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Repeal of the Carbon Tax – Details-stage Regulation Impact Statement – Department of the Environment

On 13 November 2013, the Prime Minister introduced the Clean Energy Legislation (Carbon Tax Repeal) Bill 2013. The repeal of the carbon tax is an election commitment of the Government. The Office of Best Practice Regulation (OBPR) assessed the significance of this proposal as A-level, meaning it is expected to have significant economy-wide impacts. The carbon tax is directly applied to a limited range of inputs, and is paid by a relatively small number of businesses or ‘liable entities’. The carbon tax directly increases the cost of: electricity and gas; managing landfill and wastewater; liquid fuels for off-road use; and synthetic greenhouse gases. Some of these products, such as electricity and gas, are used as inputs to other production processes. Consequently, a change in the price of an input can also have indirect effects on prices other products. The incidence of these price changes may be borne by businesses or households. The Regulation Impact Statement (RIS) states that there are two main problems with the carbon tax: the carbon tax increases the cost of living for the household sector; and it increases costs for business, both in terms of higher input costs, and the costs incurred by liable entities in complying with carbon tax obligations. The RIS outlines the following impacts on the environment, households and businesses:

  • The carbon tax was implemented to achieve a 5 per cent reduction in greenhouse gas emissions by 2020.  The Government is committed to achieving this through other policy approaches. Therefore it is not expected that there will be a significantly different environmental outcome in terms of expected GHG emission reductions.
  • It is expected that household cost of living will be lower.
  • It is expected that the cost of inputs for business will be lower, and this may have subsequent economic impacts resulting from those cost reductions being passed through to end users of affected products and services, such as consumers.  The Australian Competition and Consumer Commission will have a role in monitoring these expected price reductions.

It is estimated that the policy will result in an overall reduction in business compliance costs of $85.3m in the first year following repeal. A details-stage RIS was prepared by the Department of the Environment and certified as adequate by a Deputy Secretary from that Department. Consistent with the Government’s best practice regulation requirements the RIS focussed on the impacts of the election commitment and did not consider alternative approaches. The Office of Best Practice Regulation has assessed that the details-stage RIS contains an adequate level of analysis and meets the Government’s best practice regulation requirements.