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Australia Passes Carbon Tax

Australia has passed a carbon tax, making it the second major economy after the EU to put a cap on carbon.

The legislation sets a fixed carbon tax of A$23 (US$23.7) a ton on the country’s 500 biggest polluters, starting in July 2012. The program then shifts into an emissions trading scheme from July 2015, Reuters reports. Australia’s carbon market is expected to reach as much as A$15 billion by 2015.

The package of 18 laws passed the Senate today with a margin of only four votes, according to the Financial Times. The tax squeaked through the lower house of parliament last month by just two votes.

Along with the tax and trading scheme, the legislation provides for billions of dollars in compensation for export-exposed industries, such as steel makers, aluminum companies and zinc refiners, which will get 94.5 percent of their carbon permits free for the first three years. Australia will also spend more than A$13 billion on renewable and clean energy projects.

With the rules, Australia hopes to reach a goal of cutting emissions by five percent, from 2000 levels, by 2020. The country emits the most CO2 per capita of any developed nation, because of a high reliance on coal.

Australia has been debating the creation of a carbon tax for over a decade, and the issue helped force the fall of two prime ministers, John Howard and Kevin Rudd.

But uncertainty over the system remains because opposition leader Tony Abbott has sworn a “blood oath” to repeal the laws if elected. The minority government of prime minister Julia Gillard (pictured) holds power by a margin of just one seat, and a poll today showed conservatives leading Gillard’s Labor by 53 to 47 percent. The next election is due to take place in late 2013.

In addition to the EU carbon trading system, New Zealand runs a program similar to Australia’s, and India has a coal tax. China and South Korea are developing carbon trading systems, and South Africa is planning caps for top polluters.

The European carbon market has suffered its own problems. Permit prices have lost a third of their value since the beginning of 2011, hitting a 33-month low of 9.37 euros last week.

Despite this, the European Commission said the bloc will still offer to increase its 2020 emissions reduction target to 30 percent if other countries commit to similar reductions.

Gillard’s government hopes the carbon tax’s passage will help to push other countries into a global agreement to curb emissions, which will be discussed in Durban later this month.


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