Australian parliament approves carbon tax cut

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25 July 2014, Gas, Electricity

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Between 2013 and 2014, the levy for emitting 1 tonne of carbon was $24.15, and 185 companies were required to pay carbon tax on their emissions. Australia's heavy involvement in fossil fuels (particularly black and brown coal) and minerals makes the country's economy highly susceptible to carbon taxation. The repeal of the carbon tax will prove to be a huge relief to aluminum smelting companies, raw material vendors, and obviously energy providers. Australian residents should notice a decrease in energy bills as providers will now not need to pass on the cost of the carbon tax to them. The Australian federal government generated $6.5bn from its carbon tax during the last fiscal year, which gives an idea of what carbon emitters could save.

However, this is a significant setback for pro-renewable energy and climate change policies worldwide. Australia was one of the first pioneers of carbon taxation after a number of European countries introduced similar legislations or carbon trading systems. The debate regarding how to deal with carbon emissions is particularly difficult, and no country has yet got its policy/system completely right. Most experts in the industry believe today's carbon trading prices or tax levies would need to increase by a factor of double digits to seriously change certain entities' behavior.

In the meantime, Mr Abbot has proposed a public fund of $2bn that is aimed at encouraging big polluters to cut their emissions. His idea is still rather nebulous, and also seems to imply that Australian taxpayers will subsidize businesses, which seems out of place with his Liberal Party's free-market beliefs. As yet, there may be no repercussions for the repeal of the carbon tax, but Mr Abbot will undoubtedly receive pressure from world leaders at the G20 leaders' summit in Brisbane later in 2014, and also at the 2015 UN climate change conference in Paris.

In 2011, only Saudi Arabia emitted more carbon dioxide than Australia per capita out of the G20 nations, with Australia producing 18 metric tonnes of carbon per capita. The US and Canada followed closely behind with 17.6 and 16.2 tonnes per capita. The highest European country in the rankings was Germany, emitting slightly more than 9 tonnes per capita. Although carbon emission levies still need work, it is clear to see that cutting carbon tax completely is not the way to go. / / @DatamonitorEN

Source: MarketLine

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