Carbon Polluters, Coal Miners Pay in Australian Tax Overhaul
Australia is charging its largest polluters for carbon emissions and taxing profits of iron ore and coal producers starting today in the biggest change since 2000 in how the government collects and spends money.
The country will assess almost 300 of its largest polluters a fixed price of A$23 ($23.55) a metric ton for their greenhouse gases. Mining companies including BHP Billiton Ltd. (BHP), Rio Tinto Ltd. and Fortescue Metals Group Ltd. (FMG) face a separate levy on 30 percent of earnings from iron ore and coal starting today.
Prime Minister Julia Gillard, who pushed her climate law through Parliament last year, is trailing in opinion polls behind the Liberal-National coalition led by Tony Abbott, who has vowed to repeal carbon pricing. Gillard is counting on payouts and credits worth about A$30 billion over the next four years to placate Australian business and households facing higher power bills.
“This is the most effective and efficient way to drive innovation to find better, less-polluting ways of producing power, goods and services,” Treasurer Wayne Swan said in his weekly economic note today. “It will help reduce Australia’s annual emissions by at least 159 million tons per annum by 2020, equivalent to taking 45 million cars off the road.”
Carbon pricing is Australia’s main tool for meeting its target of a 5 percent cut in emissions from 2000 levels by 2020. The levy will be fixed until 2015, when the country plans to introduce a market-based system.
‘No Discernible Impact’
The Treasury estimates the carbon tax will reduce gross domestic product and employment growth by less than a quarter percentage point in the fiscal year beginning July 1, and have “no discernible impact” on the nation’s unemployment rate, which has hovered just above 5 percent for the past year.
The economy “will continue to prosper as Australia moves to a clean-energy future,” Treasury said in its budget papers released May 8. “Around A$100 billion of investment in new clean-energy sources such as solar, wind and geothermal will be unleashed over the period to 2050.”
Gillard’s law creates a new tradable commodity. Each permit carries the right to emit one metric ton of greenhouse gases in Australia. While a fixed price on carbon is different from a tax, which is used in some Scandinavian countries, Abbott has accused Gillard of imposing a “toxic tax” that will be a “wrecking ball” for the economy in Australia, the world’s largest exporter of thermal coal.
“When the dust settles following the furious debate that we’ve had about carbon pricing, I think Australians will come to see that this has been an important reform at the right time,” Gillard said yesterday, according to an e-mail from her office.
Higher Power Prices
Australia expects to raise A$24.7 billion over four years from the carbon levy, the government said in budget documents. Electricity prices will climb by as much as 10 percent, or an average of A$3.30 a week per household, according to Climate Minister Greg Combet, who cited Treasury modeling.
The government will provide A$9.2 billion over three years in the form of free permits to help businesses such as aluminum smelters, steelmakers and pulp manufacturers. Power generators will get A$5.5 billion, while consumers will receive A$14.9 billion through tax changes and benefits.
“On day one of a new government, the carbon tax repeal process will begin,” Abbott said yesterday in Melbourne in a speech to the Federal Council of the Liberal Party, according to a transcript from his office. “On day one of a new Parliament, the carbon-tax repeal legislation will be introduced.”
Australia’s mining tax will raise less than half the amount forecast by its Treasury in the next two years and reduce profit estimates for groups including BHP and Rio, UBS AG said in a report dated June 22. Companies will pay A$1.8 billion in the 2013 fiscal year and A$1.4 billion in 2014, compared with government forecasts for revenue from the tax of A$6.5 billion in both years, said Glyn Lawcock, a Sydney-based analyst at UBS.
“Together with the introduction of the mining tax -- labeled the minerals resource rent tax by the Commonwealth -- this represents the largest change to the tax system since 2000,” according to Kieran Davies, chief economist at Barclays Capital in Sydney.
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