The National Development and Reform Commission (NDRC) manages China’s economic system and formulates development policy. It determines China’s level of activity in overseas investment markets, and it approves major infrastructure projects.

The NDRC is the successor to the State Planning Commission (SPC), which ran China’s centrally planned economy from 1952 until 1998. It reports directly to China’s highest executive body, the State Council of the People’s Republic of China.

Strange, then, that the NDRC has negotiated a “memorandum of understanding” on future resource development opportunities in Australia not with Prime Minister Julia Gillard but with the premier of the state of Western Australia, Colin Barnett. The MOU executed in mid-September establishes an annual meeting among WA and Chinese officials, an “investment facilitation working group” that will discuss key sectors and industries, including resources, resources-related technologies, energy, agriculture, machinery, chemicals and infrastructure.

China has been and will continue to invest in Western Australia’s resources; what’s unique about this arrangement is that the NDRC sought out the deal and negotiated it over the course of 12 months–and that Premier Barnett felt sufficiently empowered to set his state’s course independent of the federal government. In his words, “Western Australia’s economic development is not focused on what happens in Canberra. It is focused on what happens in Asia.”

Mr. Barnett in no uncertain terms noted that the willingness of the NDRC to deal directly with WA was a sign of the Middle Kingdom’s anger and resentment toward the federal government over its proposed mining tax. The Minerals Resource Rent Tax (MRRT) is a proposed 30 percent levy on “super profits” earned from mining iron ore and coal in Australia. China is the biggest buyer of Australia’s stores of those two commodities.

Ms. Gillard no doubt owes her prime ministership to the controversy that surrounded her predecessor Kevin Rudd’s introduction of what was to be a 40 percent tax on not only iron ore and coal but gold, nickel and uranium mining, too, and sand and quarrying activities. A season of dueling TV ads resulted in Mr. Rudd’s ouster and Ms. Gillard’s ascendance. The reworked “mining super profits” tax now targets the two resources China needs most from Australia, and the fallout, including this stunning work-around maneuver by a state premier, will almost certainly end with another new Australian prime minister.

Although recent polling suggests a plurality of Australians support the 30 percent mining tax, Ms. Gillard’s standing with Australians has been in steady decline; according to recent polling conducted by Newspoll for The Australian, the percentage of voters “dissatisfied” with Ms. Gillard has spiked to 68 percent. Mr. Rudd is preferred as Labor leader by 57 percent to 24 percent.

Ms. Gillard has said she’ll remain in office until the next election, which must take place by late 2013. The poll of 1,152 voters shows the right-leaning Liberal/National coalition led by Tony Abbott would win office if an election were held now, with Mr. Gillard’s Labor the first choice for only 27 percent of voters. Mr. Abbott and his surrogates have said the coalition would “demolish” the MRRT and “decimate” a proposed carbon tax by introducing benefits to be paid to taxpayers to offset the effects of the AUD23 per tonne levy.

The Carbon Tax Down Under

“It will provide business and investors with the certainty and confidence that they require to make long-term decisions about the future allocation of their capital.” That’s the reaction of Australia’s Institute of Chartered Accountants to the federal government’s proposal to put a price on pollution.

Reaction from some leaders in affected industries–in February 2011, when the plan was first introduced, and in mid-July, when Prime Minister Julia Gillard fleshed out final, critical details–hasn’t been so clinical. But if American experience is any guide, this particular set of environmental regulations–even if enacted, which is far from certain at this point–won’t be as debilitating  business as some interested observers would have you believe.

The wisdom of the Land Down Under assuming a leadership role on an issue of planetary scale is questionable, particularly considering the impact it will have on industries that have driven the country’s economy for a decade. But in whole Australia’s “Clean Energy Plan” seems relatively benign.

Beginning Jul. 1, 2012, Australia’s 500 biggest polluters will pay a tax of AUD23 (approximately USD24.65) per metric ton of carbon emitted. The carbon tax will rise by 2.5 percent per year before Australia transitions to the largest cap-and-trade scheme outside Europe in 2015. The market will then set the price of carbon emissions and emissions credits.

The carbon permits part of the plan is based on the global theory that because greenhouse gas emissions move around the earth at high altitudes, it doesn’t matter where emission reductions take place as long as fewer greenhouse gases enter the world’s atmosphere. As businesses reduce their output the price they pay for permits will decline, theoretically incentivizing investment in energy efficiency.

The government has set aside AUD9.2 billion over the first three years to help industries adjust to the new tax, including AUD5.5 billion for upgrading coal-fired power plants that aren’t closed down; AUD1.3 billion for coal mines to target high-methane emissions; and an additional AUD1.3 billion to create jobs at the mines most affected by the tax.

High-emission exporters, such as steel, aluminum and pulp and paper makers, will get free carbon permits to help them through their pollution abatement period. The steel industry, which will receive funding from the AUD9.2 billion “Jobs and Compensation” package, was granted an additional AUD300 million in “adjustment payments.”

The government will buy out and close down the worst coal-fired power plants, which in total have an output capacity of 2,000 megawatts of electricity, including the controversial Hazelwood power plant in Melbourne, Victoria, reputed to be the least carbon efficient power station in Australia. A AUD10 billion Clean Energy Finance Corporation will be established to invest in new energy technology. And AUD3.2 billion is earmarked for the Australian Renewable Energy Agency.

Fuel for most business and personal transportation is excluded from the carbon tax, but owners of heavy transport vehicles will start paying the tax in 2014. The government originally planned to impose a carbon tax on automobile fuel but later decided it would be a politically risky issue. Domestic aviation fuel taxes will be increased by an amount equal to the carbon tax. Agriculture isn’t subject to carbon pricing.

Average assistance to households under the plan is forecast to offset the cost-of-living increases that will result as carbon-tax-paying polluters pass on costs to customers. This will form the cornerstone of Ms. Gillard’s defense of her Clean Energy Program, which as of this writing faces considerable public opposition.

The carbon tax, should it be enacted, will land squarely on coal-fired power plants that produce 77 percent of the country’s electricity and iron and mineral mining companies that account for 35 percent of Australian exports.