Australian Senate Rejects Carbon Tax Scheme

by Mary Swire, Tax-News.com, Hong Kong

17 August 2009

The Australian government’s Carbon Pollution Reduction Scheme, aimed at reducing the country’s greenhouse gas emissions, has been defeated in parliament.

The scheme, scheduled to start on July 1, 2010, had aimed to reduce Australia’s carbon emissions by at least 5% by 2020 (using 2000 as the base year). The government also had an upper target of a 25% reduction, if the climate change conference in Copenhagen in December were to decide on tougher emission cuts.

Had the scheme been accepted, the government would have introduced an Australian emissions unit auction charge, which would have been established in the first half of 2010 through emissions unit auctions. Businesses emitting greenhouse gases would have needed to purchase a permit based on that charge for the volume of gases each produced. As that additional cost would then have been absorbed or passed on to customers, a charge per unit of emissions could have been imposed at a level so as to encourage businesses and households to reduce their emissions by the desired amount.

The other side to the scheme concerned transitional relief for households by means of a "cent-for-cent" reduction in excise tariffs to offset the impact of emission pricing on all fuels, particularly on petrol and diesel. There would also have been transitional assistance for the agriculture, fishing, and road transport industries through new fuel credits.

Discussion on the scheme largely centered around whether it would have the desired effect at an affordable cost, and speculation on its effect on individual industries and their employees’ jobs. Opponents to the scheme wanted it to be delayed at least until after the Copenhagen conference, when a global target might be decided.

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