Carbon Tax – What It Means to Your Business

By on June 26, 2012

BRUCE McCLURE, General Manager of the CMPA reports on what the Carbon Tax will mean to your business.

AS all Australians are aware the Carbon Tax comes into operation on the 1 July 2012. The impact on business is obviously not known at this stage but various authorities including the Federal Government have varying opinions on what it will mean and what the impact will be on businesses.

This article does not comment on the rights or wrongs of the tax but will only be commenting on the likely impact on our members businesses.

Organizations such as the Victorian Employers Chamber of Commerce and Industry (VECCI) have held seminars around Victoria where the likely impacts on business have been discussed and they have tried to give an indication of likely impacts.

From the 1st July 2012 approximately 300 of the biggest emitters of carbon pollution (carbon dioxide, methane, nitrous oxide and perfluorocarbons from aluminum smelting) will be required to pay, via a permit system on every tonne released into the atmosphere, an initial tax of .$ 23 per tonne.

This tax is to be indexed to inflation and will rise to around $24.15 in 2013-10 and $25.40 per tonne in 2014-15 depending upon inflation. From the 1st July 2015 the price paid per tonne will be set by the market via a cap and trade system.

Most companies operating large emitting facilities will be liable, that is, those who generate over 25,000 tonnes of CO2-e emissions each year. The numbers of emitters is largely based on emissions data reported under the National Greenhouse and Energy Reporting (NGER) Scheme.

A price on carbon will not apply to fuel for household transport, light vehicle business transport and off -road fuel used by agriculture, forestry and fisheries. A carbon price will however, be applied to domestic aviation, domestic shipping, rail transport and non transport use of fuels.

The Government has also foreshadowed that there will also be an application of a carbon price on heavy on-road transport from the 1 July 2014. All extractive industry businesses will need to keep a close watch on fuel prices and its impact on their costs.

A number of new federal government bodies will be established and funded to oversee the carbon tax implementation, including a Climate Change Authority, which will advise the government on carbon tax implementation and a Clean Energy Regulator, established to administer the scheme.

In addition a newly formed Clean Energy Finance Corporation will invest $10 billion dollars over 5 years in new clean energy technology, while the Australian Renewable Energy Agency will consolidate $3.2 billion in existing federal programs to fund renewable energy projects. There are also a number of other compensation and development funds focused on biodiversity, low carbon agriculture, small business grants and support for indigenous communities.

VECCI has identified the following cost increases to your business as a consequence of the carbon tax. This is based on Government modelling and other available data and should be taken as an indication only. The anticipated cost increases for resources are Electricity 30%, Gas 15%, Water 0.5-1.5%, Steel 0.5-2.0%, Aluminium 0.5–2%, Concrete 0.5–5%.

Please note that, for the example above, the carbon tax will contribute to electricity price rises by approximately 10% and it is important to understand the origin of rises if attributing price increases to the carbon tax. However, discussions with a licensed electricity retailer has indicated that the electricity price rise for some commercial and larger industrial customers may be a lot higher than 10% and the actual percentage increase will not be known until after your next electricity bill arrives. The impact on other areas such as Fuel, Waste, Chemicals, and Paper are unknown at present.

The ACCC has been directed by the Australian Government to undertake a compliance and enforcement role in relation to claims made about the impact of the carbon price.

The ACCC’s role includes:

  • informing and educating businesses, including through issuing guidance, about their responsibilities under the Act in relation to these claims
  • raising awareness amongst consumers about their rights under the Act
  • investigating and, where appropriate, taking action against businesses who engage in practices that contravene the Act.

The ACCC’s focus is to ensure businesses do not make misleading claims about price increases as a result of the carbon price. The ACCC does not have a role in formally monitoring, setting or restricting price increases linked to the carbon price and cannot prevent a business from putting up its prices as a result of the carbon price.

Some businesses may choose to absorb additional costs associated with the carbon price, while others may choose to pass additional costs on to customers by increasing the price of their goods and services.

If a business tells you its prices have gone up due to the carbon price, the business has a legal obligation to ensure this is not false, misleading or deceptive and should seek to ensure its claim is right.

Businesses are allowed to increase their prices but when businesses claim that their price rises are linked to the carbon price, the law states they must not mislead. This is the same for any claim about a price increase.

If you intend to raise your product prices due to the introduction of the Carbon Tax then be very careful about the amount you intend to raise your prices by and it make it very clear what your price rise is attributed to.

The ACCC is watching the Carbon Tax issue closely and in the worst case scenarios will be seeking court- imposed penalties of up to $1.1 million for serious breaches or injunctions to stop a business from making certain claims.

Now that the Carbon Tax is in place and now applies to all businesses, there obviously will be considerable monitoring and comment from many sources. The CMPA will keep members up to date and provide information on relevant costs and other issues arising as soon as they are known.

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