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Australia’s Senate voted to repeal Carbon tax

Jul 17, 2014 15:17 IST

Australia's Senate on 17 July 2014 voted to repeal the carbon tax. The Australian Senate voted by 39 to 32 votes to repeal the tax. With this Australia became the first country in the world to abolish carbon tax.

The repealing of the carbon tax will now be replaced with Direct Action Plan, if Senate passes it. Direct Action Plan is a 2.55 billion Australian dollars taxpayer-funded plan under which industries will be paid to reduce emissions and use cleaner energy.

The carbon tax was passed in July 2012 by the previous Labor government headed by Julia Gillard. The tax was levied on the 348 biggest polluters. The tax saw 348 of Australia's biggest companies pay 23 Australian dollars (22.60 US dollars) for each tonne of CO2 they emitted.

Comment

The repeal of carbon tax is a major victory for Prime Minister Tony Abbott of Liberal-National coalition. He had promised to repeal the carbon tax in his election manifesto in June 2013. The repeal would give a fillip to the Abbott government’s Economic Action Strategy.

However, the repeal of carbon tax has been criticized by the environmentalists. They cite it as a major setback in fighting global warming and global CO2 trading. This is because Australia is one of the world's biggest carbon emitters on a per capita basis and has world's third largest emissions trading scheme (ETS) after Europe and Guangdong.

It might also affect Australia's Renewable Energy Target scheme (ETS). Australia’s ETS was designed to ensure that 20 per cent of Australia's electricity comes from renewable by 2020.

Australia also had committed unconditionally to reducing its overall emissions by 5 per cent compared with 2000 levels by 2020.

About Carbon Tax

A carbon tax is a tax on energy sources which emit carbon dioxide. It is a pollution tax, which some economists favour because they tax a bad rather than a good (such as income). Carbon taxes address a negative externality. Externalities arise when an individual production or consumption activity imposes costs or benefits on others.

By placing a cost on these negative externalities the underlying purpose of a carbon tax is to reduce emissions of carbon dioxide and thereby slow global warming.

The first carbon tax was enacted in Finland in 1990, with a small tax on fuels (except for biofuels including peat).

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