The Australian Government has released details of its plan to meet proposed carbon reduction targets by 2020. With such a plan sure to be rubber stamped by Parliament in the coming weeks, what does it mean for you?
Which businesses will be hit and by how much?
From 1 July 2012, the top 500 companies, rather than the initially quoted top 1000, will be charged $23 for every tonne of carbon they produce. This will run for three years with inflationary rises, (2013/14 – $24.16, 2014/15 – $24.77) before the implementation of a full emissions trading scheme, which will allow the market to set the carbon price.
What is an emissions trading scheme and why not just stick with the carbon tax?
An emissions trading scheme is where companies buy and sell emission permits to enable them to meet the reduced emissions target of five per cent, below the 2000 level, by 2020. The move to an emissions trading scheme is necessary to allow market forces to manage and set the price for emissions and facilitate trading with other countries.
How will this revenue be spent?
The revenue will be used in several ways but most notably to provide compensation to households which will experience a rise in their cost of living. This increase will be due to the cost of the carbon tax being passed on to companies by the 500 businesses being charged. A significant portion will also be used to encourage and assist business to improve their energy efficiency and directly drive the movement in renewable energy. This includes:
$10b to the Clean Energy Finance Corporation
$1.2b to the Clean Technology Program
$250m increase to the Expanding Low Carbon Communities
How much will living costs increase by?
The estimated increase is expected to be 0.7 per cent but what does this mean in everyday costs? The “average” household, of which we are unsure exactly who this consists, will see increases of $9.90 per week, or $515 per year. This increase includes $3.30 for electricity, $1.50 for gas and $0.80 on food bills.
What will be the average compensation?
Average households will be compensated $10.10 per week, or $525 per annum. Therefore, if you qualify as part of an average household, you will see little or no affect to your household budget. You may, in fact, be marginally better off.
How will I get my compensation?
Compensation measures will be delivered by several different means. Tax cuts, worth $8b, will see 60 percent of income earners receiving an annual tax cut of $300 per annum. These will be delivered by lifting the tax-free threshold from $6,000 to $18,200 from 1 July 2012 and will remove one million people from the tax system altogether.
Pensioners will see payments increase by 1.7 percent, or $338, for a single pensioner each year.
What is excluded?
Good news for motorists and small business, petrol at the pump will not be hit by the carbon tax, however heavy business will lose tax credits. Farming, forestry and fisheries are also excluded from the carbon tax.
What’s the downside?
Well, that depends on how much money you earn. There is no doubt that the cost of living will increase but four million households are predicted be compensated more than their additional costs. Overall, 90 per cent f households will be compensated for the higher costs attributable to the carbon tax, leaving only 10 per cent, in the highest income group, uncompensated. Those businesses taxed will obviously feel the pinch but they will simply pass on these costs. Retailers, who are already struggling in a tough economic climate, claim they will suffer with people having less money to spend.
Carbon tax – good or bad?
This is for you to decide. Yet keep in mind, regardless of your thoughts on climate change or global warming, Australia is the largest per capita producer of carbon emissions in the developed world – surely not an enviable mantle to hold.