Australia to Set Carbon Tax Next Year Ahead of Trading Plan

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Australia to Set Carbon Tax Next Year Ahead of Trading Plan
Bob Brown, Greens party leader, left, and Greg Combet, minister of climate change, center, look on as Prime Minister Julia Gillard speaks on the proposed carbon tax and emissions trading program in Canberra. Photographer: Mark Graham/Bloomberg

Australia will set a price on carbon emissions next year in preparation for a trading program that could begin as early as 2015 aimed at curbing greenhouse gases.

The government will impose a price starting on July 1, 2012, Prime Minister Julia Gillard said in a statement today. The amount of the tax, which Gillard didn’t specify, will be fixed for three to five years before the trading system begins and will then be determined by the global market, according to the statement.

Gillard vowed to revive the climate-change plan after she replaced Kevin Rudd last year. Rudd’s popularity plummeted after he shelved the pricing and trading proposals, which require approval from parliament and will need the support of four lower-house lawmakers from outside the ruling Labor party.

“It is the cheapest and fairest way to cut pollution and build a clean energy economy,” Gillard said. “The best way to stop businesses polluting and get them to invest in clean energy is to charge them when they pollute.”

Countries are already spending billions of dollars to reduce emissions and promote renewable energy. Low-carbon energy investment surged to a record $243 billion last year, Bloomberg New Energy Finance said on Jan. 11.

Gillard established a Multiparty Climate Change Committee, a measure proposed by the Australian Greens party, to consider how to reduce emissions. That committee still needs to discuss incentives to industries and households as well as setting the level of the tax.

Out In Front

“The politics of getting this across the line is paramount,” Anthony Hobley, Sydney based lawyer and climate change specialist at Norton Rose LLP., said in a phone interview. “Australia gave the impression it was out in front on pricing carbon, but if there are delays on these timelines today it will behind countries like China, Japan and Korea in putting a price on carbon.”

The levy would need to be at least A$25 ($25.20) a ton to be effective, Origin Energy Ltd. Managing Director Grant King said today during an earnings teleconference call from Sydney.

“We have got work to do on industry assistance arrangements, we’ve got work to do on household compensation,” Gillard said. “There will be some difficult conversations to come.”

Independent Lawmakers

Two of the independent lawmakers Gillard needs to support the laws in parliament -- Tony Windsor and Rob Oakeshott -- are part of her multiparty committee. Windsor said, while he supported the framework released, it didn’t guarantee his support for any legislation.

“Don’t construe by my presence here that I’ll be supporting any scheme,” Windsor said today as he stood beside Gillard at her media conference. “This is very much the start of the process.”

Opposition leader Tony Abbott said his Liberal-National coalition wouldn’t support the laws. He said it would add A$300 per year to household electricity bills and that a voter backlash would prevent it getting parliamentary approval.

“We will fight this every second of every minute of every hour of every day of every week of every month,” Abbott told reporters in Canberra. “I don’t believe it’s going to happen.”

Gillard’s Labor government has previously promised at least a 5 percent cut in emissions by 2020 compared with 2000 levels and didn’t release fresh figures today. Australia, the biggest exporter of coal, will also source one-fifth of its energy from renewable energy projects such as wind and solar by 2020.

Floods, Cyclone

The nation has been hit in the past three months by flooding, bushfires and Tropical Cyclone Yasi, which killed at least 36 people, destroyed homes and wiped out crops. The Greens party, whose support Gillard needs to pass climate legislation in the upper house Senate, has blamed climate change for the increased intensity and frequency of extreme weather events.

Santos Ltd., Australia’s third-largest oil and gas producer, said today’s announcement was an “important step” to a well-designed price. Alcoa Inc., the biggest U.S. aluminum producer, said it supported a “carefully designed” carbon price that doesn’t damage industry.

“Regardless of the approach taken, it is critical that the government’s climate change response ensures the sustainability and growth of what are world class alumina and aluminium assets in Australia,” Alcoa Australia Managing Director Alan Cransberg said in an e-mailed statement.

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