30 June 2012

A price on air pollution

Does the price of an iPhone include the services provided by nature? No, it does not. Ecosystems which naturally filter water, forests which clean the air, or organisms which provide medication are all available… and free. The price of an iPhone neither includes the cost of the damages caused to nature.

This situation has to change since these services become more and more rare due to the level of exhaustion nature is attaining all over the world. There must be a price to pay for endangering nature, and for contributing to climate change. Nature does not renew itself at the pace humankind requires today…

Political leaders slowly realize that reducing pollution must be encouraged and that the transition to a low-pollution economy must start. Australia, which has the highest level of carbon emissions per capita among the developed countries, understood this and will not allow its businesses to pollute the air for free any more.

Carbon Price

Coal-fired thermal power station - 
The UK will soon have regulations to 
permit new construction of coal-fired 
thermal stations only if they are equipped 
with carbon capture and storage. 
This technology, still under development, 
captures the carbon from the combustion 
of the coal and stores it underground.
From the 1st of July Australia will not be the same as its economy and culture will head to a low-carbon approach. Indeed from this date a carbon tax, also called Carbon Price, will be effective.This not without a vast controversy and many speculations about the economic impact of this decision. The decision being to tax the carbon emissions of around 300 companies which represent two thirds of Australia’s total emissions (the other third being car transportation and farm activities). Companies concerned are mainly electricity providers, but also coal and gas companies, aluminium producers and cement companies.

A smooth mechanism

The companies concerned by the Carbon Price will legally require a permit for each ton of carbon that they release into the atmosphere. Every year a fixed number of permits will be established so that the total emissions of these companies are controlled. Between 2012 and 2015, the Australian government will regulate the system. The price of a ton will start at 23 US dollars.

During these first three years there will be enough permits so that companies can adjust progressively to the system: companies will start to treat pollution as a cost of doing business.

After 2015 the price of the permits will be fixed by an emission trading system. The number of permits available will get tighter over time. Companies will need to invest in cleaner ways of producing energy, for instance, by exploiting Australia’s renewable energy potential. They will also need to invest to be more energy efficient.

This governmental initiative has the potential to reduce up to 1,1 billion tons of carbon emissions by 2020. This is the equivalent to reducing by 2020 Australia’s emissions by 25% compared to 2000 emissions. This is also equivalent to permanently removing 70 million cars of the road by 2020.

From where the money comes and where it goes

Many Australians fear this tax will raise the prices of their expenses. According to the recently published report The Carbon Price and the Cost of Living by The Climate Institute, an independent Australian research organization, this tax will not necessarily increase greatly those expenses. In the worst case scenario, the Carbon Price could result in a 0,6% increase in the cost of living of the Australians over the 2012-2013 period. This worst case scenario corresponds to companies passing to the consumers 100% of the cost of the tax. This will probably not be the case since the companies would lose too much competitiveness and will prefer to avoid buying permits. Quite naturally the companies will rather invest in greener ways of doing business…

With the money that will be recovered from the Carbon Price, the Australian Government will mainly: cut specific taxes and other payments to households; financially help concerned companies to adjust; and promote energy efficiency, renewable energies and other low-pollution support.

Video from the Australian Government explaining the impacts of climate change as part of their Clean Energy Future plan.

As these 300 companies will look for ways to reduce their environmental footprint, every citizen can do the same. Simple changes in behaviour or investing in energy efficiency are making a difference!


Australia is not the first country to implement a carbon tax. As shown in the here-after table, European countries have taken similar measures. Each country’s tax diverges one from the other depending on the concerned fuels, types of industry or pollution sources.

Source : The Climate Institute


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