Factbox: Carbon taxes around the world

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Carbon taxes have been introduced by several countries since 1990 (AFP/Getty Images).

Carbon taxes have been introduced by several countries since 1990 (AFP/Getty Images).

How do carbon taxes work, and which countries have already introduced them? Check our quick guide.

As debate intensifies over the federal government's carbon scheme, SBS looks at how carbon taxes work and which countries have introduced them.

What is a carbon tax and why is it being proposed?

The government plans to tax the carbon pollution caused by the burning of fossil fuels, including coal and petroleum. A carbon tax puts a price on the carbon released when fossil fuels are burned. It is designed to include in the price of fossil fuel use the cost of the environmental damage it causes.

By increasing the price of using fossil fuels, supporters of a carbon tax argue it will create incentives to develop and use technologies that reduce carbon emissions, including fuel-efficient cars and renewable energy sources. Supporters say that taxing carbon will make individuals take into account the price of using fossil fuels in their personal decisions, including the cars they buy and the appliances they use.

For emitters, using carbon-based fuels would eventually cost more than reducing their use of fossil fuels.

How does a carbon tax work?

With a carbon price, the government taxes each tonne of carbon pollution released when fossil fuels are burned. The carbon price is a tax rate set by the government.

The Gillard government has not announced the price it will set on carbon pollution. However it has said the price will be fixed for a period of three to five years.

The tax will include the stationary energy sector, the transport sector, and the industrial processes sector. Agriculture will not be included in the scheme.

How is it different to an emissions trading system?

The federal government plans to move to an emissions trading system three to five years after a carbon tax is introduced.

Emissions trading is different to a carbon tax. In an emissions trading system, a central authority sets a cap on how much a pollutant such as CO2 may be emitted. The cap is allocated to companies in the form of emissions permits, which give them the right to emit a certain amount of the pollutant. Firms are required to hold a number of permits equivalent to their emissions.

The total number of permits issued to all companies cannot exceed the emissions cap, limiting total emissions to that level. Firms that need to increase their emission permits must buy them from companies that require fewer permits. This means permit buyers are paying a charge for polluting more, while sellers are being rewarded for reducing emissions.

Which other countries have a carbon tax?

Finland: introduced the world’s first carbon tax in 1990. Initially the tax exempted few industries and fuels.

In 2010 Finland’s price on carbon was €20 per tonne of CO2. Natural gas has a reduced tax rate, while peat was exempted between 2005-2010.

Taxation of liquid fuels and coal takes account of both their energy content and carbon dioxide emissions, and also emissions into the local environment that have adverse health effects.

The Netherlands: the Netherlands levies a general fuel tax on all fossil fuels. Fuels used as raw materials are not subject to the tax. Tax rates are based on both the energy and carbon contents of fuels.

Sweden: in 1991 Sweden enacted a carbon tax.

With Sweden raising prices on fossil fuels since enacting the carbon tax, it cut its carbon pollution by 9 per cent between 1990 and 2006.

India: a levy on coal producers was introduced in 2010. India expected to raise $535 million from the tax, the first measure used by the subcontinent to reduce companies’ use of fossil fuels.

Norway: in 1991 Norway introduced a tax on carbon. However its carbon emissions increased by 43m per cent per capita between 1991 and 2008.

Denmark: enacted in 1992, Denmark’s carbon tax applies to all energy users, which includes the industrial sector. But industrial companies are taxed differently depending on the process the energy is used for, and whether or not the company has entered into a voluntary agreement to apply energy efficiency measures.

Denmark’s per capita carbon dioxide emissions were nearly 15% lower in 2005 than in 1990.

Switzerland: a carbon incentive tax was introduced in Switzerland in 2008. It includes all fossil fuels, unless they are used for energy. Swiss companies can be exempt from the tax if they participate in the country’s emissions trading system.

Overall, greenhouse gas emissions in Switzerland remained stable between 1990 and 2007.

Ireland: a tax on oil and gas came into effect in 2010. It was estimated to add around €43 to filling a 1000 litre oil tank and €41 to the average annual gas bill.

