Proposed Emissions Reductions and Budget Restructuring Plan Unveiled
A new report, backed by senior economists and former public servants, suggests the Albanese government could achieve significant emissions reductions and restructure the federal budget. The plan involves taxing polluting companies, potentially generating over $35 billion annually. The analysis, from the Superpower Institute led by Ross Garnaut and Rod Sims and supported by Ken Henry, advocates for two primary levies.
Key Levies Proposed
- Polluter Pays Levy: This levy would target companies involved in the extraction or import of fossil fuels consumed within Australia.
- Fair Share Levy: This proposal aims to raise the tax on profits for local gas producers from roughly 30% to nearly 60%, bringing it closer to rates seen in other fossil fuel-exporting countries like Norway (75-90%).
Financial Impact and Household Compensation
The report estimates these two taxes would collect an average of $35.6 billion annually from 2026 to 2050. Annual revenue is projected to commence at under $20 billion and potentially exceed $40 billion post-2030.
Under the plan, households would receive compensation, and in some instances overcompensation, for increased costs. This would be facilitated through a universal energy compensation payment and a targeted additional household support package. These payments would be front-loaded over the next decade and gradually decrease as households transition from fossil fuels to clean electricity. Small businesses would also receive compensation.
Political Landscape and Rationale for Reform
The report revives a call for Australia to re-introduce carbon pricing, a concept previously abolished in 2014 and subsequently rejected by the Labor party due to political concerns.
Rod Sims, chair of the Superpower Institute, argues that the current political, economic, and climate landscape has changed substantially since 2014.
"He outlines three potential paths for Australia: failing to meet emissions targets, intensifying current policies (which could increase consumer costs), or mandating polluters to bear the financial burden and accelerate emissions cuts."
Implementation, Funding Allocation, and Public Support
Sims indicated that approximately $5 billion annually from the levy revenue should be directed towards household cost-of-living relief. The remaining funds could address the long-term structural budget deficit, social policies, and green industries.
The "polluter pays levy" is described as a "simple" mechanism, applicable to about 60 companies responsible for roughly 80% of Australia's emissions. The institute proposes the pollution levy begin at $17 per tonne of carbon dioxide, with a planned increase to link it with the European Union carbon price by 2034.
Polling data from Redbridge Group, commissioned by the institute, indicates that 68% of Australians support the introduction of a "polluter levy" on major greenhouse gas emitters.
Former federal Treasury head Ken Henry affirmed the credibility of the report's figures and its recommendations, noting a contemporary opportunity for significant policy reform in the national interest.