Earlier this month, Australian Prime Minister Julia Gillard announced a plan estimated to reduce Australia's carbon emissions to 80% of 2000 levels by 2050. The plan involves a carbon tax beginning in July 2012 which will be replaced after three years by an emissions-trading program. The tax begins at A$23 per ton and increases 2.5% per year for the three years it is in effect. A coalition between Ms. Gillard's Labor party and the Australian Greens essentially assures the proposal's passage through parliament.
The plan includes numerous tax cuts and subsidies aimed to lessen the impact of putting a price on carbon and to encourage low-carbon alternatives. Roughly half of the revenue collected from the tax will go to households to help offset costs of higher electricity and other goods. Every household with less than A$80,000 of income is expected to receive a tax cut under this plan and nine out of every ten households will receive some kind of economic benefit. The average cost per household, without these tax breaks and other benefits, is estimated at A$9.90. A$9.2 billion over the first three years will go directly back to certain companies exposed to the tax and approximately A$10 billion over five years will be spent on developing renewable energy technologies and resources. In fact, the benefits of the plan are so generous that it is expected to cost the country over A$4 billion in its first four years.
Reaction to the proposal has been, as expected, very mixed. Although Australians are still decidedly against a carbon tax, the difference shifted 6% in favor of the proposed plan in the two weeks since its announcement. And while the coal industry claims the plan will hurt exports and could wipe out almost A$9 billion of value, a takeover bid one day after the plan was announced offered a 40% premium for Macarthur Coal, a large Australian coal miner and exporter.