Clean Energy Future

An environmental problem with an economic solution

Putting a price on carbon is the most environmentally effective and cheapest way to cut pollution.

This is a fact that is well recognised by economists from around the world, and respected institutions such as the OECD and the Productivity Commission. Currently, releasing carbon pollution is free despite the fact that it is harming our environment.

A carbon price changes this. It puts a price on the carbon pollution that Australia’s largest polluters produce. This creates a powerful incentive for all businesses to cut their pollution, by investing in clean technology or finding more efficient ways of operating.

It encourages businesses across all industries to find the cheapest and most effective way of reducing carbon pollution, rather than relying on more costly approaches such as government regulation and direct action.

Breaking the link between emissions and economic growth

The carbon price is the first element of the Government’s plan for a clean energy future: it triggers a broad transformation of the economy. Our economy has successfully handled comparable structural changes over its history. In fact, transformative changes – new products and technologies, and the integration of our economy into the global economy set in train by the reforms of the 1980s and 1990s – have underpinned rising prosperity and sustainable growth in Australia.

Treasury modelling shows that, under a carbon price, the economy continues to grow.

Figure 1: Gross National Income with and without the carbon price

For more information see: Chapter 3 – Putting a price on carbon pollution.

For further details about a carbon price see:

• How a carbon price works
• The carbon pricing mechanism
• Climate Change Authority.

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How a carbon price works

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Who pays the carbon price

Australia’s biggest polluters will be required to pay for their pollution under the carbon pricing mechanism. These organisations will need a permit for every tonne of carbon pollution they produce – the cost of that permit is the carbon price.

Households, small businesses and other organisations will have no direct obligations under the carbon price. A carbon price will not apply to agricultural emissions or emissions from light on-road vehicles. To find out which companies will pay the carbon price read Carbon Pricing Mechanism: Who is liable?

What are the price impacts?

Some businesses will pass on the carbon price, leading to modest rises in prices. In 2012-13, this is expected to increase the cost of living by 0.7 per cent. The GST and related changes to the tax system pushed up prices more than three times as much as the carbon price is expected to.

Many prices, particularly food, will hardly be affected. On average food will go up by less than $1 per week for households.

Appropriate action will be taken against businesses that use the carbon price as an excuse to put up prices beyond the cost of carbon.

Households and jobs will be supported

Every cent raised from a price on carbon will be used to provide tax cuts and increased benefits to households, support jobs in the most affected industries, and build a new clean energy future.

The Government will ensure that those Australians that need help the most, particularly pensioners and low and middle income households, will get assistance for the cost of living impact of the carbon price. Read more on helping households.

The Government has carefully designed a number of measures to support jobs and competitiveness as we move to a clean energy future. Read more on helping business.

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