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Australia To Float Carbon Price

16 July 2013   (0 Comments)
Posted by: Author: Mary Swire
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Author: Mary Swire

Australia's new Treasurer has said that the Government believes a switch to a floating carbon price would better reflect world prices.

Chris Bowen made the claim during an interview on the 3AW Mornings program. Questioned as to whether Prime Minister Kevin Rudd was likely to make changes to the controversial carbon a tax election pledge, Bowen hedged that the timing of any reforms will depend on "a lot of variables." He did however admit that the Government has "taken a decision to move to a floating price."

The Government has been "working it through," and wants "to make sure it's done in a fiscally responsible way," Bowen clarified.

The Labor Government implemented its carbon pricing mechanism (CPM) on July 1 last year. The CPM requires large carbon emitters to purchase a permit for each tonne of pollution they release into the atmosphere. The initial cost of a permit was set at AUD23 (USD20.80) per tonne, but rose to AUD24.15 at the beginning of this month. The intention was for it to increase to AUD25.40 for 2014-15, and ultimately be set by the market from 2015-16.

In September, 2012, the Government announced that plans for a carbon price floor would no longer be implemented, and that it would instead link its proposed Emissions Trading System (ETS) with the European Union's (EU). An interim link was expected to be established, enabling Australian businesses to use EU allowances to help meet liabilities under the Australian ETS from July 1, 2015, while the full link would be completed no later than July 1, 2018.

Bowen further contended that moving to a floating price system is a sensible decision, because the country is seeing its mining boom come to an end, and therefore must "spur more investment in manufacturing and in services." In addition, as the carbon price in Europe is lower than in Australia, at around AUD6 a tonne, it "makes sense to match our price to theirs earlier."

In a separate interview with Australia's Channel Ten, Bowen stressed that Rudd "feels it is an important part of our positive plan for our economy, managing the transition from the mining boom to the post-mining boom phase.

"Spending cuts will nevertheless be needed to compensate for the anticipated loss in revenue, and the Government will announce them in due time. The industry assistance plan unveiled when the original carbon tax kicked in will "be calibrated to match new arrangements," Bowen added.



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