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Key Documents & Presentations

Market-based Approach


Carbon Tax

Australian Carbon Tax (Fixed Price Emissions Trading

The Australian Government started imposing a carbon tax of AUD 23 (Australian dollar) per tonne of emitted CO2 on select fossil fuels consumed by the country’s biggest 500 polluters from July 2012. The carbon tax amount applies incremental to AUD 24.15 per tonne in 2013–14 and AUD 25.40 in 2014–15 in order to prepare the economy to eventually transition to the international price level. Fixed price permits cannot be banked. The Carbon tax was designed to take effect until a flexible emissions trading scheme comes into force on July 1, 2015. More information on Australia’s emissions trading scheme is available in the Emissions Trading Scheme section below.

Carbon Tax Repeal Bills

Prime Minister Tony Abbott and his Coalition government introduced the carbon tax repeal bills as the first item of legislative business for the 44th Parliament on November 13, 2013. However, the carbon tax repeal bills were rejected on March 20, 2014 and can be reintroduced in the Parliament after three months have passed.

Development of Carbon Tax-Related Bills
  • The Government proposed the legislation to abolish the Clean Energy Finance Corporation (CEFC) in an attempt to reform climate change policy of the previous Government but it was rejected by the Senate on December 10, 2013. The CEFC abolition bill was reintroduced on March 17, 2014 and is now before the Senate.
  • The Government sees many of the functions performed by the Climate Change Authority will not be necessary once the carbon tax is repealed. The legislation to abolish the Climate Change Authority was rejected by the Senate on March 3, 2014.
  • The legislation to abolish the carbon tax was rejected by the Senate on March 20, 2014. The Government will reintroduce the carbon tax repeal bills and related bills.
Rationale to Repeal the Carbon Tax

Rationale behind the move to repeal the carbon tax is to:

  • Reduce the cost of living - modelling by the Australian Treasury suggests that removing the carbon tax in 2014-15 will leave average costs of living across all households around AUD 550 lower than they would otherwise be in 2014-15;
  • Lower retail electricity by around 9 per cent and retail gas prices by around 7 per cent than they would otherwise be in 2014-15 with an AUD 25.40 carbon tax;
  • Boost Australia’s economic growth, increase jobs and enhance Australia’s international competitiveness by removing an unnecessary tax, which hurts businesses and families;
  • Reduce annual ongoing compliance costs for around 370 liable entities by almost AUD 90 million per annum; and
  • Remove over 1,000 pages of primary and subordinate legislation.

Emissions Trading

Australia repealed the Carbon Pricing Mechanism (CPM) July 1, 2014. 

The CPM was an ETS introduced under the Clean Energy Act of 2011. the mechanism covered approximately 60% of Australia's carbon emissions, including from electricity generation, stationary energy, landfills, wastewater, industrial processes and fugitive emissions. 

From 2012 to 2013, Australia's Clean Energy Regulator sold carbon units for a fixed price ($23/unit). From 2013 to 2014, the price per unit increased to $24.15. If a liable entity did not surrender sufficient credits in a given period, a fee was charged. From 2012 to 2014, this fee was 130% of the fixed price of units multiplied by the numder of units short.

Liable entities under the CPM included most large business and industrial facilities but did not directly cover the majority of Australian business or households.

Offset Crediting 

The Emissions Reduction Fund provides incentives to business and individuals to invest in emissions reduction activities. Total capitalization of the fund is A$2.55 billion, begining in the 2014-15 budget cycle. 

The following activities could be eligible projects under the Emissions Reduction Fund:

  • upgrading commercial buildings
  • improving energy efficiency of industrial facilities and houses
  • reducing electricity generator emissions
  • capturing landfill gas
  • reducing waste coal mine gas
  • reforesting and revegetating marginal lands
  • improving Australia’s agricultural soils
  • upgrading vehicles and improving transport logistics, and
  • managing fires in savanna grasslands.

The crediting and purchasing elements of the Emissions Reduction Fund will start following the repeal of the carbon tax and the passage of implementing legislation. 

Other Climate Financing Instruments

Kangaroo Green Bond

The World Bank issued its first Australian dollar denominated green bond (dubbed Kangaroo green bond) with a five-years of maturity on April 16, 2014. The bonds were placed with 15 investors who have a specific interest in supporting climate-smart projects. The proceeds will be used to finance climate-related projects. The issuance of the green bond in the Australian market will help build the green bond market that mobilizes private sector financing for climate-smart activities and drive to a low-carbon economy.

National Context

Australia's Mitigation Profiles

Australia is one of the top 20 polluting countries in the world and produces one of the highest per capita emissions. At a current speed, Australia's emissions are projected to increase by 24 per cent in 2000-2020. Australia is the world’s largest coal exporter and needs to curb emissions from carbon-intensive manufacturing processes.

According to data from the Department of the Environment, Australia’s national emissions are heavily produced from energy (fuel combustion 67.3%, fugitive emissions 7.2% respectively) followed by agriculture (15.8%), industrial processes (5.6%) etc. (2012 data) and on a rising trend as in figures 1 and 2.

