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Carbon tax divides Australia

Protesters hold a banner against Australian Prime Minister Julia Gillard during a rally against a carbon tax in central Sydney July 1, 2011

The tax proposals have led to protests

By Phil Mercer
BBC News, Sydney

Australia's Prime Minister Julia Gillard is facing a fight to the political death over a carbon tax that has split the nation.

Five hundred of Australia's worst polluters will be forced to pay AU$23 ($25;£15) for each tonne of carbon dioxide they emit under a scheme lauded by environmentalists as historic but condemned as economic madness by conservatives.

The Gillard blueprint aims to cut emissions by at least 5% of 2000 levels - or 160 million tonnes - within a decade. Multi-billion dollar compensation packages for businesses and tax cuts for households are an attempt to sweeten Australia's most comprehensive economic reforms this century.

The sweeteners should secure legislative approval - but only just, thanks to crucial from a handful of independent MPs and the Greens that gives the Labor government the slimmest of parliamentary majorities.

Ms Gillard is to spend two weeks travelling the country on an election-style road trip selling the pollution levy to a largely sceptical public. If she fails to convince the people, the fate of her government at the next election seems assured.

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