Understanding the carbon tax

Published: July 28, 2011 - 12:00 PM

Will the cost of groceries go up?

With the Carbon Tax debate in full swing, it can be hard to get to the bottom of the facts and what the tax will mean for electricity and gas costs for the average Australian household.

Will the carbon tax make our electricity prices go up?
Will he carbon tax make the cost of groceries, petrol and other goods rise?
Is the carbon tax going to make it harder to save money on electricity and gas prices?

So here’s our Carbon tax cheat sheet to help you understand the great big tax:

The Carbon Tax is being introduced to influence businesses and consumers to change the way they use energy. The tax’s aim is to promote investment in green energy such as solar, gas and wind and penalise those businesses that pollute the environment.

The carbon tax penalises the top 500 biggest polluting business by charging them $23 for every tonne of carbon emissions they produce. The heaviest polluting industries will be allocated additional funds by the Government to assist them to move to cleaner energy alternatives.

Only 0.02 per cent of businesses will be taxed. Fuel is exempt from the tax so the price you pay for petrol at the bowser will not increase as a direct result of the carbon tax. In addition, distributors and companies that emit synthetic greenhouse gases including air conditioning and refrigeration businesses are exempt from the tax.

It is expected that the increased costs that businesses will face as a result of the Carbon Tax will be passed on to consumers through higher prices for goods and services including higher prices for electricity and gas. To compensate for these price increases, most households – 90 per cent - will be compensated by tax cuts or family allowance increases. 70 per cent of households will be compensated fully and pensioners will receive additional pension payments.

If the legislation is passed in parliament, the carbon tax will come into effect on 1 July 2012. It will then be replaced by a market-based Emissions Trading Scheme.

With expected price increases expected in electricity and gas prices, it is important that households save as much money as possible by finding cheap electricity and cheap gas prices. The Carbon Tax will not affect competition within the energy markets, and consumers will still be able to choose their energy suppliers and shop around for the best electricity or best gas deal in NSW, Queensland, Victoria and South Australia. Deregulation may come to other states at later dates.

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