FACTBOX-How Australia will ease costs of carbon trade

March 10 (Reuters) - Australia plans to auction carbon permits to 1,000 of the country's biggest companies, covering 75 percent of national greenhouse emissions, under its emissions trading system due to start from July 2010.

Following is a brief description of how much the government expects to raise from selling permits, and how the money will be spent to help ease the costs to business and consumers.

Legislation for the scheme was released on Tuesday.

HOW MUCH WILL IT COST?

The government will allow the market to set the price of carbon, but expects the initial price to be around A$25 ($15.80) per tonne.

The carbon price will be capped at maximum A$40/tonne, rising at 5 percent a year above inflation, to provide a further safety valve in the early years of the scheme.

WHAT IS THE ECONOMIC IMPACT?

The government says it expects emissions trading to only trim 0.1 percent from average economic growth from 2010 to 2050, with a one off rise to inflation of around 1.1 percent, based on a carbon price of arounds A$25/tonne.

Average household energy costs will rise A$4 a week for electricity and A$2 a week for gas and other household fuels.

HOW MUCH MONEY WILL BE RAISED?

Based on a permit price of A$25, the government expects to raise around A$11.5 billion in 2010-11, and A$23.5 billion over the two year 2010-11 and 2011-12.

The government says every cent will be spent to help households and business adjust to the cost of the scheme.

HOW WILL THE MONEY BE SPENT?

Over the first two years, A$9.9 billion will go to householders, through higher pensions and welfare payments, targetted assistance, and tax cuts and rebates.

A$4.3 billion will be spent on fuel tax adjustments to householders, agriculture, fishing and heavy road transport businesses, and for liquefied petroleum gas, compressed natural gas and liquefied natural gas users.

A$2.15 billion will go to community organisations, businesses, workers and regions through a special Climate Change Action Fund.

A$7.4 billion worth of carbon permits will be allocated to help strongly affected industries, including the electricity sector and emissions-intensive trade-exposed industries.

HOW WILL MAJOR TRADE-EXPOSED INDUSTRIES BE HELPED?

Assistance is available for coal-fired electricity generators with emissions intensity above 0.86 tonnes of carbon dioxide-equivalent for every megawatt hour of electricity generated.

Major emitting trade-exposed industries (producing 2,000 tonnes or more of carbon dioxide-equivalent for every A$1 million in revenue) will receive 90 percent of permits for free.

Likely industries to receive 90 percent of free permits are aluminium smelters, cement clinker producers, lime, silicon and iron and steel manufacturers.

Other trade exposed industries, which produce between 1,000 and 1,999 tonnes of CO2-equivalent for every A$1 million in revenue, are to receive 60 percent of permits for free.

Likey industries to receive 60 percent of free permits are alumina and petrol refiners and LNG producers.

The rate of assistance will be cut by 1.3 percent per year. ($1 = A$1.58) (Reporting by James Grubel; Editing by David Fogarty)

Source: http://www.reuters.com/