Australia's carbon price compared with international carbon markets

Price is Right? (Adam Morton, 2012)

Adam Morton's work entitled "The Price Is Right?" published online the 'Environment' website examines whether Australia's carbon price is too high compared with other major countries in the world. Morton states that the idea that the carbon tax in Australia is too high began with an assumption among those in a political debate and then at some point 'became an assumed wisdom." (Morton, 2012)

The Truth

Morton states that when one actually surveys the carbon market on an international and local basis that the idea of whether the carbon tax in Australia is really higher than in other major countries is not as clear. The original price of $23 per ton of carbon dioxide placed by the multiparty climate committee of Labor, Greens, and independent MPs was based in part on the European price which was at the time approximately $20 per ton of carbon dioxide. However, the European price later fell and is presently less than $10 per ton of carbon dioxide. AS well, Morton reports that the United Nations scheme resulted in a price that is less than $5 per ton of carbon dioxide. This is based on the "price of carbon credits generated in the Clean Development Mechanism" according to Morton.

II. How It Works

Morton reports that the carbon tax in Australia is set to work as follows:

(1) Beginning July 1, approximately 400 businesses will pay $23 per ton of carbon dioxide emitted;

(2) Treasury projects the cost of living will increase by 0.7%, electricity bills by 10%;

(3) Approximately 60% of households will be fully over compensated for initial cost increase. 30% will be partially compensated, 10% will get nothing;

(4) The goal is to encourage electricity generators and big industry to move to cleaner generation/production -- to pay for emissions cuts overseas. (Morton, 2012)

It is reported that a carbon tax has been in existence in Sweden since 1991 and has slowly increased as planned which gave businesses in Sweden time to adjust to be carbon tax. The European price is reported as fluctuating over the past five years. It is stated that the London-based carbon markets director for Bloomberg New Energy stated that he believed that there is a good case for "cutting the starting price to $15." (Morton, 2012) It is believed that the carbon price will affect investment decisions.