Australia Introduces Carbon Trading Mechanism to Build a Clean Energy Economy

After the EU and New Zealand, Australia became another advanced economy that introduced carbon trading mechanisms nationwide. Pricing for carbon emissions is a core part of Australia’s overall approach to climate change, which is the beginning of Australia’s transformation of its economic development model.

After six months of repeated consultations, the Australian government has finally decided to start a carbon tax on 500 major companies in mining, transportation, and energy industries starting from July 1, next year. This is another advanced economy following the EU and New Zealand and introducing a carbon trading mechanism nationwide.

According to the latest data, Australia’s greenhouse gas emissions increased by 0.5 percentage point in 2010 to 543 million tons. Among them, carbon emissions in the energy sector increased by 44% between 1990 and 2010. The Australian government expects that the implementation of the carbon tax collection plan will reduce carbon emissions by 159 million tons in 2020, which is 5% lower than in 2000. Australian Prime Minister Julia Gillard sees this plan as the fairest and cheapest way to reduce environmental pollution, and it is also the most effective way to build a clean energy economy. She believes that the best way for companies to stop environmental pollution and make more investments in clean energy is to allow them to pay carbon taxes when they cause pollution.

The focus of this taxation is on mining, energy, and transportation. The companies included in the taxation list include Rio Tinto, BHP Billiton and Woodside Mineral Resources and Oil Giants, International Power, TRU Energy and other power companies, as well as Bruskov, Yigang and other steel companies. The specific levying rate is that from July 2012 to June 2013, the tax will be AUD 23 per tonne of CO2 emitted (approximately USD 24.7); from July 2013 to June 2014, it will increase to AU$24.15; July 2014 As of June 2015, it was AUD 25.40. The new taxation plan will cover 60% of Australia’s carbon emissions. The Australian government intends to invest A$9.2 billion in the first three years, on the one hand to shut down some of the more polluting power plants, and on the other to ensure that the pillar industries such as steel and aluminum are protected from “killing”. From 2012 to 2015, the government will issue free carbon emission allowances, and 66% will provide export-oriented enterprises with intermediate emissions. For enterprises such as aluminum plants, zinc smelting plants, and steel mills that emit large amounts of carbon and have a large amount of trade, the share of carbon emissions permits will cover 94.5% of the company's average emissions.

Australia has a population of 21.7 million. 80% of its electricity supply comes from coal-fired thermal power generation. Its carbon emissions account for 37% of the country's total greenhouse gas emissions. It is one of the countries with the highest per capita greenhouse gas emissions in developed countries. For reasons of economic structure, it was not until December 3, 2007 that Australia officially signed the Kyoto Protocol. In order to reduce carbon emissions and promote the development of clean energy, Australia has continued to increase investment in recent years.

When calculating the emissions of mining companies, the Australian Government takes into account every aspect of mining, transportation, and port to departure. Due to the weight problem, minerals need a lot of energy support in the production and transportation links, which will inevitably lead to a large amount of carbon dioxide emissions. Australia is the world's major exporter of ores and coal. This carbon tax scheme is likely to increase the cost of ore exports. Judging from the taxation price of CO2 units, compared with the current level of more than ten euros per ton in the European carbon trading market, Australia’s carbon tax price of 23 A/t is relatively heavy. Some experts believe that the carbon tax increases the cost of producers, and the company will transfer certain new costs to the downstream, making Australia's exports of ore and coal “ups and downs” and affecting end users.

The carbon tax introduced this time is regarded as the improvement and continuation of the resource surtax proposed in 2009. In order to obtain sufficient support, the new plan also incorporates a series of compensation measures, including the "Employment and Competitiveness Program", which provides 9.2 billion AUD worth of compensation for emission-intensive export-oriented industries; more than half of the carbon tax revenue is increased. Subsidies and tax reductions provide compensation for 90% of affected households; the establishment of a 1.2 billion Australian dollar "clean technology program" and the A$1.3 billion "coal industry employment plan." The Australian government hopes to implement this comprehensive carbon tax collection plan for three years, and then gradually transition to total greenhouse gas control and carbon emission trading mechanism in 2015. Gillard said that pricing for carbon emissions is a central part of Australia’s overall approach to climate change, and the Australian government will pay more attention to clean energy, which is the beginning of Australia’s transformation of its economic development model.