Australia’s Carbon Tax

The carbon tax was introduced in July 2012 on about 300 of the largest polluters. Australia’s carbon emissions make up 1.5% of the world’s total. The tax was seen as a remedy to correcting market failure and a more effective method than the carbon trading scheme in Europe. However, it has caused a significant increase in the costs of production causing a loss of jobs and an increase in energy prices for the consumer. Is this an example of the’ polluter pays’ principle and internalising the costs thus establishing a more desirable equilibrium? Abbot, the Australian prime minister is now looking to scrap the tax. Will he replace it with anything? Will this be an example of government failure?

introducing the tax        scrapping the tax

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