Prime Minister Julia Gillard has announced plans to roll out a carbon tax from July 2012.

Now whats carbon tax?

A carbon tax is an environmental tax that is levied on the carbon content of fuels.It is a form of carbon pricing. Carbon atoms are present in every fossil fuel (coal, petroleum, and natural gas) and are released as carbon dioxide (CO2) when they are burnt. In contrast, non-combustion energy sources—wind, sunlight, hydropower, and nuclear—do not convert hydrocarbons to carbon dioxide. A carbon tax can be implemented by taxing the burning of fossil fuels—coal, petroleum products such as gasoline and aviation fuel, and natural gas—in proportion to their carbon content. Since energy is used in all products and services, the tax will make virtually everything more expensive.

What is the purpose of Carbon Tax?

The government plans to tax the carbon pollution caused by the burning of fossil fuels, including coal and petroleum. A carbon tax puts a price on the carbon released when fossil fuels are burned. It is designed to include in the price of fossil fuel use the cost of the environmental damage it causes.

By increasing the price of using fossil fuels, supporters of a carbon tax argue it will create incentives to develop and use technologies that reduce carbon emissions, including fuel-efficient cars and renewable energy sources. Supporters say that taxing carbon will make individuals take into account the price of using fossil fuels in their personal decisions, including the cars they buy and the appliances they use.

For emitters, using carbon-based fuels would eventually cost more than reducing their use of fossil fuels.

 

The Carbon Tax will start at about $25 per tonne, it will need to rise to about $80 per tonne to make renewable energy competitive. But many say it will not work as intended due to many reasons.

Now how will it affect us?

In the real world, industries and big companies are not impacted by new or increased taxation, since they absorb the cost by increasing their price to consumers. So it affect us, the general public, pay the tax.

Energy is used everywhere in society, so all goods and services, including electricity, food and transport will be more expensive, and increasingly more so; they have to be, for the tax to change our behaviour and that of businesses. GST will be further added on top.