Costa Rica: in 1997 Costa Rica enacted a tax on carbon pollution, set at 3.5 per cent of the market value of fossil fuels. The revenue raised from this goes into a national forest fund which pays indigenous communities for protecting the forests around them.

Quebec, Boulder - The Canadian province of Quebec, and the US city of Boulder have also implemented carbon taxes.

Your Comments

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Carbon Tax

Noelene Lee - from Broome Western Australia, 1 month

I dont believe Australia needs a carbon tax as we already pay tax on our fuel. Since Australian Government introduced the GST to Australia there seems to be more asnd more ways for the Government to add extra Taxes on top of Taxes. The cost of living has got out of hand with the wages not increasing to compensate for all of the Price rises in Food, Electricity, Fuel, Medical costs just to name a few. It seems to me that there is always take, take, take and no giving back. What about a fair go?

carbon gas

erwin - from maryborough, 1 month

1 smoker in one room obviously creates less pollution than 10 or more. With the industrialisation and increased population (in the same room) it would stand to reason that there has to be an increase in the pollution. But for as long as we have people who believe that daylight saving would fade the curtains !?, there is no hope for them to see the daylight (due to the pollution). As not everyone, who expresses their opinion is a scientist, comments seem to be based on their political background.


lars - from melbourne, 2 months ago

Im sorry but carbon tax is just that a TAX- we can never help solve the worlds problem until we eliminate coal, petrol and instead use solar energy to power our homes and cars, The government is not investing the money into new technology but instead will pocket the cash whilst keeping fingers crossed that companies will spend money on new technology's, i think they will just pass them on to us the consumer, whilst China the US and Japan keep burning carbon at no price the biggest pollut


Micky - from Perth WA, 2 months ago

The Australian Carbon Tax is WAY higher than any other country's similar tax. It is just a tax: a revenue raiser for the Gov't. It will do NOTHING to decrease "CO2" in the atmosphere. Co2 is a very small percentage of total gases in the atmosphere. The earth is going through a cooling period now. The Tax will reduce Australia's competitiveness and so must be passed on. Scrap it. It is nonsense.


geoffm - from Tewantin. Qld., 3 months ago

It is simple - whatever Australia decides to actually do to reduce the amount of CO2 we produce, the level of the INCREASE alone of the amount of CO2 produced by China is enough to totally nullify all our efforts. Then add in the amount of CO2 produced by India and the USA, and the result makes ALL Australia's efforts absoklutely useless - we will NEVER have a part in reducing the world CO2 level. But the warming seas have been responsible for the INCREASE in the world's coral reefs !!

7 billion tons of coal a year is used

Manu - from Sydney, 5 months ago

From a report on new energy... To make 28 billion tonnes of CO2 we dig 7 billion tonnes of coal and suck countless gallons of oil and gas from the ground. Each year the 28 billion tonnes of CO2 we make induces heating. The oceans are now heating at the phenomenal rate of 300 trillion watts. In frighteningly human terms that is equivalent to detonating five Hiroshima sized A-bombs every second, every day of every year.


i - from k, 6 months ago

very bad

Australian Government=liars,cheats and money scammers

HaydosAus - from Adelaide, 6 months ago

The government is grabbing our money. Here are my reasons: 1. The Carbon Tax is just one of taxes we don't need 2: The price of gas is going up, now we need to pay just to use it 3: Diesel is bloody expensive for just the waste of what's made after making petrol

"Just plant trees" isn't going to fix it

Michael - from Albury, 6 months ago

The people who suggested we can solve everything by planting trees should realize that proposal was debunked by the "Towards 2000" science TV show about two decades ago. Even replanting 1/3rd of the entire globe's surface with trees wouldn't mitigate enough carbon. The only permanent solution was found to be reducing CO2 emissions. We've known all this for decades but not yet done anything. Amateurs should butt out now & leave the "helpful advice" role to proper Climatologists.

Carbon Price...

Daniel - from Sydney, 6 months ago

Australia is a decade behind at least when it comes to pricing carbon and trying to cut pollution.This is very overdue.

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