Inflated carbon price could hinder manufacturing

Small to medium size manufacturers could be hard hit by the Government’s plan to start the pricing of carbon at $23 a tonne from July 1, 2012, approximately $5 higher than the world price at around $18.

The Australian manufacturing industry has long fought for a low introductory carbon price to ease the impact of a carbon tax will bring to the local industry and its workers.

However the $23 a tonne starting price set by the Government, which is expected to rise to around $29 by the time an emissions trading scheme is implemented in 2015, is considered too high by some industry leaders and could lead to an inflated carbon market.

Priced significantly higher than New Zealand’s carbon price of $9 per tonne – which is half the value of the approximate world price – and $13 higher than Australian Industry Group (Ai Group)’s advised $10 per tonne, its is nevertheless, less than Professor Garnaut’s advised $26 a tonne.

While climate change experts say a $10 carbon price would be way too low to drive and innovate change, the lower price would have eased the impact stemming from a carbon tax but placed businesses at a higher risk when the prices rise to $30 or $40 to meet targets.

According to Ai Group chief executive Heather Ridout, the calls for a low $10 per tonne carbon price was aimed at assisting industry transition and adjust to a carbon price as the full impacts of a carbon tax remains unclear.

But the while the debate around the price for carbon could continue without no end, one thing local manufacturers can agree upon is the viable and lucrative future Australia has in renewables.

The transition from zero carbon price to $23 per tone carbon price could see companies go out of business while others grow from expanding into the renewables markets.

Regardless, an expected 170,000 jobs is set to be lost from manufacturing over the next 10 years even without the introduction of a carbon price due to the ongoing structural change in Australia’s manufacturing sector.

This, Ridout explained, is why Ai Group has pushed for a lower carbon price – to start the industry off slow and to make sure the transition arrangements are in placed – and to ensure that the sector is strong enough survive these major changes.