Australia to switch from carbon tax to emissions trading scheme

Key greenhouse gas emitter Australia has announced that it will scrap its carbon tax in favour of an emissions trading scheme that puts a limit on pollution from 2014, a year earlier than planned.

The move is set to cost the government billions of dollars but Treasurer Chris Bowen said cuts would be made elsewhere to compensate, with the Labor Party sticking to its plan to return the budget to surplus in 2015-16.

Bowen confirmed media reports that the fixed carbon tax of A$24.15 (HK$170) per tonne would be dumped in favour of a floating price of between A$6 and A$10 per tonne from July 1 next year to ease pressure for families and help support the non-mining sectors of the economy.

With national elections later this year, Labor is hoping the change will see a drop in soaring electricity prices.

"There is a substantial impact on the budget of doing this, of course there is, and it is several billion dollars, but we will be financing that in a fiscally responsible way," Bowen told the Ten Network, adding that full details would be announced over coming days. "It means ensuring that our strategy of returning to surplus over the economic cycle is adhered to, so it is a challenge. I think families will see a big benefit in what we are bringing forward".

Australia is among the world's worst per capita polluters due to its reliance on coal-fired power and mining exports. It introduced a "carbon tax" last year, charging big polluters for their emissions.