Australia plans to impose carbon tax on worst polluters Published duration 10 July 2011

media caption Julia Gillard: "As a nation we need to put a price on carbon"

The Australian government has unveiled plans to impose a tax on carbon emissions for the worst polluters.

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.

Households are expected to see consumer prices rise by nearly 1%, and the move has been criticised by the opposition.

Critics argue the levy would damage economic competitiveness.

Australia is one of the world's worst emitters of greenhouse gases per head of population.

The country relies on coal for 80% of its electricity generation, and is a major coal exporter.

Charm offensive

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. Motorists are also to be exempt, except for heavy lorries.

Steelmakers, coal mines and electricity generators will receive compensation to ensure they stay in business. Other tax cuts are planned for consumers.

"As a nation, we need to put a price on carbon and create a clean energy future," Ms Gillard told a news conference in Canberra.

"Australians want to do the right thing by the environment."

The prime minister is due to make a televised address later on Sunday to try to sell the package to the nation.

The biggest polluters will be paying the fixed price per tonne of CO2 until 2015, 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 energy industry and the political opposition have mounted a vociferous campaign against the carbon tax, with protests in all of Australia's major cities in March.

Critics argue a levy would damage economic competitiveness.

Opinion polls show roughly 60% of voters against the policy.

The government hopes to win them over by spending some of the cash raised by the carbon tax to compensate households for higher energy bills.

It is promising tax cuts for low and middle-income households, as well as increased state pension and welfare payments.

However, Australia's ABC national broadcaster says households are expected to see consumer prices - including food - rise by an average of 0.7% due to the effect of the carbon prices on large emitters.

'Self-harm'

Ms Gillard's coalition government has a majority of just one seat in the lower house of parliament.

Past attempts to get the tax through parliament were defeated.

Opposition leader Tony Abbott pledged to wage a political war against the proposed carbon levy.

He said: "A one-sided carbon tax, a unilateral carbon tax is an act of economic self-harm."

But now the Australian government's aim will be to cut 159m tonnes of carbon pollution by 2020, reducing emissions by 5% below 2000 levels.

Apart from the European Union, only New Zealand currently imposes a national carbon tax.