Asian carbon tax debate set to warm up

Business groups and the mining industry also believe the tax is flawed. They argue it will cost Australia valuable resource contracts, which will go instead to emerging resource states in Africa and South America.

"Australia has lost its manufacturing, all but lost its agriculture, tourism is gone and pretty soon, we will lose our mining industry. The carbon tax is the final nail in the coffin," said Bob Katter, an independent member of parliament from north Queensland.

Prime Minister Julia Gillard has dismissed the critics, saying the tax will be "good for Australia and Australians", while Tony Wood, energy program director with the Grattan Institute, an independent Melbourne-based public policy think tank, believes much of the criticism against the carbon tax is "overstated".

A carbon tax will have only a minor impact on costs and competitiveness - much smaller than other factors, such as exchange rates, labor market costs and fuel prices, said Wood, arguing that "Many industries will pass on their costs to their customers".

And some businesses have already signaled higher prices. The Australian national carrier Qantas has said it will charge passengers between $1.82 and $6.86 extra on a one-way ticket to cover the cost of the carbon tax.

Shane Oliver, chief economist at the investment company AMP Capital, also believed the economic impact of the tax is unlikely to be large. "Over time, with a price put on carbon pollution, investment in clean energy and growth in clean industries will likely offset reduced investment and slower growth in dirty-energy sectors.

"Businesses and households will use the price signal from the carbon price to reduce energy consumption," he said.

The government will spend half the revenue earned by the tax to compensate households for higher electricity and other living costs that polluters pass on. Another 40 percent of the revenue will be used to help industries lower their costs by switching to cleaner forms of energy, if they face competition from untaxed foreign competitors.

About A$10 billion will be invested over five years in wind, solar and other renewable energy sources and Australia aims by 2050 to cut its emissions by 80 percent from the levels recorded in 2000.

A study by the Tokyo-based Asian Development Bank Institute estimates that Asia currently accounts for 27 percent of the world's energy-related emissions, a figure that is likely to increase to 40 percent by 2030.

The ADBI said that Asia's urban population is expected to double by 2050 from the current 1.6 billion people living in urban centers.

Asia is now at a crossroads in its development, concluded ESCAP in its Low Carbon Green Growth Road Map for Asia and the Pacific report. It said that while high levels of economic growth have lifted millions out of poverty in recent years, the region's political leaders will need to rethink their strategies if growth is to be maintained.