Australia’s Carbon-Pricing Payoff

CANBERRA – This month, Australia joins a growing number of countries to introduce a price on carbon emissions, at a level twice as high as Europe’s. For Australia – a land not only of endless sunny beaches, but also of endless supplies of fossil fuels – this is a remarkable development.

Australia is among the world’s highest per capita emitters of CO2, owing to its reliance on coal – the most carbon-intensive fuel. Coal is also a massive export earner, bringing in roughly $2,000 per citizen annually.

Hardly a week passes without climate policy making headlines in Australia. It already has brought down two prime ministers and one opposition leader. Although bipartisan support for an emissions-trading scheme briefly appeared to be within reach, the deal fell apart, and the new opposition leader, Tony Abbott, has made a “pledge in blood” to repeal the legislation if he comes to power.

So what does this hotly contested scheme comprise? This month, Australia’s 400 largest polluters will begin paying a fixed tax of A$23 ($24) per carbon ton that they emit, covering more than 60% of the country’s emissions. The rate will increase by 2.5% annually until 2015, when it will move to a floating rate. Much of the increased cost will be carried over to consumers.