Climate Change Alert: Carbon tax passed: What you need to know - 8 Nov 2011

After being carried by a slender majority through the House of Representatives in October, the Government's Clean Energy Bill and package of 17 complimentary bills passed in the Senate on 8 November 2011.

The carbon tax will commence on 1 July 2012, at which point Australia's top 500 polluters (those companies that emit more than 25,000 tonnes of carbon dioxide equivalent per year - including methane, nitrous oxide, and perflourocarbon from aluminium production) will be required to purchase carbon units from the Office of the Clean Energy Regulator at a cost of $23 per carbon unit per tonne.

Here, partner Michele Muscillo and solicitor Ben Ricketts outline what businesses need to know about the carbon tax's implementation.

What you need to know about the carbon tax

The mining industry, electricity producers (particularly those using coal) and large industry will be affected by the tax. Of the 500 companies affected, around 110 are based in Queensland.

The carbon tax will stay in its fixed phase for the first three years. The cost of polluting will rise as follows:

  • $23 in the first year;
  • $24.15 in the second year; and
  • $25.40 in the third and final year of the fixed phase period.

After three years, the carbon tax in its current form will end, and Australia will then transition into an Emissions Trading Scheme (ETS) similar to that first proposed by Kevin Rudd in 2009.

Under the ETS, emitters will be required to purchase carbon units via auction on the open market. Carbon units will be able to be generated by green industries, such as wind farms, geothermal energy, and solar energy producers.

The price of carbon units during the flexible years (ie from 1 July 2015 onwards) will, of course, be dictated by the market. However, to give a measure of surety to industry, the Government has mandated a floor price of $15 in the first year, rising to $16 in the second year and $17.05 in the third year (2017).

Various industries will be exempt from the carbon tax. These include agricultural specific practices such as emissions from livestock, rice, the burning of savannah grassland of sugarcane and emissions from soil, as well as fugitive emissions from decommissioned underground mines and legacy emissions from landfill facilities for waste accepted before 1 July 2012. For more information on who will be covered by the tax, please see our previous Alert.

Certain industries will also be available to receive assistance under the Government's Jobs and Competitiveness Program.

For more information on the carbon tax and its impact on your business, please contact HopgoodGanim's Climate Change team.