Figure 1. National Greenhouse Gas Inventory by Subsector in 2012

Data: National Greenhouse Gas Inventory –Kyoto Protocol Accounting Framework

Figure 2. National Greenhouse Gas Inventory Trend by Subsector 1990-2012

(excluding LULUCF)

Source: Department of the Environment

Commitments under the National Climate Change Plan

Following the 2013 election, the Australian Government is reforming its national climate change policies. The Clean Energy Future (CEF) Package [Publication, PMR presentation] set forth by the former Government as its comprehensive climate change policy may be disbanded as vowed by the Coalition during the election. The Clean Energy Future (CEF) Package mandated to reduce emissions by 5 (unconditional target)-15 or 25 (conditional targets) per cent below 2000 levels by 2020 and by 80 per cent from 2000 levels by 2050 to move Australia to a clean energy future.

The Government proposes the Direct Action Plan to reach its emissions reduction target and repeal the carbon tax. The Direct Action Plan “builds on” (or “complement”) the Carbon Farming Initiative (CFI) and aims to achieve low-cost emissions reduction primarily through Emissions Reduction Fund (ERF; "centerpiece of the Direct Action Plan") and One Million Solar Roofs. Together with the Renewable Energy Target (RET) scheme, Australia sets its target to reduce emissions by 5 per cent below 2000 levels by 2020 and plans to generate 20 per cent of national electricity from renewable sources by 2020. The design of the Emissions Reduction Fund is being widely discussed in the country and the public consultation has concluded on February 21, 2014 [Emissions Reduction Fund update].

Commitments under the Kyoto Protocol

Australia ratified the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) in December 2007 after long debate and pledged to limit its annual carbon emissions to 8 per cent above 1990 levels during the Kyoto period (2008 to 2012).

1989, The Ozone Protection and Synthetic Greenhouse Gas Management Act 1989 was passed to control the manufacture, import and export of all ozone depleting substances (ODSs) and their synthetic greenhouse gas (SGG) replacements.

2000, The Renewable Energy (Electricity) Act was passed.

2003, State-based Greenhouse Gas Reduction Scheme commenced.

2006, State governments’ report supported a national approach to emissions trading.

2007, The Australian Government committed to national emissions trading

2007, the National Greenhouse and Energy Reporting Act 2007 was passed.

2008, The Garnaut Climate Change Review, Green Paper and White Paper on the Carbon Pollution Reduction Scheme (CPRS), and Multi-Party Climate Change Committee Agreement were published.

2009, The Australian Parliament failed to pass Carbon Pollution Reduction Scheme (CPRS) by twice

2010, Multi-Party Climate Change Committee of Parliamentarians was formed.

2011, The Australian National Registry of Emissions Units (ANREU) Act 2011 and the Australian National Registry of Emissions Units (ANREU) Regulations 2011 were legislated to provide the legislative support for the administration of ANREU and meet the requirement of the Kyoto Protocol.​​

2011, The Carbon Credits (Carbon Farming Initiative) 2011 (CFI Act) was passed by Parliament on 23 August 2011.

2011, The Clean Energy Future Package was developed on July 10, 2011 as a comprehensive plan for a clean energy future. It comprises four key elements: introducing a carbon pricing mechanism; promoting innovation and investment in renewable energy; encouraging energy efficiency; and improving land-sector productivity, sustainability, and resilience. 

2011, The Australian Parliament legislated the Clean Energy Act 2011 on November 18, 2011 to establish a carbon pricing mechanism.

2011, The Clean Energy Regulator Act 2011 was passed and established a body to administer the carbon pricing mechanism, renewable energy policies and the Carbon Farming Initiative.

2012, The Climate Change Authority was established on July 1, 2012 to monitor and review the progress of the Clean Energy Future Package and provide periodic recommendations to Parliament.

2013, The Government introduced legislation to repeal carbon tax and commence the Direct Action Plan.  

Sources: Department of the Environment; Australia: Why Emissions Trading?; Australia: Moving to a Clean Energy Economy

Focal Point


The Government has released the Emissions Reduction Fund White Paper setting out key aspects of the Emissions Reduction Fund.  

The World Bank issued the first Australian dollar-denominated green bonds to support financing climate-change related projects.

The Department of the Environment released Australia’s National Greenhouse Accounts presenting national, state and territory and industry emissions estimates.

The Government has released the Emissions Reduction Fund Green Paper outlining its preferred design options for the Emissions Reduction Fund.

The Emissions Reduction Fund will provide incentives for companies to reduce their emissions.

The Australian Government will abolish the carbon tax from 1 July 2014.

The Government has released an exposure draft of the legislation required to implement emissions trading from 1 July 2014.

The Government has announced that the Australian emissions trading scheme will begin on 1 July 2014.

A year after the carbon pricing started, evidence shows that the Clean Energy Future policies are working as designed.

The two countries agreed to strengthen their collaboration on carbon markets.

More news from the Department of the Environment is available here.

More news from the Clean Energy Regulator is available here.

All Documents & Presentations

Other documents

More documents from the Department of the Environment are available here. [Fact sheets]


  • Australia is actively working with other countries and organizations to combat climate change and driving a low carbon economy including Australia-Capacity National GHG Roundtable (APCMR) with Thailand. 

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