Understanding the Carbon Tax

A Carbon tax is a price to be paid on all carbon dioxide emitters in Australia which is one of the highest carbon producers in the world because of its coal and mining industries. When Prime Minister Gillard introduced the carbon tax, there has been some debate over the judiciousness of the tax especially among the general public and the business sectors.

One of the apprehensions among the general public is that the tax will affect even those that are not directly benefiting from revenues generated by the mining sector. In effect Australians will bear the added carbon tax; although on the one hand the tax aims to foster and sustain a greener environment for Australia in the long run in accord with the Kyoto Protocol. 1

Among the business sectors, it is feared that the tax might slacken Australia’s economic growth since a number of Australia major industries are engaged in coal, mining, industrial, and some other sectors that are rich carbon emitters. Notwithstanding these fears however, it is best to understand and shed light on the clear and present implications of carbon tax on Australia’s businesses.    Julia Gillards Carbon Tax

The Carbon tax which will take effect on July 1 2012 will definitely have its effects on business, but only on the top big businesses in Australia and not on the small ones. The tax will be levied on a $23 per ton basis and will affect some 500 largest-polluting-companies. These companies will be fixed-tax for three consecutive years until such time when the Australian government implements the market-based tax scheme starting on July of 2015.

Exempted in the carbon tax scheme are the agricultural sectors and users of light vehicle petrol.  Indirectly affected by the carbon tax are the regular households, farmers, and small scale businesses. Although fuel for transport is not included, heavy transportation will be taxed by 2014 along with poorly maintained generators with more than 2000 megawatt capacity which will pay the tax by 2020.

The Australian government is aware that big companies cannot initiate drastic carbon cutting measures without jeopardizing their business operations and competitive advantages in the local and international markets. In order to remedy this, some $9billion has been allocated to prevent probable job losses in industries such as those that manufacture aluminum, cement, and zinc; some $ 1.3 billion are stipulated for those that will be affected in coal and mine sectors; and some $300 million is earmarked for those involved in the steel industry. An additional $ 1.2 billion is set for the Clean Technology Program which aims to develop more efficient energy measures in the industrial sectors. 2

At present the carbon tax has become a contentious political issue because overall, the tax measure will directly and indirectly influence via state intervention the following: cost of living in Australia, the national budget, research and development, overall economy, governance, government assistance, and even international linkages.3