One of the key items on Prime Minister Julia Gillard’s agenda is pricing carbon and her new multi-party committee aims to spearhead legislation this term.
With the backing of the members of the committee, Ms Gillard has announced her framework for pricing carbon, which is set to begin on July 1, 2012.
Under the plan, the carbon price will initially be a fixed price set by the Government, before moving to a market-based cap-and-trade scheme.
The initial fixed price essentially constitutes a carbon tax.
The aim of the cap-and-trade scheme, also known as an emissions trading scheme, and a carbon tax are similar: to lower harmful emissions to help reduce the impact of climate change. But both use different mechanisms to achieve that goal.
The Government is yet to decide on what the fixed price will be, as well as the levels of compensation for consumers and business.
Here ABC News Online talks to environmental economist Jeff Bennett, from the Crawford School of Economics at the Australian National University, about what a price on carbon would involve.
What does it mean to put a price on carbon?
The bottom line is that everything we do in our lives involves some production of carbon waste products.
The products that we consume involve the generation of carbon products, especially of course through the use of energy [that] predominantly comes from fossil fuels, which when burned emit carbon dioxide into the atmosphere.
At the moment, emitting carbon into the atmosphere in Australia is free, so what we see is our atmosphere is being used as a waste dump for carbon at no cost.
By putting a price on your emissions of carbon into the atmosphere, just like any other commodity, as the price goes up, you’ll use less of it.
So it’s a mechanism for trying to reduce the amount of carbon being put into the atmosphere.
Who would pay a carbon tax?
We are all using the atmosphere as a waste dump, we all use that atmosphere because we’re emitting carbon through our direct activities or the products we consume that are produced using carbon ...