(Repeats story first published on Sunday, no change to text)
* Australia joins the EU and New Zealand in pricing carbon
* Banks, polluters to remain sidelined due to uncertainty
* A$23/tonne starting price, carbon trading begins 2015
By James Grubel and Stian Reklev
July 1 Australia on Sunday joins a growing
number of nations to impose a price on carbon emissions across
its $1.4 trillion economy in a bitterly contested reform that
offers trading opportunities for banks and polluters but may
cost the prime minister her job.
Australia's biggest polluters, from coal-fired power
stations to smelters, will initially pay A$23 ($23) per tonne of
carbon dioxide emitted, more than twice the cost of carbon
pollution in the European Union, currently trading around 8.15
euros ($10) a tonne.
The economic pain will be dulled by billions of dollars in
sweeteners for businesses and voters to minimise the impact on
costs, with the consumer price index forecast to rise by an
extra 0.7 percentage point in the 2012-13 fiscal year.
The scheme allows emissions trading from 2015, when
polluters and investors will be able to buy overseas carbon
offsets, or ultimately trade with schemes in Europe, New Zealand
and possibly those planned in South Korea and China.
Prime Minister Julia Gillard's minority government says the
plan is needed to fight climate change and curb greenhouse gas
pollution. Australia has amongst the world's highest per capita
CO2 emissions due to its reliance on coal-fired power stations.
Yet even as it starts, the scheme's future is in doubt. The
conservative opposition has vowed to repeal it if they win power
in elections due by late next year and have whipped up a scare
campaign saying the tax will cost jobs and hurt the economy.
Gillard, her poll ratings near record lows and her Labor
party heading for a heavy election defeat, hopes that the
campaign will quickly run out of steam once the scheme starts.
"Cats will still purr, dogs will still bark," Gillard said
after Opposition leader Tony Abbott's visit to an animal shelter
to warn of higher electricity prices on charities. "The leader
of the opposition's fear campaign will collide with the truth."
But voters remain angry that Gillard broke a 2010 election
promise not to introduce a carbon tax and many observers think
government hopes of a resurgence after July 1 are unlikely.
"The damage is already done," political analyst Nick
Economou at Monash University said.
"What will be interesting is whether Labor takes the lemming
option and follows her over the cliff, or whether it decides
that she is the cause of their problems and has to go."
A poll by the respected Lowy Institute think-tank found 63
percent of voters oppose the carbon scheme.
Many big polluters, such as miners, also remain vehemently
opposed and uncertainty over its future is crimping investment
in the power sector.
UBS has cut its earnings estimates for global mining houses
BHP Billiton and Rio Tinto by
between 3 and 4 percent ahead of the carbon tax and another tax
on mining profits also due to start on Sunday.
The Australian carbon scheme is the product of years of
fierce bargaining with business and political parties.
It will initially cover just under 300 companies and
councils that comprise about 60 percent of the nation's roughly
550 million tonnes of CO2.
For the first three years, polluters will pay a fixed price
for CO2 emissions, reaching A$25.40 a tonne in the final year.
From July 2015, emissions trading with regular auctioning of
pollution permits will start, along with rules that allow
polluters to buy overseas emission reduction offsets, such as
Certified Emission Reductions (CERs), part of the United
Nation's Kyoto Protocol climate pact.
A floor of A$15 a tonne and a cap of A$20 above the expected
international price will run till 2018.
BILLION-DOLLAR PRIZE, MAYBE
Despite the scheme's soft start and openness to
international markets, bankers and big polluters remain
cautious, with opposition leader Abbott's "blood oath" to repeal
the scheme stirring deep unease.
Traders are also awaiting final rules on implementing the
floor price on international units.
Morgan Stanley says it is likely there will be very limited
trade in international units until there is certainty on the
repeal risk, plus clarity on the 2015-18 floor price and whether
Australia agrees to a second commitment period under Kyoto.
"Since a domestic unit auction will most likely not occur
until after the next election in late 2013, if the Opposition is
still talking about rescission and repeal, it is unlikely that a
forward market will develop in these units," Emile Abdurahman,
executive director of Morgan Stanley Commodities in Sydney, said
in emailed comments.
For now, repeal remains a real possibility because of the
way it has polarised the country, Australian National University
climate policy analyst Frank Jotzo wrote in a recent commentary.
"Australia's carbon pricing mechanism might enter history as
one of the best-designed yet shortest-lived policies for climate
change mitigation." ($1 = 0.9976 Australian dollars)($1 = 0.8047
(Writing by David Fogarty; Editing by Lincoln Feast and Ed