ANDREW Donnelly posed a good question in inquiring what exactly the carbon tax is to be levied on (The Border Mail, August 9).
There are two broad options for pricing carbon in a market economy: a carbon tax and an emissions trading scheme, both of which have been incorporated into the government’s Clean Energy Future proposal.
A carbon tax is a blanket cost per tonne of “CO2 equivalent” paid by the highest polluting businesses for every tonne that they produce.
CO2 equivalent is the baseline against which the “radiative forcing” — the energy-trapping potential-of all greenhouse gases is measured.
An emissions trading scheme is more elaborate.
A cap on the total amount of carbon emissions is set to limit emissions growth.
Portions of the total emissions cap are shared between polluting businesses who can buy and sell their permits, creating an incentive to reduce their emissions output because of the profits efficient enterprises can make in selling permits.
The emissions cap is gradually reduced over time, thereby lowering the total carbon footprint of the national economy.
In either case, liable businesses calculate their emissions burden in terms of CO2 equivalent using the framework specified in the National Greenhouse and Energy Reporting Act 2007 and subsequent legislation.
Emissions are measured through either direct observation or estimated using data such as fossil fuel consumption, invoices, and various other sources specified in the guidelines of the legislation.
The carbon tax rate and the price of emission permits are calculated per ton of CO2 equivalent.
— DR BENJAMIN HABIB,
La Trobe University Albury-Wodonga Campus