Australia to scrap carbon tax in favour of emissions trading

Australia's prime minister, Kevin Rudd, said Tuesday a deeply unpopular carbon tax will be replaced by a less-severe emissions trading scheme a year ahead of schedule in a bid to lower power bills for households as a tight national election looms.

The carbon tax on Australia's worst industrial polluters, including its coal-reliant power producers, went into effect in July 2012 and was supposed to remain in place until 2015. At that point, it was set to be replaced by an emissions-trading scheme, in which the cost of emitting a tonne of carbon would be determined by buyers and sellers in a carbon market.

Rudd is advancing that timeline by a year, with the emissions-trading scheme now beginning on July 1, 2014. The move will reduce the cost of carbon from a predicted $25.40 (Australian), or about $24.40, per tonne in July next year to an estimated $6 (Australian), or $5.76, per tonne, Rudd said.

"This is the fiscally responsible thing to do," Rudd told reporters in the northern city of Townsville. "The nation's 370 biggest polluters will continue to pay for their carbon pollution, but the cost will be reduced, meaning less pressure on consumers."

Spending cuts to cover budget shortfall

The move is expected to save Australian households an average of $380 (Australian) a year, Rudd said. The savings would largely be in the form of lower energy bills.

The government will make up for a predicted $3.8 billion (Australian) shortfall in the federal budget with spending cuts, including scaling back funding for some environmental programs.

The carbon tax was enacted under the previous prime minister, Julia Gillard, who was ousted by Rudd last month in an internal Labour party coup. Rudd had been ousted as prime minister by Gillard in her own internal coup three years earlier.

Under Gillard, Labour looked set for an overwhelming defeat at this year's elections. But recent polls suggest the race has tightened since Rudd took back the reins. Gillard had set elections for Sept. 14, though Rudd can hold them between August and November. He has refused to publicly announce a date, though said "there's not going to be a huge variation" from Sept. 14.

Coal makes Australia one of world's worst emitters

Gillard pushed through the carbon tax in a bid to gain needed support from the minor Greens party, despite a campaign promise not to do so. The government defended the move as a necessary weapon against climate change. Australia is one of the world's worst greenhouse gas emitters per capita because of its heavy reliance on massive coal reserves to generate electricity.

But the backlash from the public was intense, with some dubbing Gillard "Ju-liar." Conservative opposition leader Tony Abbott has repeatedly hammered Labour over the tax, using it to paint the ruling party as untrustworthy.

On Tuesday, Abbott criticized Rudd for saying the government was terminating the tax.

"All he's done is simply brought forward Julia Gillard's carbon tax changes by 12 months. He's not the terminator — he's the exaggerator. He's not the terminator, he's the fabricator," Abbott told reporters in the island state of Tasmania. "He's changed its name, but he hasn't abolished the tax. All he's done is given Australians one year only of very modest relief."