Australia Carbon Tax is Passed

While the US is distracted by Herman Cain's peccadilloes and I've been distracted by Mississippi's personhood initiative, the really big news is that the Australian Senate passed the carbon tax, 36-32. (Thanks Steve.) It goes into effect next July. 

A $23 a tonne carbon tax will now be paid by about 500 high-emitting companies from next July, with about half the revenue to be returned to households in the form of tax cuts and increases in pensions and family payments, to compensate them as electricity generators pass through the cost of the new tax.

Another $9.2 billion over the first four years of the carbon pricing scheme will be paid to high-emitting industries with overseas competitors not subject to a tax. They will receive up to 94.5 per cent of their emission permits for free.

The carbon price is designed to meet the emissions reduction target endorsed by both major parties of at least 5 per cent by 2020, compared with 2000 levels. Labor is now promising to cut Australia's emissions by 80 per cent by 2050.

The accounting looks pretty complicated and revenue-neutral for most folks, though naturally some groups are predicting big costs:

• the government predicts the cost to the average household will be A$9.90/week, but will receive A$10.10/week in compensation. (Currently A$1 = US$1.04)
• Master Builders Australia: predicts A$5,000/new home
• National Farmers' Federation: predicts up to A$10,000/farmer/yr
• domestic flights will go up A$2-4 per flight.
• "All low-income households will be fully compensated for the expected rise in their cost of living, the government says, and most will be better off. Two thirds of middle-income households will be fully compensated, along with about one in five high-income households." (The Sydney Morning Herald)
  

This is a big deal for those who back climate change legislation, it seems to me, and it will be interesting to see how this pans out in Australia. Julia Gillard deserves a huge amount of praise (and maybe even a Nobel Peace Prize). Australia now become the world's test bed for pricing carbon.

PS: Here is a good picture of Australia's carbon emissions. Here's a more succinct summary: in 2008 Australia emitted 18.9 mt per person, ahead even of the US's 17.5 mt/person.