The Australian government yesterday unveiled its long-awaited carbon tax plan, immediately sparking a row over the economic impact of the controversial carbon levy.
As widely anticipated, Prime Minister Julia Gillard confirmed yesterday that the new tax will come into effect from July next year, hitting Australia's top 500 emitters with a Aus$23 (US$24.74) a tonne carbon tax.
She also confirmed the tax will rise 2.5 percent a year until 2015, at which point the levy will transition into an emissions trading scheme that is expected to be the world's third national greenhouse gas cap-and-trade scheme after the EU and New Zealand.
Gillard hailed the proposals -- which have been put together following months of tense negotiations between the minority Labor government and the Green and independent MPs it will rely on to pass the tax -- arguing they represented the cheapest means of delivering a "clean energy future" and meeting Australia's target of cutting emissions five percent by 2020.
The government also provided fresh details of the compensation package it is putting together to protect households and carbon-intensive industries from the impact of the new tax.
Gillard said half the revenue raised from the tax will be immediately recycled in the form of tax cuts to households, worth more than $15 billion. According to government calculations, two-thirds of all households will receive some form of financial assistance to cope with rising energy bills, while many of the poorest households will find themselves better off, despite anticipated increases in energy bills of A$10 a week.
A further $10 billion has been earmarked for the formation of a new Clean Energy Fund to help accelerate the development of renewable energy projects, while the mining industry will be offered access to a A$1.3 billion compensation package, and electricity generators will be offered government loan guarantees to help them refinance loans impacted by the new levy.
Gillard immediately launched a week-long election-style tour of the country in an attempt to sell proposals that, according to recent polls, are opposed by about 60 percent of the electorate.
Speaking to reporters she insisted the new tax would have a positive impact on the Australian economy.
"At its core it really is quite simple: At the moment, we put carbon pollution into our atmosphere for nothing -- a big polluter can just keep chugging it up into the skies and not pay anything," she said.
"Those big polluters will pay a price -- they're smart business people. When a bill comes in for carbon pollution, they'll say, 'How can I reduce that bill? How can I change my processes so I generate less carbon pollution?'"
Many economists endorsed the government's position, insisting the tax would have little impact on Australia's economy, which has been enjoying a period of unprecedented growth on the back of Chinese demand for its mineral resources.
The government said the tax would add just A$1.80 per metric tonne to the cost of coal, having a negligible impact on prices that are at a near record high of above US$300 a metric tonne.
However, carbon-intensive businesses and opposition politicians lined up to attack the proposed tax, predicting it would have a crippling effect on the country's economy.
Opposition leader Tony Abbott slammed the new levy as "a tax increase pretending to be an environmental policy -- Socialism masquerading as environmentalism".
Meanwhile, airlines Qantas and Virgin Blue said the impact of the tax on their operations would be passed on to customers in the form of higher ticket prices, and the Australian Coal Association predicted the tax would result in about 4,700 direct jobs being lost across the mining industry.
Gillard rejected the prediction of job losses, insisting strong global demand for coal will mean recent jobs growth across the sector will continue.
Tony Windsor, an independent MP who is expected to support the new tax when it comes to a parliamentary vote in the autumn, insisted that despite public opposition the tax was necessary.
"It's not about me being re-elected, or who's going to be the prime minister," he said, according to BBC News reports. "This is about the history of people, most of whom haven't even been born yet. And if I'm sacked from politics because of that, well, I'll remove myself with a smile on my face."
This article originally appeared on BusinessGreen and is reprinted with permission.