morgan conducted a poll about the carbon tax in early February. It found 49 per cent of Aussies want to repeal the carbon tax.

In comparison, 41 per cent think the carbon tax should stay in place, and the remainder of Australians either didn't think it wasn't important or couldn't say.

However, the overall majority - 86 per cent - said they thought Australians should reduce its carbon dioxide emissions. This number did not change depending on people's political alliances, with Greens, Labor and Liberal supporters equally supporting a reduction of emissions.

Mr Hunt said the government is committed to reducing emissions by 5 per cent below 2000 levels by the year 2020. The way it intends to achieve this goal is through the Emissions Reduction Fund, which will encourage businesses to take action. 

Direct action plan

The plan set out by the Coalition to reduce emissions has four prongs - clean air, clean land, clean water and heritage protection.

The Emissions Reduction Fund is the jewel in the government's direct action plan crown, falling under the clean air segment.

It plans to provide incentives to reduce emissions across the Australian economy with a fund of $3 billion set aside for projects designed to reduce carbon emissions.

Under the coalition plan, businesses will compete to win tenders and then will be paid to reduce the emissions created.

This is a direct contrast to the carbon tax program where the biggest polluters paid for the amount of greenhouse gases produced, which in theory would provide an incentive to reduce the levels of gas.

The current government claims the direct action plan is better for the economy, and will ensure a reduction of emissions at the best possible price.

This funding will go to support Australian green projects, according to the Liberal Party, and will not support foreign carbon credits. 

According to the Liberals, this will also have a flow-on effect where the job market is concerned, keeping more employment in the country.

The green paper on the subject is currently open for consultation and will be until February 21, after which time a white paper will be developed.

How will this affect consumers?

Currently, the costs of the carbon tax are passed onto consumers by their electricity suppliers, who are charged for the creation if excess greenhouse gases.

There is compensation offered to mitigate these costs. However, the Coalition government claims the best case scenario will still see over half of Australians worse-off under the policy, according to the action plan drafted by Greg Hunt.

Mr Hunt's action plan states no extra taxes will be levied on Australian households and families in order to achieve a reduction in Australian carbon dioxide emissions by 5 per cent by 2020.

Posted by Liam Tunney.