Carbon price too high: industry concerned

Five hundred of Australia’s biggest polluters will pay $23 per tonne of carbon emitted from June next year, according to the government’s climate package revealed yesterday by Prime Minister Julia Gillard.

Industry is concerned not only that this tax is too high, but also that many more Australian businesses will end up paying the fee beyond the 500 companies initially planned.

Gillard’s government plans a starting price of $23 a tonne from July 1, 2012, rising to around $29 by the time an emissions trading scheme is installed in 2015.

The plan aims to reduce carbon emissions by 160 million tonnes by 2020, or 5% below 2000 levels.

Companies that produce 25,000 tonnes of carbon dioxide per year or more will be penalised, although certain industries will be exempt, including agriculture and forestry.

“We generate more carbon per head than any other people in the developed world,” Gillard said.

“We’re about the run a marathon and we’re starting a few kilometers behind the start line. We’ve got a lot of work to do to hold our place in the race that the world is running.”

Australia’s largest industry representative and government adviser, the Australian Industry Group (Ai Group), claims the $23 starting price is too high, and will damage Australia’s competitive on a global footing.

"Today’s package is complex and raises many questions which we will need to examine closely in consultation with our members,” said Ai Group chief executive, Heather Ridout.

“At first glance, however, our evaluation suggests that large parts of industry will be underwhelmed and will remain deeply concerned that their competitiveness will be damaged. 

This is especially so in these very uncertain economic times when manufacturing in particular is experiencing extremely stressful economic conditions.”

The government has attempted to address industry issues through its carbon package, however it still falls sort in a number of important areas, Ridout said.

Ridout’s advice to government:

  • The measures providing transitional support to trade-exposed businesses need to be strengthened;
  • The initial price of $23 is excessive and should be reduced; and
  • There is no plan for cleaning out the existing array of inefficient and costly greenhouse gas abatement measures.

Other concerns for industry:

  • Some exporting and importing businesses are expected to pay almost 2.5% of revenue in carbon taxes, reducing their margins significantly.
  • A new focus on R&D investment grants doesn’t cater for companies expanding off the back of existing ideas.
  • The $23 a tonne – suggested by The Greens at the last election – could rise to above global levels by 2012–13. 
  • There is already a number of state-governed carbon reduction measures in place, which the federal government does not plan to eradicate with the onset of the carbon tax.

The Ai Group has helped the government come up with a number of measures to dull the pain of the climate package, including $300 million for the steel manufacturing industry, the Clean Technology Food and Foundries Investment Program which provides $150 million over six years; the Clean Technology Innovation Program, the Technology Investment Program, and the Clean Energy Finance Corporation.

There is also a number of investment write-offs for small manufacturers.

“While this assistance is welcome, the design of the measures needs to be improved,” said Ridout.

"Ai Group will continue to seek improvements to this package, and consult closely with our member companies in the coming months as the package moves through the Parliament and the review processes."

Though the bulk of the manufacturing industry is against the carbon tax, Australian emissions are expected to keep rising in the future – especially since our economy relies heavily on local coal mining.

Regardless of rising emissions, federal opposition treasury spokesman Joe Hockey is warning the Coalition that if it wins the next federal election, it will be obliged to abolish the carbon tax to support those voters that supported it through the election.

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