carbon price

What's happening on 1 July 2012?

The Australian Government is introducing a price on carbon. Initially the price will be set at $23 per tonne.

Why is a carbon price being introduced?

A price is being put on carbon pollution to properly reflect the true cost to our health and the environment of the way we manufacture, produce, distribute, use and dispose of goods and services. The theory is that if we can see and understand the true, full cost of doing things a particular way then we might make much better decisions about which resources we use and how we use them.

Do I have to pay the carbon price?

As a consumer you do not pay a price for carbon directly. Australia's 500 largest polluters (e.g. power stations, mines and heavy industry) will be required to pay a price for their carbon pollution. However, as these large carbon emitters are involved in pretty much every aspect of the goods and services we consume, you will end up paying higher prices for many of the goods and services you buy.

Why is carbon bad?

Carbon dioxide and other greenhouse gases are bad for us in two ways:

• We absorb and breathe them in every day and this can impact our health and reduce our life expectancy (if you have ever stood on the side of a busy road you will understand immediately how breathing in petrol fumes makes you feel); and
• These gases create a layer around planet earth that causes heat from the sun to get trapped in the atmosphere, meaning that the earth gets warmer and warmer. In other words, for you gardeners out there, the planet becomes more like a greenhouse. The effects of this are seen in melting polar ice caps and the resulting rising sea levels. It also means that we will see more extreme weather effects i.e. more droughts, more floods, etc.

What if I don't believe that carbon pollution is that bad?

Well, at this point, if you are not convinced you're not convinced. Your vote is the best way to express your views.

So how will a carbon price affect my energy bills?

The bad news is that your energy bills will go up.

However, analysis by the Australian Energy Market Commission estimates the carbon tax will have a modest impact on household power prices, pushing them up by an average of about 6 per cent per year: 1.64 cents per kilowatt hour in 2012/13 and 1.74 cents in 2013/14.

The rise in electricity prices will vary by state - by how much depends upon where your state's electricity comes from and how it is generated. Electricity can be generated a number of different ways. The most common way of producing electricity is by burning coal, which generates a lot of carbon dioxide. Newer generation plants tend to use natural gas which produces much lower emissions. In Australia there are also a few hydro-electric schemes which use water to produce electricity and hence produce a low level of carbon dioxide.

Natural gas prices will also increase due to the carbon price but probably by less than the rise in electricity prices. Natural gas is a more efficient source of energy but like electricity it also creates carbon pollution in producing it and delivering it to your home.

What can I do to reduce the impact of the carbon price on my household budget?

The most important step you can take is to look at ways you can reduce the electricity and gas you use in your home. For useful ideas and tips you can check out our Energy Savings Guide.

The Australian Government, recognising that most Australians will be worse-off financially with a carbon price, is introducing a number of packages to assist households. The Household Assistance Package will include a combination of assistance payments to eligible households as well as cuts to the income taxes you pay the government from 1 July. You can read more about your entitlements on the Department of Human Services website.

Where can I learn more?

You can learn more about carbon emissions and carbon pricing by watching this video:

You might also like to try the Australian Government Clean Energy Future website.