Australia Adopts Carbon Tax, Why Can't U.S.?

The Australia Senate's passage November 8 of the Clean Energy Bill legislative package containing a carbon tax marked a significant step by a major industrial nation to regulate greenhouse gas emissions. Yet, it received scant attention in the U.S. even though this was a major step the likes of which the U.S. has studiously avoided so far. Australia's path to regulating carbon has been every bit as controversial as in the U.S., indeed it cost two prime ministers their jobs and could imperil the current prime minister's as well. Nevertheless, after much debate and passion, Australia stands ready to tax carbon while the U.S. still can't or won't.

Australia's Program

The law has two major components -- a carbon tax starting July 2012 of AUS$23 per ton, followed by a carbon trading program in 2015. Although the country's 500 largest polluters will be covered, the package of laws also provides for compensation to soften the blow. For example, for the first three years almost all carbon permits will be free to high-emissions exporters, such as aluminum and steel, while subsidies will be provided to the coal and steel industries to reduce their emissions. Furthermore, businesses and consumers will receive compensation if electricity prices rise and workers will get a small tax cut. Renewable energy also gets help in the form of a Clean Energy Finance Corporation to promote private investment along with a federal-level renewable energy agency that will provide R&D grants.

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