A carbon pricing scheme (CPS), commonly termed as a 'carbon tax' was introduced by the Gillard Government in 2011 and came into effect on 1 July 2012.Under the legislation, the biggest carbon-emitting companies in Australia would pay a price for each tonne of carbon.Then Opposition Leader Tony Abbott termed the intended tax as a "toxic tax from a government with the Midas touch in reverse". Gillard's CPS was in operation until it was replaced on 17 July 2014 by the Abbott government.

1. Has the carbon pricing scheme been an adequate measure to correct the market failure and reduce CO2 emission. ?
2. What is the socially optimal level of output and price of the carbon content of fuels ?
3. Prime Minister Gillard also proposed that Australian households would be handed more than $15 billion in compensation to help offset the impact of the carbon tax. How would this compensation stimulate the output, employment, and price level?