Australia Aims To Make Change With A Carbon Tax

Earlier this month, the world's largest carbon emitting nation per capita - Australia - announced possible plans to impose a carbon tax for the country's largest polluters. In conjunction to the announcement of the proposed new taxation, Australia's Department of Energy & Climate Change published a white paper titled Planning Our Electric Future: A White Paper For Secure, Affordable And Low-Carbon Electricity which presents some strong recommendations for carbon emission management.

The proposed action plan to tackle climate change by taxing the nation's worst carbon emitters was not met graciously by many Australian residents as evidenced by the photo on the Guardian's article coverage of the issue. Widely supported or not, the government has good incentives for the changes and a fairly sound road map to carry out the changes.

Some of the highlighted recommendations in the White Paper include:

• a Carbon Price Floor (announced in Budget 2011) to reduce investor uncertainty, putting a fair price on carbon and providing a stronger incentive to invest in low-carbon generation now;

• the introduction of new long-term contracts (Feed-in Tariff with Contracts for Difference) to provide stable financial incentives to invest in all forms of low-carbon electricity generation. A contract for difference approach has been chosen over a less cost-effective premium feed-in tariff;

• an Emissions Performance Standard (EPS) set at 450g CO2/kWh to reinforce the requirement that no new coal-fired power stations are built without CCS, but also to ensure necessary short-term investment in gas can take place; and

• a Capacity Mechanism, including demand response as well as generation, which is needed to ensure future security of electricity supply. We are seeking further views on the type of mechanism required and will report on this around the turn of the year.

Download the executive summary of the White Paper here.
Or, download the full White Paper here.

Obviously most of the opposition to the proposed tax comes from citizens who don't want to see their energy bills increase - and understandingly so. But lets be honest here, what better way is there to teach efficiency than by raising rates? In my head, there isn't. As the Guardian reports, "The average australian household will see its bills increase by around $10 a week, and critics of the plan say ordinary voters will be unfairly burdened by higher costs passed on to them by the big polluters." But this isn't necessarily the case. Guardian continues on to report "(Prime Minister Julia) Gillard said 50% of the scheme's revenue would be returned to households in the form of tax cuts and compensation worth more than $15 billion. Two-thirds of all households would receive enough assistance to cover the entire financial impact of the tax."

By allowing half of the carbon tax revenue to be returned to low income families - who are at the same time low emitters of carbon, the proposed taxation should be able to effectively target the largest of carbon emitters in the country. The remainder of the taxation revenue can then go towards filling the funding gap necessary to facilitating clean and efficient energy development and mass deployment.

Although carbon taxation is an idea most seem not to savor, I think it is a brilliant idea. It is a method that will not only promote energy efficiency both at the household level and the heavy coal burning industry level, but also raise the significant revenue needed to jump start our national clean energy economy - funds that seem to continue to be slashed from US annual budget plans.