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Australia: Climate Change Reforms Passed, Price on Carbon to Apply from July 2012

(Nov. 15, 2011) On November 8, 2011, the Australian Senate passed a package of 18 bills that will result in the implementation of a carbon pricing mechanism from July 1, 2012. (Clean Energy Legislation, Department of Climate Change and Energy Efficiency website (last visited Nov. 10, 2011); Clean Energy Bill 2011: Revised Explanatory Memorandum, Parliament of the Commonwealth of Australia website(last visited Nov. 10, 2011).)

The “Clean Energy” bills were passed without amendment by a margin of 36 to 32, after more than a decade of debate in Australia on whether and how to impose a carbon emissions tax. (Lenore Taylor, Senate Passes Carbon Tax, THE SYDNEY MORNING HERALD (Nov. 8, 2011); Carbon Tax Vote a Major Milestone: PM, THE SYDNEY MORNING HERALD (Nov. 8, 2011).)

Deputy Prime Minister and Treasurer Wayne Swan said that the legislative package “represented one of the most important economic reforms in the nation's history.” (Press Release, Prime Minister, Deputy Prime Minister and Treasurer, & Minister for Climate Change and Energy Efficiency, Australia Poised for a Clean Energy Future (Nov. 8, 2011).) The legislation includes the following elements:

As a result of the legislation, “[a]round 500 of the country's biggest polluters will be required to pay for each tonne of pollution they release into the atmosphere.” (Clean Energy Bill 2011: Revised Explanatory Memorandumat 11.)

  • There will be a two-stage approach involving a fixed price on carbon for three years, starting at AU$23 (about US$ 23.65) per ton with an increase of 2.5% per year. The second stage, starting on July 1, 2012, involves a transition “to a fully flexible price under an emissions trading scheme, with the price determined by the market.” A price ceiling and floor will apply from the commencement of the flexible price period, and linking to international carbon markets and emissions trading schemes will be allowed. ( 12.)
  • There will be broad coverage of sectors, including the “stationary energy sector, industrial processes, non-legacy waste, and fugitive emissions (other than from decommissioned coal mines).” Transport fuels are excluded from the mechanism. (Id.)
  • A Climate Change Authority will be established to provide advice on pollution caps and undertake reviews of the mechanism, and a Clean Energy Regulator will administer the mechanism. ( 13.)
  • Revenue from the carbon price will be passed to households in the form of a reduction in taxes, as well as “special payments for people with high energy use due to medical needs, shared assistance between aged care residents and providers,” and “the development of an opt-in program where household assistance payments can be directed towards accredited energy efficiency measures through non-government organisations.” ( 14-15.)

According to the government's climate change website, “[o]ver half the money raised from the carbon price will be used to assist households. Nine in 10 households will receive a combination of tax cuts and payments to help with the costs of the carbon price.” (Reducing Australia's Emissions, Department of Climate Change and Energy Efficiency website (last visited Nov. 10, 2011).)

The Australian government is aiming to reduce pollution by at least 5% compared with 2000 levels by 2020, and to 80% below 2000 levels by 2050. (National Targets, Department of Climate Change and Energy Efficiency website (last visited Nov. 8, 2011.)

In addition to the carbon pricing mechanism, the government's climate change program includes investing more than AU$5 billion (about US$5.14 billion) in developing and commercializing clean energy technologies, the establishment of the Australian Carbon Trust to assist businesses to pay for energy efficiency improvements, and the development of training resources and new qualifications so that people are “ready to join the new clean industries and take up the new green-collar jobs of the future.” (Id.)

Opposition Leader Tony Abbott has promised to repeal the legislation, saying that it is a “betrayal of the Australian people” and that “[i]n the absence of action by other nations, all that the Gillard Government has done today is export jobs and emissions overseas.” (Press Release, Tony Abbott, Carbon Tax Vote (Nov. 8, 2011).)

In an address to the Carbon Expo Australasia the day after the passage of the legislation, Prime Minister Julia Gillard said that the debate about carbon pricing had been “perhaps the most complex policy debate in Australia's peace-time history” and that the changes will mean that, by the middle of the century, Australia “will be a different nation…where the three-century-old link between emissions growth and economic growth has finally been broken.” (Press Release, Rt. Hon. Julia Gillard, Address to the Carbon Expo Australasia 2011, Melbourne (Nov. 9, 2011).)