Australia's Carbon Tax Closer After Key Vote

By RAY BRINDAL

CANBERRA—Australia's controversial plan to introduce a tax on carbon emissions cleared a major political hurdle Wednesday, securing the expected approval of the country's lower legislative house.

The package to introduce a price on carbon pollution and encourage investment in clean and renewable energy narrowly passed at 74-72. The law is now assured easy passage through the Australian parliament.

Australian Prime Minister Julia Gillard has staked her Labor Party's future in government on introducing the reform, which wasn't included in its manifesto in last year's election. The policy was almost guaranteed approval after independent lawmakers who back Ms. Gillard agreed to support the bill despite a fierce campaign by the opposition to derail the process.

A group of almost 70 demonstrators against the tax chanting "no mandate, democracy is dead" were expelled from the House of Representatives for disrupting Ms. Julia Gillard's question time after the package passed.

Treasurer Wayne Swan described the passage of the legislation as "the most significant economic and environmental reform in a generation."

The package will allow the government to price emissions of carbon dioxide at a rate of 23 Australian dollars (US$23) a metric ton to the nation's 500 biggest polluters to curb emissions and cut pollution. The measure also aims to encourage investment in clean and renewable energy, provide assistance to some affected industries including steel, and to provide compensation by way of tax cuts and increase government pension payments, Ms. Gillard said.

Business lobby groups in Australia have mostly opposed the tax, arguing that it will add to rising operating costs at a time when the strong Australian dollar weighs on areas of the economy like manufacturing and tourism.

Heather Ridout, chief executive of the Australian Industry Group, said that the timing of the Clean Energy Bill couldn't be worse given weaker economic circumstances, the lack of global and domestic consensus on issues related to climate change and the existing structural pressures on manufacturing.

The Business Council of Australia, which represents big companies, wants amendments to the measure so that Australia acts only in tandem with other nations over time, and adjustment to make Australia competitive in case of economic shocks.

But Frank Jotzo, Director of the Center for Climate Economics and Policy at the Australian National University, said the carbon pricing legislation will give businesses more certainty for their investments.

"The fundamental point is that putting a price on carbon is the economically best way of reining in emissions growth. What was voted in today could well be the first step on the journey to effective and economically sensible climate policy in Australia," Mr. Jotzo said in a statement.