Image: Supporters of carbon tax
Rick Rycroft  /  AP
Supporters of a controversial carbon tax gather in June at a rally in Sydney.
updated 7/10/2011 2:00:46 AM ET 2011-07-10T06:00:46

Australia will force its 500 worst polluters to pay 23 Australian dollars ($25) for every ton of carbon dioxide they emit, with the government promising to compensate households hit with higher power bills under a plan to reduce greenhouse gas emissions unveiled Sunday.

Prime Minister Julia Gillard sought to reassure wary Australians that the deeply unpopular carbon tax will only cause a minority of households to pay more and insisted it is critical to helping the country lower its massive carbon dioxide emissions. Australia is one of the world's worst greenhouse gas polluters, due to its heavy reliance on coal for electricity.

"We generate more carbon pollution per head than any other country in the developed world," Gillard told reporters in Canberra as she released details of the tax, which will go into effect on July 1, 2012. "We've got a lot of work to do to hold our place in the race that the world is running."

Story: Australia PM Wins Crucial Support for Carbon Tax

The government hopes businesses affected by the tax will seek out clean energy alternatives to reduce their bills. The affected companies will have to pay AU$23 per metric ton of carbon, with the price rising 2.5 percent a year until 2015, when the plan will move to a market-based emissions trading scheme.

By 2020, the tax will have helped reduce carbon pollution by 160 million metric tons — the equivalent of taking 45 million cars off the road, Gillard said.

Households unfairly burdened?
Critics of the plan say Australian households will be unfairly burdened by higher costs passed onto them by the big polluters. To help compensate for the higher bills, nine out of 10 households will receive some form of assistance in the form of income tax cuts and payments. Two-thirds of all households will receive enough assistance to cover the entire financial impact of the tax, Gillard said.

Story: Australia to Set Carbon Price of A$23 Per Metric Ton

Under the plan, the average household will see their costs increase by AU$9.90 a week, which includes an additional AU$3.30 per week for electricity and another AU$1.50 a week for gas. But the government says on average, households will receive AU$10.10 a week in assistance.

Industries affected by the change will get AU$9.2 billion in compensation over the next three years, with the worst-hit businesses expected to be steel and aluminum manufacturers.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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