Burning fossil fuels causes real damage. It drives more extreme heat, droughts, floods and fires, raises insurance costs, harms health, and puts pressure on household budgets and public services. These costs don’t disappear – they show up in higher bills, higher taxes, and greater risks faced by communities.
Right now, most of that damage is paid for by the public, not by the companies that cause it. That’s unfair – and it leaves households carrying the costs of pollution they didn’t choose.
The Polluter Pays Levy
The Polluter Pays Levy is a simple, efficient, and effective policy for reducing carbon emissions. It would improve welfare, provide a clear investment signal across 80 per cent of the economy, and raise $22.6 billion a year that can be used to support households and strengthen the budget.
Policy Overview
A levy on the carbon content of fossil fuels, charged at the point of extraction or import.
The PPL covers ~80% of emissions by targeting just ~140 Australian sites (fewer than 60 companies), plus imports.
Cuts pollution faster – reaching around 100 million tonnes
of additional annual abatement in 2036, compared with current policies
Increases efficiency by simplifying a patchwork
of inefficient schemes
Raises substantial public revenue
A PPL raises an average of $22.6 billion per year (2026–2050)
~50% of revenue to be returned to the public in the first
10 years, including:
- Household Energy Compensation Payment (average $4.1bn/year):
A universal quarterly payment to all households designed to fully cover conservative estimates of energy bill increases. Payments will average $330 per year through to 2050. - Household Support Package ($4bn/year):
Targeted funding for the first decade to assist those most exposed to general price pressures, including low-income earners and the ~60% of households facing barriers to electrification (such as renters). Payments would range from $490 to $1,300 per year depending on targeting. - Small Business Energy Compensation Payment ($325m/year):
Extends current energy bill relief with a $325 annual payment to roughly 1 million small businesses. Value to be reviewed after 5 years.
Ingrid Burfurd
Economic Research Director
Dr Ingrid Burfurd is an economist who has worked on public policy in the Victorian public service and academia. Before joining TSI she was a Senior Associate at the Grattan Institute.
