Australia on Sunday joins a growing number of nations to impose a price on carbon emissions across its $1.4 trillion economy in a bitterly contested reform that offers trading opportunities for banks and polluters but may cost the prime minister her job.
Australia''s biggest polluters, from coal-fired power stations to smelters, will initially pay A$23 ($23) per tonne of carbon dioxide emitted, more than twice the cost of carbon pollution in the European Union, currently trading around 8.15 euros ($10) a tonne.
The economic pain will be dulled by billions of dollars in sweeteners for businesses and voters to minimise the impact on costs, with the consumer price index forecast to rise by an extra 0.7 percentage point in the 2012-13 fiscal year.
The scheme allows emissions trading from 2015, when polluters and investors will be able to buy overseas carbon offsets, or ultimately trade with schemes in Europe, New Zealand and possibly those planned in South Korea and China.
Prime Minister Julia Gillard''s minority government says the plan is needed to fight climate change and curb greenhouse gas pollution. Australia has amongst the world''s highest per capita CO2 emissions due to its reliance on coal-fired power stations.
Yet even as it starts, the scheme''s future is in doubt. The conservative opposition has vowed to repeal it if they win power in elections due by late next year and have whipped up a scare campaign saying the tax will cost jobs and hurt the economy. Gillard, her poll ratings near record lows and her Labour party heading for a heavy election defeat, hopes that the campaign will quickly run out of steam once the scheme starts.
"Cats will still purr, dogs will still bark," Gillard said after Opposition leader Tony Abbott''s visit to an animal shelter to warn of higher electricity prices on charities. "The leader of the opposition''s fear campaign will collide with the truth."
But voters remain angry that Gillard broke a 2010 election promise not to introduce a carbon tax and many observers think government hopes of a resurgence after July 1 are unlikely.
"The damage is already done," political analyst Nick Economou at Monash University said.
"What will be interesting is whether Labour takes the lemming option and follows her over the cliff, or whether it decides that she is the cause of their problems and has to go." A poll by the respected Lowy Institute think-tank found 63 percent of voters oppose the carbon scheme.
Many big polluters, such as miners, also remain vehemently opposed and uncertainty over its future is crimping investment in the power sector.