Australian carbon tax splits parties

Australia yesterday joined the growing number of nations to impose a price on carbon emissions in a bitterly contested reform.

It is a move that offers trading opportunities for banks and polluters but may cost the prime minister her job.

Australia’s biggest polluters, from coal-fired power stations to smelters, will initially pay $23 per tonne of carbon dioxide emitted, more than twice the cost of carbon pollution in the European Union, which trades at around $10 a tonne.

The economic pain will be dulled by billions of dollars in sweeteners for businesses and voters to minimise the impact on costs.

The scheme allows emissions trading from 2015, when polluters and investors will be able to buy overseas carbon offsets, or ultimately trade with schemes in Europe, New Zealand and possibly those planned in South Korea and China.

Prime Minister Julia Gillard’s minority government says the plan is needed to fight climate change and curb greenhouse gases. Australia has amongst the world’s highest per capita CO2 emissions due to its reliance on coal-fired power stations.

Yet even as it starts, the scheme’s future is in doubt. The conservative opposition has vowed to repeal it if they win power in elections due by late next year.

Gillard, her poll ratings near record lows and her Labour party heading for election defeat, hopes that critics will quickly run out of steam once the scheme starts.