Australia plans to scrap carbon tax, bring forward trading scheme

CANBERRA Mon Jul 15, 2013 9:38pm EDT

Australia's Prime Minister Kevin Rudd laughs during an address to the Health Services Union annual convention in Sydney June 7, 2010. REUTERS/Tim Wimborne

Australia's Prime Minister Kevin Rudd laughs during an address to the Health Services Union annual convention in Sydney June 7, 2010.

Credit: Reuters/Tim Wimborne

CANBERRA (Reuters) - Australia's government moved on Tuesday to scrap its carbon tax and bring forward an emissions trading scheme a year earlier than planned, a policy shift certain to be a focal point in an election likely to be held within weeks.

Prime Minister Kevin Rudd said he wants the fixed price on carbon emissions to end on June 30, 2014. A floating carbon price, or emissions trading scheme (ETS) that will be linked to the European carbon market, will start the following day.

Rudd said the change would slash A$3.8 billion from the federal budget over the forward estimates period. He said his government would make up the gap with savings of around A$3.9 billion from a range of measures.

The tax was due to raise A$8.14 billion in 2013-14, and A$8.6 billion in 2014-15.

The policy shift would see the cost of carbon permits fall from the planned A$25.40 ($23.09) per metric ton from July 2014 to around A$6 per metric ton, Rudd said, saving big businesses billions of dollars in carbon costs.

"The government has decided to terminate the carbon tax to help cost of living pressures for families and to reduce costs for small businesses," Rudd told reporters at a media conference in Queensland state. "This is modest relief, but it is real."

The carbon tax, introduced by Rudd's predecessor Julia Gillard as her central policy to cut carbon emissions, is currently set at A$24.15 a metric ton.

It applies to around 300 of Australia's biggest polluters, including mining giant BHP Billiton, Qantas Airways and BlueScope Steel, and 60 percent of the country's 550 million metric ton of annual emissions.

But Rudd's new carbon plan is reliant on his centre-left Labor Party winning national elections, due between late August and November, and receiving support from the minority Australian Greens party.

The conservative opposition has promised to scrap the carbon price altogether if it takes power, with opposition leader Tony Abbott dismissing the ETS as a "so-called market in the non-delivery of an invisible substance to no-one".

The measures by which Rudd's government plans to make up the budget gap after the scrapping of the carbon tax include the removal of a tax concession on the personal use of salary-sacrificed or employer-provided cars.

(Additional reporting by Jane Wardell in Sydney; Editing by Paul Tait)

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