Both programs are aimed at tackling pollution by putting the onus on companies that produce carbon dioxide, but they go about it in very different ways. So what’s the difference between the carbon tax and ETS?
Carbon Tax
The carbon tax was launched on July 1, 2012 by the Labor government to tackle the problem of pollution.
Companies in Australia that emit over 25,000 tonnes of carbon dioxide are currently charged $25.40 per tonne emitted, payable to the Australian government.
It’s an attempt to encourage companies to cut emissions of harmful greenhouse gases in order to cut their operating costs.
According to the federal government, about 75,000 businesses pay the carbon tax or a similar emissions taxing scheme.
In its first two years, the carbon tax raised about $15.4 billion in gross revenue.
The government says eliminating the carbon tax with ETS will reduce household energy costs because it says the burden of the carbon tax was passed on to the taxpayer.
It also says the tax cut will boost economic growth and increase global competitiveness.
Emissions Trading Scheme
Where the carbon tax charges companies by the amount of carbon they emit, it doesn’t limit the amount they can emit.
Under an emissions trading scheme, however, carbon wouldn’t be priced by tonne. Instead, there would be a cap on how much carbon dioxide may be emitted.
It would be allocated to companies through permits for every tonne of carbon dioxide they produce - allowing them to emit a certain amount based on the emissions they usually produce – but it cannot exceed the cap.
If a company needs more emissions permits, they may buy them from a company that requires fewer permits. This way, companies will be charged for polluting more, and others will be rewarded for emitting less.
In 2015, the carbon tax is legislated to transition into an emissions trading scheme but the future of the environmental program is uncertain.
Environment Minister Greg Hunt has said that the trading scheme is not the Coalition's policy but the government would be open to discussions.
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