We explain what a carbon tax is and how it will affect the nation's economy and more importantly your pocket

With almost 3000 people rallying outside Parliament House in Canberra yesterday to protest against a carbon tax we take a look at what it actually means for Australians.

Wednesday's rally followed an 8000-strong pro-carbon tax rally of environmental activists recently in Melbourne.

With the issue generating hysterical political debates and sharply dividing the Australian electorate, we explain what a carbon tax is and how it will affect the nation’s economy and people’s pockets. (For a related reading, http://au.news.yahoo.com/a/-/latest/8996115/carbon-tax-protest-targets-gillard/)

What Is Carbon Tax

A carbon tax is an environmental tax levied on the carbon content released by burning fuels like coal, petroleum and natural gas.

Carbon atoms present in fossil fuels are released as carbon dioxide when they are burnt. A carbon tax is implemented by taxing the burning of these fuels - specifically coal, petroleum products such as gasoline and aviation fuel, and natural gas.

The taxing is in proportion to the carbon content of the fuels.

A carbon tax is considered environmentally friendly and economically viable as it increases the competitiveness and value of non-carbon technologies such as wind, sunlight and hydropower and also raises revenues. (For a related reading, http://au.finance.yahoo.com/news/Carbon-price-cost-275-ERAA-aap-651690052.html)

The federal government under Prime Minister Julia Gillard plans to introduce a price on carbon emissions from July 1, 2012.

The scheme would involve a yet-to-be-determined price on a tonne of carbon emissions from July 1, 2012, followed by an emissions trading scheme (ETS) with a flexible price in three to five years.

Carbon Tax: The Good, The Bad & The Ugly

There are various schools of thought on the effect of carbon tax on the Australian people and the economy.

Manufacturers say the introduction of carbon tax will harm the industry and entrench Australia's dependence on resources.

Bluescope Steel chief executive Paul O'Malley said a high Australian dollar and higher interest rates were creating a tough environment for the manufacturing, education and tourism sectors as Australia rises on the back of the resources boom.

"Throwing a carbon tax on top of that basically says no we don't want to be anything but a resources economy," he said.

There are also fears that bills will leap after the tax is introduced. There have been estimates that the average household power bill will increase by about $300 a year.

The government has assured households they will be compensated for any price increases. Ms Gillard said Australians can "expect to see a generous assistance package", but she says it is too early to know how much it will be worth. (For a related reading, http://au.finance.yahoo.com/news/Carbon-pricing-cost-aap-2229476623.html)

A visiting European Union carbon price expert has also assured that people would see little impact on their cost of living under the scheme.

Jill Duggan, a carbon price expert from the EU's Directorate-General for Climate Action, said the scheme has created more jobs for the 500 million people in European countries who have lived with an emissions trading scheme since 2005.

Duggan said it was easier to implement than first feared.

Duggan said Australia had the chance to invest in sustainable energy systems such as solar to actually increase employment.

Environmental groups see carbon tax as a step in the right direction to controlling global warming and fighting climate change.

A report says billions of dollars raised by Australia's carbon tax will end up overseas, helping poor countries battle climate change.

Ms Gillard's new tax will be used to allow Australia to meet its share of a $100 billion-a-year United Nations fund to transfer wealth from rich countries to help undeveloped nations adapt to global warming. (For a related reading, http://au.finance.yahoo.com/news/Govt-weighs-carbon-tax-ad-abc-554962952.html?x=...)

What The Public Thinks

The carbon tax plans have hit consumer confidence, which has fallen in the wake of the proposal's announcement.

The Westpac-Melbourne Institute measure of consumer sentiment dropped 2.4 percent in March with concerns about the federal budget and tax issues considered the major issues at play for the drop. It now sits at its lowest level since June last year.

But the general economic outlook remains good, with respondents increasing upbeat about the economy over the coming 12 months.

The Politics Of Carbon Tax

Opposition Leader Tony Abbott has made his anti-carbon tax stance clear many times. He has also slammed Ms Gillard for going back on her campaign promise to not introduce the tax.

He maintained a carbon price would be "great big new tax on everything", while shadow environment spokesman Greg Hunt said Ms Gillard had twice before the election unambiguously ruled out a carbon tax under her Government.

"It now looks like Julia Gillard is opening the door to a plan by Labor's partners, the Greens, for a carbon tax," he said. (For a related reading,http://au.finance.yahoo.com/news/PM-denies-business-left-abc-497322168.html?x=0)

I have notice how all the liberals have keep away from this thread


Whats wrong don't you lot like the truth?

So, how is a Carbon Tax going to actually reduce Carbon emission, in OZ, let alone the rest of the planet, without making the Disposal Income of most taxpayers disappear?