What do you mean by the carbon tax?

A carbon tax is an environmental tax that is levied on the carbon content of fuels. It is a form of carbon pricing. Carbon atoms are present in every fossil fuel (coal, petroleum, and natural gas) and are released as carbon dioxide (C02) when they are burnt. In contrast, non-combustion energy sources-wind, sunlight, hydropower, and nuclear-do not convert hydrocarbons to carbon dioxide. A carbon tax can be implemented by taxing the burning of fossil fuels-coal, petroleum products such as gasoline and aviation fuel, and. natural gas-in proportion to their carbon content.

Carbon taxes are one of the ^policy measures that can be used in reducing greenhouse gas emissions from fossil fuels. A number of countries have implemented carbon taxes or energy taxes related to carbon content. Carbon taxes offer a potentially cost-effective means of reducing greenhouse gas emissions. From an economic perspective, carbon taxes are a type of Pigovian tax.

They help to address the problem of emitters of greenhouse gases not facing the full (social) costs of their actions. Carbon taxes are a regressive tax, in that they disproportionately affect low- income groups.

The regressive nature of carbon taxes can be addressed by using tax revenues to favour low-income groups. However, there is substantial opposition to such taxes in most countries of the world, especially those countries which rely on coal as a major generator of low cost power, and which are among the biggest emitters of carbon dioxide.

The Australian government has unveiled plans to impose a tax on carbon emissions for the worst polluters on July 10, 2011. Prime Minister Julia Gillard said carbon dioxide emissions would be taxed at A$23 ($25; £15) per tonne from 2012.

The country’s biggest economic reform in a generation will cover some 500 companies. In 2015, a market-based trading scheme will be introduced. Australia is one of the world’s worst emitters of greenhouse gases per head of population. Under the new scheme set to begin on 1 July 2012, the government plans to include any company that produces at least 25,000 tonnes of carbon dioxide per year. However, agriculture, forestry and land will be excluded from the levy. Steelmakers, coal mines and electricity generators will receive compensation to ensure they stay in business. Other tax cuts are planned for consumers.

The policy lays down the foundation for the biggest emissions-trading scheme outside of Europe. From July 2012, 500 of Australia’s top polluters will pay around $25 for every ton of carbon they release into the atmosphere. That fee will rise by 2.5 per cent annually until 2015, when the carbon price will be replaced with an emissions-trading scheme.

The biggest polluters will be paying the fixed price per tonne of C02 until 2.015, when a market-based trading scheme is expected to be introduced. The government will then set a floor price and an upper limit for at least the first three years to avoid excessive price fluctuations.

The goal of the bill is to reduce Australia’s total emissions by 5 per cent below 2000 levels by 2020, and ultimately reduce carbon pollution by 80 per cent below 2000 levels by 2050.

Adopting new technologies:

There is a $300 million package to support jobs in steel manufacturing by encouraging innovation and another $1.3 billion towards rewarding coal mines that reduce their emissions.

An Energy Security Fund will be established to pay for the closure of Australia’s most polluting electricity generators. The Government wants to remove 2,000 megawatts of capacity from these generators before 2020 and replace them with cleaner electricity generators – preferably gas.

Another $3.2 billion in existing funding will be brought under one agency to support new technologies from the research and development to market stages. There is also a $40 million program for remote Indigenous communities for clean power supplies – like solar panels and wind turbines – so existing diesel generating plants can be replaced. Nearly $1 billion will go towards a biodiversity fund to help farmers and community groups look after the ecosystem and get rid of invasive species.