Australia expects to raise A$24.7 billion ($24.8 billion) in four years from the carbon tax coming into effect July 1, as the government seeks to reduce emissions and spur investment in cleaner energy.
The levy on Australia’s biggest polluters starts at A$23 per ton of carbon and rises by 2.5 percent in real terms in each of the following two fiscal years. Treasury projects they will reach A$29 in 2015-16, when the mechanism moves to a price set by the market, the government said in the budget yesterday. The tax is expected to increase consumer prices by 0.7 percentage point in the 12 months starting July 1.
International emission-permit prices fell after elections in the European Union that may complicate the bloc’s economic recovery and amid growing supply from Russia. United Nations credits for next year declined 1.5 percent to 3.83 euros ($4.99) a metric ton on the ICE Futures Europe exchange at 10 a.m. in London yesterday, the lowest since the contract was first offered in January 2011. EU carbon futures for December, the industry benchmark, slid 1 percent to 6.65 euros a ton.
“We’re seeing huge volatility in the EU price, which isn’t surprising in the sense that everything to do with Europe has been volatile,” Prime Minister Julia Gillard said in an interview in Canberra today. “The EU itself is looking at its own scheme and we don’t know what may come out of that.”
The government’s estimate for A$29 a ton is threatened by this year’s slide in UN and EU prices, according to Bloomberg New Energy Finance. The Australian carbon price may range from A$15 in 2015 to A$16.60 in 2018, BNEF analysts led by Seb Henbest said in March in a report.
“Traded international prices have fallen, in part because of the downturn in Europe,” the Australian Treasury said in yesterday’s budget. “The unsettled global outlook is contributing to uncertainty around the future path of carbon prices. In 2015-16, the budget would be firmly in surplus even if the price floor of A$15 were to bind.”
Gillard’s government is planning to boost renewable sources to about 40 percent of Australia’s energy supply by 2050 from about 10 percent in 2011.
“The carbon price will transform our economy by decoupling economic growth from growth in pollution,” Greg Combet, Australia’s climate change minister, said in a statement accompanying the budget.
Opposition leader Tony Abbott, whose Liberal-National coalition leads the government by 18 percentage points in the latest opinion poll, has vowed to scrap the carbon levy if he wins power in elections due by the end of 2013.
The levy will apply to about 500 of the nation’s largest polluters who pump out some 60 percent of Australia’s emissions, Combet said.
The government is setting up the Clean Energy Finance Corp., which will receive A$2 billion a year for the five years starting July 1, 2013, to invest in renewable energy projects. It’s also establishing the Australian Renewable Energy Agency to oversee A$3.2 billion in funding for cleaner power generation starting from July this year. A separate A$1.2 billion program will offer grants to assist companies seeking to reduce emissions.
The carbon levy is forecast to increase costs by A$9.90 a week on average for households, more than offset by government plans to provide A$10.10 a week in assistance.
Gillard’s government also plans measures worth about A$1.6 billion to assist coal and steel companies that face increased costs because of the carbon levy, as well as setting aside money for small businesses and to help workers in key industries develop skills needed by clean energy producers.
The government will set a floor and a ceiling for the first three years of flexible pricing that begins July 1, 2015.
“We’ve got in the budget numbers projections about what the price will be when we move to a floating price in three years’ time,” Gillard said today. “I don’t think we can necessarily look at today’s volatility and say that will be the dominant order in three years’ time when we move to a floating scheme.”