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Australia Sets Out Post-Carbon Tax Emissions Plan

by Mary Swire,, Hong Kong

28 April 2014

The Australian Government has released a White Paper that sets out the final design for an incentives-based Emissions Reduction Fund (ERF), which would replace the carbon tax it is attempting to repeal.

The document was published by Environment Minister Greg Hunt, who said that it offers "a cost effective, practical and simple approach to reduce [Australia's] emissions without a multi-billion dollar carbon tax."

The Government failed in its first attempt to repeal the carbon tax, after the Labor and Green contingents in the Senate cooperated to defeat the legislation. The Government will reintroduce its repeal package, but continues to face stiff opposition. This week, Clive Palmer, leader of the Palmer United Party, said that he would rethink his stance on repeal were the Government to push ahead with its "Direct Action" policy and tie its ERF plans to Budget legislation.

The Fund is the centrepiece of the Coalition's Direct Action plan to tackle climate change, and would be funded by public spending rather than a specific tax. According to Hunt, it will "help Australia meet its 2020 emissions target … [and] drive private sector investment to achieve emissions reductions." It is intended to operate alongside existing programs that already offset emissions growth, such as the Renewable Energy Target and energy efficient standards on appliances, equipment and buildings.

In compiling the White Paper, the Government considered more than 290 submissions received in relation to its initial Terms of Reference and more than 340 responses on its Green Paper released in December 2013. It said that the design has been driven by the need to secure low-cost and genuine emissions reductions and ensure streamlined administration.

The Government has committed a total of AUD2.55bn (USD2.37bn) to the Fund, and will consider further funding in future Budgets. The crediting and purchasing elements of the Fund would start following the repeal of the carbon tax.

Auctions would start in the first half of 2014, and be run quarterly. Prior to the first auction, the Government would conduct a market assessment of projects proposed to be bid into the Fund by business. The Clean Energy Regulator would publish an indicative 12-month forward schedule of auctions, along with the weighted price awarded to successful projects after each auction.

Payments received for undertaking projects under the Fund would be treated as income for taxation purposes. Standard deduction allowances for costs incurred in the process of generating such income would apply.

As the White Paper makes clear, "the Government believes that there is a better way to reduce emissions than by imposing taxes or emissions trading systems that increase energy costs for businesses and households."

TAGS: Budgets | tax | investment | business | energy | Australia | legislation | carbon tax | revenue statistics | tax reform | standards

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