Australian Government Wants to Calm ‘Fear’ of Carbon Tax Plan

Australia’s government will try to calm public “fear” that its plan to tax companies for carbon pollution will raise costs for households, as Prime Minister Julia Gillard’s popularity slumps to an all-time low.

“We will methodically go around explaining this to people,” Climate Change Minister Greg Combet said in an interview on Channel 10 television today. “When we have the opportunity to go through the facts with people, the fear starts to drop away very quickly.”

Australia expects to raise about A$27.8 billion ($30.2 billion) in three years by making polluters pay an initial charge of A$23 per ton of carbon dioxide from July 2012, increasing the price by 2.5 percent a year, plus inflation until the tax gives way to a cap-and-trade system in 2015. Gillard announced the carbon proposal on July 10.

While the Labor government has secured support for the tax from Greens and independent lawmakers, whom Gillard relies on for a majority in parliament, 53 percent of Australians in a July 18 Nielson poll said they would be worse off under carbon pricing.

“The government is going to stick to its guns,” Combet said. “We will continue to explain this to people, in particular that the price impacts are modest, and to meet that there are tax cuts and increases in pensions and other benefits that mean nine out of 10 households receive some assistance.”

Support for the Labor government fell one percentage point to 26 percent, a record low, according to the Nielson poll. The government last week started a A$25 million advertising campaign on television networks to promote the plan.

Carbon Permits

Under the plan, the government will provide A$9.2 billion in the form of free carbon permits over three years to assist the biggest-polluting businesses.

The tax may cut profits and jobs, threatening some mines with closure in the world’s largest coal exporter. Newcrest Mining Ltd. (NCM), Australia’s biggest gold producer, said July 21 the levy will cut net profit after tax by 1 percent to 3 percent during the first three years of operation.

Fortescue Metals Group Ltd. (FMG) said last month the plan would have an impact on the company’s growth and jobs. Qantas Airways Ltd. (QAN), Australia’s largest airline, said it will raise air fares. The Australian Coal Association said overseas buyers of coal may switch to other nations and force the closure of mines at home.

Coal mining companies in Australia will be required to pay for fugitive emissions -- gas emitted naturally from coal operations -- while receiving A$1.3 billion in compensation, with the biggest polluters getting assistance over six years. Other so-called trade-exposed industries such as steel producers will also receive assistance.

“This is a difficult political environment at the moment but this is a critical reform for the future of the country and future generations,” Combet said. “We have to play our part internationally in tackling climate change.”

Treasurer Wayne Swan has said Australia’s low unemployment, record trade and a strong investment pipeline made the introduction of a carbon tax feasible in the face of global economic uncertainty.

To contact the reporter for this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.