October 11, 2011 / 11:24 PM / 8 years ago

Australia's carbon tax plan passes biggest hurdle

CANBERRA (Reuters) - Australia’s plan for a sweeping national carbon price passed its biggest political hurdle on Wednesday when the lower house of parliament voted in favor of the scheme — a major victory for beleaguered Prime Minister Julia Gillard.

Gillard, who is staring at electoral defeat according to opinion polls, has staked her minority government’s future on the sweeping economic reform which will impose a carbon tax on around 500 of the country’s biggest polluters from July 2012, before moving to a carbon trade scheme in 2015.

“Today is a significant day for Australians and the Australians of the future who want to see a better environment,” Gillard said before the bills passed with 74 votes to 72 against in the House of Representatives.

Australia, the world’s biggest coal exporting nation, accounts for around 1.5 percent of global emissions, but it is the developed world’s highest polluter per capital due to a reliance on coal for 80 percent of electricity generation.

The carbon legislation and a bill for A$300 million in assistance for the steel industry must now pass the upper house Senate in a vote due in mid November. The government and Green senators have the numbers to ensure the bills will become law.

The carbon plan, if passed by the Senate, would see Australia join the European Union and New Zealand with national emissions trade schemes, while the United States and Japan have smaller regional schemes.


Government lawmakers applauded when the lower house vote was taken while Gillard and her ministers hugged each other and waved to supporters in the public galleries.

Two previous attempts to pass laws for a carbon price failed in 2009 and was partly responsible for the ruling Labor Party decision to dump then prime minister Kevin Rudd in favor of Gillard in June 2010.

The carbon price is the central plank in the government’s plan to cut carbon emissions, blamed for global warming, by 5 percent of year 2000 levels by 2020.

The conservative opposition, currently ahead of Gillard’s Labor in opinion polls and on track to win elections in two years, said it would dismantle the tax if victorious and replace it with an alternative that did not explicitly price carbon.

“We can repeal the tax, we will repeal the tax, we must repeal the tax. This is a pledge in blood. This tax will go,” opposition leader Tony Abbott said.


The bills set an initial carbon price of A$23 a tonne, and guarantees billions of dollars of compensation for big business and households, which will face higher electricity prices.

Export exposed industries such as aluminum smelters and steel makers, will receive up to 94.5 percent of carbon permits for free, while Liquefied Natural Gas projects will receive effective assistance for 50 percent of emissions.

The scheme sets up a A$10 billion clean energy finance fund to leverage private investment into renewable energy, and sets aside A$1.3 billion to help coal mines reduce emissions.

The plan also includes an extra A$300 million to help the steel industry, which is struggling with a high Australian dollar and higher costs for raw materials.

The scheme will also allow the government to buy back up to 2,000 megawatts of electricity from Australia’s dirtiest coal-fired power stations by 2020, encouraging new investment in renewable energy and gas-fired power plants.

Agriculture is exempt from the carbon price, although farmers will be able to cash in on the market for carbon offsets.

Reporting by James Grubel and Rob Taylor, Editing by Michael Perry

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