Carbon pricing in Australia

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A carbon pricing scheme in Australia was introduced by the Gillard Labor minority government in 2011 as the Clean Energy Act 2011 which came into effect on 1 July 2012. Emissions from companies subject to the scheme dropped 7% upon its introduction.^[2] As a result of being in place for such a short time, and because the then Opposition leader Tony Abbott indicated he intended to repeal "the carbon tax", regulated organizations responded rather weakly, with very few investments in emissions reductions being made.^[3] The scheme was repealed on 17 July 2014, backdated to 1 July 2014. In its place the Abbott government set up the Emission Reduction Fund in December 2014. Emissions thereafter resumed their growth evident before the tax.^[4]

The carbon price was part of a broad energy reform package called the Clean Energy Futures Plan, which aimed to reduce greenhouse gas emissions in Australia by 5% below 2000 levels by 2020 and 80% below 2000 levels by 2050. Although Australia does not levy a direct carbon price, the plan set out to achieve these targets by encouraging Australia's largest emitters to increase energy efficiency and invest in sustainable energy. The scheme was administered by the Clean Energy Regulator. Compensation to industry and households was funded by the revenue derived from the charge. The scheme required entities which emit over 25,000 tonnes of carbon dioxide equivalent greenhouse gases per year, and which were not in the transport or agriculture sectors, to obtain emissions permits, called carbon units. Carbon units were either purchased from the government or issued free as part of industry assistance measures. As part of the scheme, personal income tax was reduced for those earning less than A$80,000 per year and the tax-free threshold was increased from A$6,000 to A$18,200.^[5] Initially the price of a permit for one tonne of carbon was fixed at A$23 for the 2012–13 financial year, with unlimited permits being available from the government. The fixed price rose to A$24.15 for 2013–14.

The government had announced that the scheme was part of a transition to an emissions trading scheme in 2014–15, where the available permits will be limited in line with a pollution cap. The scheme primarily applied to electricity generators and industrial sectors. It did not apply to road transport and agriculture. The Department of Climate Change and Energy Efficiency stated that in June 2013 only 260 entities were subject to the scheme,^[6] of which approximately 185 were liable to pay for carbon units. Domestic aviation did not face the carbon price scheme, but was subject to an additional fuel excise levy of approximately 6 cents per liter.

In February 2012, the Sydney Morning Herald reported that Clean Energy Future carbon price scheme had not deterred new investment in the coal industry, as spending on exploration had increased by 62% in 2010–2011, more than any other mineral commodity. The government agency Geoscience Australia reported that investment in coal prospecting reached $520 million in 2010–2011.^[7] Falls in carbon emissions were observed following implementation of this policy.^[8] It was noted that emissions from sectors subject to the pricing mechanism were 1.0% lower^[9] and nine months after the introduction of the pricing scheme, Australia's carbon dioxide emissions from electricity generation had fallen to a 10-year low, with coal generation down 11% from 2008 to 2009.^[10] However, attribution of these trends to carbon pricing have been disputed, with Frontier Economics claiming trends are largely explained by factors unrelated to the carbon tax.^[11][12] Electricity demand had been falling and in 2012 was at the lowest level seen since 2006 in the National Electricity Market.^[13]