As under the CPRS, the carbon tax contains billions in compensation for business. In total there is $10.3 billion for business over the first three years, with compensation guaranteed until 2018.
Coal power stations alone will receive $5.5 billion in free permits and cash over five years, compared to $7.2 billion over ten years under the CPRS. This will result in windfall profits, as power companies pass on the cost of the carbon price and pocket the compensation.
Most of the compensation is likely to flow to heavy emitting brown coal generators. This means the government will spend hundreds of millions subsidising power stations like Hazelwood over the next few years, which could then get paid billions more to close after 2016.
Business sectors that had complained about the impact of the tax received special handouts—which will be funded from the budget not carbon tax revenue. The steel industry secured 94.5 per cent of its permits for free plus a $300 million package. Coal mining bosses got a $1.3 billion support package for “gassy” coal mines. As Bernard Keane wrote in Crikey, this represents, “an outrageous cave-in to the industry that is responsible, more than any other, for Australia’s contribution to global warming.”
As under the CPRS, trade-exposed industries get the bulk of the free permits—94.5 per cent for those considered heavy polluting and 66 per cent for the rest. Other industries can access some of $1.2 billion to buy new equipment to help them cut power bills. The failure of the scheme to challenge the big polluters is blinding.
