Australia puts a price on carbon

The Australian Federal Government has announced a carbon tax of $23 per tonne effective from July 1 next year. 

Designed to slash the nation’s carbon emissions by 159 million tonnes a year, the tax will apply to Australia’s top 500 polluters under a two-phase fixed and flexible scheme. 

Under the first phase, carbon emitters will be able buy as many permits as required at the fixed price, which will rise 2.5 per cent each year until 2015 to $25.40. 

From fiscal year 2015, companies will face a “cap and trade” mechanism which places a cap on the nation’s total emissions while the price of a limited number of permits is to be determined by bidding. 

The government will create a fixed number of permits representing one tonne of carbon, which it intends to auction off or allocate to businesses to support broader economic objectives. 

No emission limits will be placed on individual firms or sectors under the package. For the first three years under the flexible system, the government intends to place a ceiling price for credits at $20 above the international price and a floor price of $15 per permit.  

Australia's carbon tax was officially announced on Sunday by Prime Minister Julia Gillard, Deputy Prime Minister Wayne Swan and Minister for Climate Change and Energy Efficiency Greg Combet. 

The scheme will split business into two camps: those that find it cheaper to bid for permits and those that can find cheaper alternatives to the prevailing price for carbon permits. 

“In both the fixed and flexible price period, large polluters will have to pay a price for every tonne of carbon pollution they release. These businesses will choose to reduce their emissions if they can do so at a cost that is less than the carbon price. In both periods, the market will determine the most cost-effective ways to reduce carbon pollution,” the government has pointed out.

The long-term impact the tax will have on investments in Australian data centre infrastructure is uncertain, however researchers from analyst firm Gartner have claimed that the impending tax and Australia's deep reliance on taxable energy sources had prevented major cloud vendors from establishing Australian operations.

In the short-term, businesses have questioned whether the carbon tax would make it cheaper to move data centre operations offshore, Gartner said.

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