Julia Gillard has committed Australia to emissions cuts of 80 per cent within 40 years, moving to replace fossil fuels with renewable energy in the most dramatic economic transformation since the lowering of the nation's tariff barriers in the 1990s.
Photo: Gary Ramage
Julia Gillard, Wayne Swan and Greg Combet after the announcement of the carbon tax.
Declaring an "avalanche of science" dictated that the nation act to combat climate change, the Prime Minister said her carbon tax package announced yesterday would cut 159 million tonnes from Australia's emissions by 2020 and allow the nation to "seize its clean energy future".
"My message to Australians today is we are now moving from the days of words to deeds," Ms Gillard said as she prepared to embark on a crucial two-week sales pitch for the package aimed at rescuing the government's fortunes. "We are going to get this done. We are going to have a clean energy future."
Unveiling a dramatic rewriting of the tax system, the Prime Minister declared the package would protect jobs and that nine out of 10 Australians would be compensated for the costs of the scheme through either tax cuts or payments in a $15.4 billion household assistance package over four years. But the carbon pricing plan is no longer budget neutral, costing $4.3bn to 2014-15. A decision to bring forward $1bn worth of assistance to the electricity industry in 2011-12 and early payment of compensation to households will dramatically slash the impact on the budget in 2012-13, allowing it to return to surplus.
The package will also rely heavily on the 500 companies liable for the carbon price buying pollution permits on international markets if Australia is to meet its emissions reduction targets of 5 per cent below 2000 levels by 2020. Projections contained in Treasury modelling predict the nation's emissions will rise to 621 million tonnes in 2020, compared with 578 million tonnes in 2012-13.
To achieve its new 2050 carbon emissions reduction target, the government will help bankroll $100bn worth of investment in new renewable energy sources such as wind, solar and geothermal power.
Environmentalists praised the package, with Australian Conservation Foundation executive director Don Henry saying it laid the foundation for Australia "to finally start seriously acting on climate change", while climate change adviser Ross Garnaut said the package would allow Australia to do its fair share of the global mitigation effort. But Minerals Council of Australia chief Mitch Hooke described it as "an exercise in revenue-churn futility, not a credible or effective climate change policy", and the Business Council of Australia described it as a "risk".
Ms Gillard said the package was in the finest traditions of Labor reform. "In designing this package we've brought our economically responsible tradition, the great Labor tradition of economic reform — what led us to float the dollar, what led us to reduce tariffs — and that is how do you change and modernise your economy at the least cost," she said. "It's what's driven us every step of the way, and if you're going to modernise your economy at the least cost and get a clean energy future, then you accept the advice of economists: the best way to do that is to put a price on carbon, to be paid by the big polluters."
In a move that will mean one million Australians will not have to pay income tax, the tax-free threshold will be raised from $6000 to $18,200 as part of a compensation package that will give workers on incomes of less than $80,000 two rounds of tax cuts by July 1, 2015.
Arguing the combined changes will mean headline tax rates will better match the effective rate that a lot of Australians now pay, Ms Gillard said the move would encourage more people into work, boosting workforce participation.
More than $10bn would be spent on industry compensation to maintain the competitiveness of energy-intensive trade-exposed industries, which will receive 94.5 per cent of their permits to produce emissions for free. Steel and coal have been given assistance outside the revenue from the carbon tax.
The electricity industry is in line for $5.5bn in compensation over six years. The package includes loan support and a combination of payments and free permits. Negotiations will also continue on the full or partial closure of a brown coal-fired power station in a bid to take 2000 megawatts of high emitting generation capacity out of the system by 2020. That cost has not been included in the budget forward estimates.
Under the carbon tax, electricity is projected to rise 10 per cent, or $3.30 a week, and gas $1.50 a week, or 9 per cent. Food costs are expected to be 80c higher which is an increase of less than 0.5 per cent. The overall impact on inflation will be 0.7 per cent in the first year.
The government said average household costs would increase $9.90 a week, while the average assistance would be $10.10 a week.
About 4 million households would be overcompensated by 20 per cent to provide a buffer against price increases, while 6 million households would have the extra costs of the carbon tax covered.
But about one million of the nation's 9 million households will not receive any compensation and will be out of pocket by up to $950 a year.
Tony Abbott said the package was "a world first" and accused Ms Gillard of using her carbon tax plan as a cover for a redistribution of wealth, describing it as "socialism masquerading as environmentalism".
Noting that "no other country on the face of the earth" had an economy-wide carbon tax, the Opposition Leader said 10 per cent of households would would receive no compensation, while 60 per cent would be worse off or "line ball".
"This is a redistribution pretending to be compensation, it's a tax increase pretending to be an environmental policy," he said.
Greens deputy leader Christine Milne said the package was "a platform for stronger, more ambitious action into the future", although the Greens have yet to sign off several additional measures announced by Ms Gillard yesterday.
The overall package, which has the support of the Greens and three independents giving the government the numbers in both houses of parliament, will start with a fixed carbon price of $23 a tonne from July 1, next year. It will rise at 2.5 per cent a year in real terms before converting to a floating price in three years, which Treasury estimates will be $29 a tonne.
Australia's carbon price trajectory will be overseen by a Climate Change Authority headed by former Reserve Bank governor Bernie Fraser.
The transformation to low-emissions technologies will be driven by a $10bn Clean Energy Finance Corporation, which will invest in businesses driving clean energy proposals. The new body will be in addition to $3.2bn Australian Renewable Energy Agency, which will drive existing low-emissions technology programs and comes despite the Productivity Commission finding that renewables had driven up abatement costs for little environmental gain.
While the package came after four months of negotiations on the multi-party climate change committee, the government revealed it had been forced to go it alone on providing assistance to the coal and steel industries after failing to win Greens backing.
©theaustralian.com.au
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