Australia will move forward with a national emissions trading scheme. Prime Minister Julia Gillard announced the Australian Government’s carbon price on the weekend - $23 for each tonne of pollution beginning on 1 July 2012.

The price will rise by 2.5 per cent a year in real terms during a three-year fixed price period until 1 July 2015. The carbon price mechanism will then transition to an emissions trading scheme where the price will be determined by the market.

Accompanied by the Minister for Climate Change and Energy Efficiency Greg Combet, the Prime Minister said the carbon price was a central element of the Government’s plan to move Australia to a clean energy future.

A carbon price will create economic incentives for the biggest polluters to reduce their emissions of greenhouse gases, states a government news release.

Around 500 businesses will be required to pay for their pollution under the carbon pricing mechanism, with more than half of this revenue used to assist households with tax cuts, increased family payments and higher pensions, benefits and allowances.

The package also proposes a Clean Energy Finance Corporation, or green investment bank, with an A$10 billion, five-year budget. At least A$5 billion of that is earmarked to support investment in renewables, with the rest to be spent either on renewables, low-emission technologies or energy efficiency measures.

Carbon price revenues will be used to support jobs and to invest in clean energy and climate change programs, stressed the Prime Minister.

The Government’s carbon pricing mechanism will be implemented in two stages.

For the first three years, starting from 1 July 2012, the price of each tonne of carbon pollution will be fixed, like a carbon tax. From 1 July 2015, the carbon pricing mechanism will move to an emissions trading scheme where the price will be set by the market.

In a statement to The Associated Press following the announcement, Prime Minister Gillard said, “We generate more carbon per head than any other country in the developed world. We’ve got a lot of work to do to hold our place in the race that the world is running”.

Mr Combet said market mechanisms were the most environmentally effective and economically efficient way of reducing pollution.

A carbon price creates a competitive advantage for businesses, investors, researchers and innovators who find cleaner ways of doing business. In this way it creates powerful incentives and uses the market to deliver benefits for the community.

The Deputy Prime Minister and Treasurer Wayne Swan said the three-year fixed price period would provide stability and predictability across the economy. It will give businesses time to understand the new system, their obligations within it and to start planning ways to reduce their pollution.

“We know a carbon price is the most cost-efficient way to cut carbon pollution,” he said, adding “Putting a price on pollution will encourage companies to innovate and invest in new technologies to use energy more efficiently.”

The move is seen as a significant reform designed tp tackle climate change and keep Australia’s economy prosperous and competitive as the world moves to a clean energy future.

There has been considerable controversy surrounding the government’s planned policy with respect to reducing carbon emissions and instituting a fixed price for carbon. Farmers in particular were concerned about the economic impacts resulting from the move.

International reaction has been mixed. Mining giant Rio Tinto said over the weekend that the Australian government’s proposed carbon tax was an unfair tax on Australian exporters, and would hinder investment, undermine Australia’s international competitiveness and hurt the nation’s export-competing industries.

“We are deeply concerned the proposed carbon tax fails to shield Australia’s export sector and leaves it at a disadvantage compared to international competitors,” Australia managing director David Peever said.

“It is crucial that Australia’s contribution to the global effort is in proportion to action being taken by overseas trading rivals so as not to disadvantage important trade-exposed industries,” he added.

Advertisements were also placed in the nation’s biggest newspapers by the Australian coal association, emblazoned with the words: “No other major coal exporter has a carbon tax. Not one,” and listing coal rivals such as Canada, South Africa and Indonesia.

Airliner Qantas Airways said the policy will cost the group some A$110-A$115 million in the first year of its introduction because of an increase in aviation fuel excise, prompting it to hike airfares.

A more positive note was sounded by one Canadian-based company with interests in Australia.

“Here is another example of a Government taking a leadership role on this important environmental issue. This announcement from Australia is on the back of the Quebec announcement last week and the recent U.S. EPA pronouncements on carbon regulation, and points to increased momentum on the issue globally.” stated Glenn Kelly, President & CEO of Quebec-based CO2 Solution Inc.

His company sees tremendous opportunity for the deployment of its pollution patented technology associated with the regulation of carbon dioxide. “We look forward to supporting worldwide efforts by industry to efficiently meet regulatory requirements for emissions reductions,” he said.

Further information about the Government’s announcement of a carbon price and mechanism is available at www.cleanenergyfuture.gov.au