Australian government to triple income tax thresholds in return for a carbon price

Australia’s Labour government announced Sunday it will triple the tax-free threshold that Australians can earn before paying tax as part of a government plan to price greenhouse gas emissions at A$23 per tonne of CO2 equivalent starting next year, 1 July 2012.

In a step that Prime Minister Julia Gillard stated would reduce emissions by 159 million tonnes a year by 2020, the Clean Energy Future plan is expected to increase Australians’ individual incomes by 16% or A$9,000 per year while creating an extra 1.6 million jobs by the end of the decade.

The carbon price will increase incrementally by 2.5% per year over three years to 2015 when a full ETS will become operable, according to the government’s plans.

Initial price increases caused by the carbon tax will be compensated by recycling half the overall revenue to households to offset against these price impacts. Four million households will receive assistance that exceeds the expected price increases while 6 million households will receive assistance meeting the price increases while 8 million households will receive some assistance. Government forecasts predict a $9.90 increase in costs for households and the average assistance will be $10.10 per week.

Increases to pensions and family allowances are also promised.

Furthermore, the tax-free threshold will more than triple from A$6,000/year to $18,200 by 1 July 2012 and increase a further $1,200 to $19,400 in 2015.

Clean Energy Supplements equivalent to 1.7% of pensions and family allowances equivalent of up to $338 per year in the case of pensioners will be payable initially in lump sums to families.

Families earning less than $80,000 will receive automatic tax cuts of $300 per year in addition to the increased tax-free threshold.

Programmes to re-train workers and assist industry to transform itself into a clean economy fall under a $9.2 billion Jobs and Competitiveness funding package over the three-year timeframe.

The steel industry specifically will receive $300 million worth of government investment to enhance innovation and technological competitiveness toward a low-carbon economy and its progress reviewed in 2014-2015 under the government’s proposed EITE (Energy Intensive Trade Exposed) Productivity Commission.

Companies in the so-called EITE category claim their operations are rendered commercially uncompetitive against developing country companies that face no constraints on their carbon and other greenhouse gas emissions under the United Nations Kyoto Protocol.

Ms Gillard in conjunction with Minister for Climate Change and Energy Efficiency Greg Combet and Minister for Resources and Energy Martin Ferguson also announced an almost $1.3 billion Coal Sector Jobs Package where the coal industry who will face an effective carbon price of $1.80 per tonne of coal produced due to coal mine fugitive greenhouse gas emissions.

While a small number of gassy mines will likely pay higher costs, the package is aimed at three coal mines in particular whose operation is critical to their respective local communities and economy.

The coal package of A$1.264 billion will reward coalmines that reduce their historical greenhouse gas emissions intensity as opposed to ­absolute emissions. An additional $70 million Coal Mining Abatement Technology Support Package will further seek to enable the coal industry to deploy technology to reduce its emissions.

The government stipulated that it will endeavour to close 2,000 megawatts of brown-coal fired electricity generation.

Manufacturing industries will receive a further $1.2 billion to invest in low-emissions technology and capital equipment with $200 million specifically earmarked for the food processing and metal foundries industry.

Transportation fuel tax credits for industry will be phased out with the exception of forestry, fisheries and agriculture while domestic aviation will see its fuel excise increased in keeping with the carbon price.

Small businesses will be exempt from any future carbon trading mechanism which will be designed to include Australia’s top 500 polluters. However, the government plans to orchestrate a $40 million energy efficiency awareness programme that in line with a new $6,500 business instant asset write-off it hopes will encourage investments into clean energy investments.

Programmes for improving energy efficiency for low-income households, improved energy access for indigenous and remote rural communities are also included.

A Climate Change Authority will be established under the chairmanship of Bernie Fraser, a former head of the Energy Investment Office in the early 1980s and more recently manager of two of Australia’s largest superannuation pension funds.

The CCA will advise the government on how to design and implement its carbon trading mechanism slated to start in 2015.

NGOs in Australia welcomed  the Clean Energy Future plan. The Australian Conservation Foundation made a detailed analysis but was reticent of government plans to continue to subsidize the coal industry and specifically called for the Labour Party to live up to election promises of no new investment in coal.

ACF also called for an end to all fuel subsidies within the three-year timeframe. ACF recently launched report questioning why taxpayers were spending $11 billion in subsidies for the fossil fuel industry.

Brent Hoare of the Green Cooling Association that seeks to phase out refrigerant gases that damage the ozone and cause climate change welcomed the government plan for including other greenhouse gases than just CO2, citing that per tonne, some gases have an average warming potential 4,000 times that of CO2.

“The potential direct emissions abatement that could be delivered by a widespread transition to natural refrigerants is estimated to exceed 15 million tonnes of CO2 per annum which would make an extremely significant contribution to the emission reduction target of 160 million tonnes of CO2,” Mr Hoare told New Orator.

In New Zealand where the government has an in principle linking up between any future emissions trading scheme emanating from Canberra, Climate Change Minister Nick Smith welcomed the Australian government’s announcement of a carbon emissions tax set initially at $A23 per tonne.

“New Zealand officials have been working closely with their Australian counterparts and any changes to New Zealand’s Emissions Trading Scheme will take account of the Australian announcement,” Dr Smith said in a statement to New Orator.

Dr Smith will meet Australian Treasurer Wayne Swan in the next week to further discussions on how to bring the schemes more closely together over time, according to a spokesperson in his office.

In Canada whose economy is similarly founded on mining and oil and gas as in Australia, Green Party leader Elizabeth May told New Orator by e-mail: “It’s brilliant!”

Canadian Environment Minister Peter Kent is yet to comment but he told New Orator last month that he would be announcing a Notice of Intent in July to regulate Canada’s greenhouse gas emissions by sector.


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