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Australia to move to a floating price on carbon pollution in 2014

16 Jul 2013

Joint media release with the Prime Minister, the Hon Kevin Rudd MP, and the Treasurer, the Hon Chris Bowen MP

Australian households will benefit from a reduction in the cost of living worth around $380 to an average household next financial year after the nation moves to a floating price on carbon emissions from July 1.

The change will ease cost-of-living pressure on families while ensuring Australia continues to play its part in reducing carbon pollution for the good of the environment.

At a time of economic transition and structural change in the global economy, the government has moved to bring forward the commencement of our emissions trading scheme.

Bringing forward the start date of emissions trading to July 1, 2014, will cost the budget around $3.8 billion over the next four years.

The government will make up for the lost revenue through savings, including $1.8 billion from changes to fringe benefits tax arrangements relating to employer-provided cars (attachment A).

Treasury modeling shows that moving to a floating rate a year ahead of schedule will ease the cost of living by $7.20 a week per family.

The impact will be greatest on electricity and gas bills.

This move is expected to save the average household around $3 a week, or over $150 in the year, on its electricity bills and around $1.10 per week, or $57 over the year, on its gas bills, providing much needed cost of living relief to many households.

Households and pensioners will continue to receive payments calculated on a higher carbon price, providing additional support to meet cost of living pressures. These benefits are permanent.

Under the previous arrangements, the carbon price was to be $25.40 per tonne next July.

Under a floating price, the figure is expected to be around $6 a tonne.

Our change is fiscally responsible and will be budget neutral. It will also bring Australia into step with its major trading partners.

Key economies like China, Germany, France and the UK already use, or are introducing, emissions trading because it is environmentally effective and economically responsible.

From July 1, 2014, Australia's carbon price will be the same as in 31 other nations covering a population of more than 500 million people.

Businesses have been asking for the early transition and the changes will reduce their input costs and boost their competitiveness.

For example, a large manufacturing business using 100 times the energy use of a typical household could see the carbon component of electricity costs fall from $15,000 to $4000 per year.

This will boost business competitiveness which will aid the transition from the mining investment boom toward a situation of more broad-based growth.

Government assistance to emissions-intensive trade-exposed industries will continue unchanged.

The Government was always committed to move from a fixed price to a floating price with the Climate Change Authority independently providing advice regarding the emissions cap.

That is why Prime Minister Rudd signed up to the Kyoto Protocol as one of his first acts in government.

Moving to emissions trading earlier means Australia will still reach its carbon pollution reduction target.

That is what both sides of politics promised in the 2007 election and, unlike the Coalition, it is still our position.

Moving quickly to a floating carbon price will allow Australia to meet its targets on emissions reductions at less cost to consumers.

The Government will also maintain strong policies alongside the emissions trading scheme to drive clean investment through the Renewable Energy Target, the Clean Energy Finance Corporation and the Australian Renewable Energy Agency.

Labor's approach represents a stark contrast to Tony Abbott's Direct Action plan on carbon emissions, which will cost taxpayers $12 billion - about $1200 a year per family.

While Mr Abbott wants families to fund his plans through their taxes, Labor is charging the nation's 370 biggest polluters and continuing to provide assistance to families to cope with the effects of carbon pricing.

Fact sheets are available at:

Media contacts: Minister Butler's office 02 6277 7920
                          PM's press office 02 6277 7744
                          Treasurer's office 02 6277 7340

Budget Impact

Bringing forward the start date of emissions trading to 1 July, 2014, will cost approximately $3.8 billion over the forward estimates, but this has been fully offset by responsible savings to ensure there is no net impact on the budget bottom line. These include:

  • reforms to car fringe benefits tax with an impact of $1.8 billion over the forward estimates;
  • ending the Energy Security Fund two years early in light of the changes to the scheme since it was first legislated (with a doubling of the allocation in the 2014/15) with a positive impact of $770 million over the forward estimates;
  • an adjustment to the Coal Sector Jobs package allocation in 2014/15 consistent with the lower carbon prices ($186 million);
  • a deferral of $200 million of funding from the Carbon Capture and Storage program and the return of $24 million to budget consistent with the profile of potential projects;
  • the return of unallocated funding from the Biodiversity Fund to the budget ($213 million over the forward estimates);
  • the return of $143 million of unallocated funding from the Carbon Farming Futures program to the budget;
  • a rephasing of $200 million of funding from the Clean Technology Program and return of $162 million of unallocated funding to the budget; and
  • reforms to APS management structure and more efficient procurement of agency software ($248 million).
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