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Impact of the carbon tax on Australian business and economy

Could the carbon tax generate more green jobs?

The federal government's carbon tax may be controversial, but it could offer opportunities as well as disadvantages.

Who is affected by the Carbon Tax?

Facing the full impact of the carbon tax in Australia will be the manufacturing industry, in which Wayne Swan, Deputy Prime Minister & Treasurer predicts 9 out of 10 companies will be negatively impacted.  950,000 manufacturing professionals claim that they are under pressure, due to the additional Carbon Tax on raw material and feel that they are unable to compete against international companies, who don’t have to pay the extra taxes.

Moreover, the Australian Trade and Industry Alliance have suggested that less than 10% of the 1.05 million professionals within the manufacturing industry will benefit from the Government’s new ‘Jobs and Competitiveness Program’, launched to help support business  affected by the Carbon Tax.  The Program will provide $9.2 billion of assistance over the first three years of the carbon pricing mechanism to safeguard jobs in industries which are heavy polluters, but also face strong international competition.  However critics are doubtful that this contribution will be adequate.

On the other side of the argument a spokesperson for Climate Change Minister, Greg Combet defends the new legislation; stating that the government's $9.2 billion ‘Jobs and Competitiveness Program’ has been designed to support industries, particularly manufacturing and alumina production and that 40% of revenue generated from the Carbon Tax is to be invested in business and industry to help them adjust and to encourage a switch to cleaner forms of energy.

What do other countries do?

The CRC Energy Efficiency scheme is a mandatory carbon emissions reporting and pricing scheme to cover all organisations using more than 6,000MWh per year of electricity.  Which has been put in place to address similar carbon issues as the Australian Carbon Tax, however it might be argued that there is no single industry which is under pressure and that there is a reduced burden on smaller businesses.

Significantly, the CRC Energy Efficiency scheme doesn’t threaten to produce job losses, and according to a report prepared by SFS Economics for the Australian Trade and Industry Alliance, the “European Union's carbon pricing scheme will likely protect 14.6 million manufacturing jobs with up to 100% free permits for 151 industry sectors – which amounts to 42% of EU manufacturing jobs.”

A mixed response

The Carbon Tax plan has drawn a mixed initial response. Even before it was announced, some of Australia’s biggest mining companies and banks had supported a carbon price. Other business leaders are more circumspect.

There are conflicting arguments and perceptions across industry, finance houses and government.  The world's largest aluminium company, Rusal own 20% of the giant Queensland Alumina Refinery and employs 72,000 people.  They are reporting that large scale projects, which provide hundreds of jobs, are having to be halted due to Carbon Tax.  Reputedly they are expecting to pay between $30 – 40 million in the first carbon tax year and over the next ten years, having to spend $400 million on carbon tax which John Hannagan, Rusal Australia’s Chariman, believes could be better spent on the expansion of the plant and future energy projects.

Contrary to this view, Elaine Prior, Director and Senior Analyst with Citi Investment Research, said the overall impact of the Carbon Tax is not expected to materially change the valuations of companies in the ASX200  and that it should not have a detrimental effect on the longevity of a company.

A move towards clean energy projects

Whatever your view, it is expected that the Carbon Tax will create a drive to a more sustainable future for Australia, and less reliance on fossil fuels.  The scheme which was passed in October 2011 is projected to cut 159 million tonnes of carbon pollution from the atmosphere by 2020 - the equivalent of taking 45 million cars off the road.

Tim Wilson, Director of the Institute of Public Affairs, believes that the biggest winner from the bill will be the green jobs sector:  “Under the new tax, the new Clean Energy Finance Corporation, which will be given $10 billion worth of funding to manage and invest in the deployment of clean energy alternatives.  If this new money is used correctly, it should provide a large boom for all green jobs in Australia”.

Christopher Ouizeman, Head of Allen & York Australia - Executive Search firm specialising in Mining & Minerals, Engineering and Environmental Recruitment comments that: “This initiative aims to help the movement towards a clean energy future; this will provide new employment opportunities for Australian workers – in clean industries such as renewable energy generation, carbon farming, and sustainable design”.

Sustainable Business Australia CEO Andrew Petersen, said the Carbon Tax package was “actually good news for the business community.” The most emissions-intensive, trade-exposed activities will receive assistance to cover 94.5% of industry average carbon costs in the first year of the carbon tax.

Benefits to the wider community

The revenue from the CRC, £1 billion a year by 2014-15, is being directly invested into public finances, including spending on the environment and similarly the Australian government plan to spend half the revenue from the Carbon Tax compensating households for higher electricity prices and other living costs that polluting corporations pass on.   The ‘assistance measures’ include a rise in the tax-free threshold from $6,000 to $18,000 and up to $338 per year extra for single pensioners.  In addition, all taxpayers with incomes below $80,000 will get tax cuts - most about $300 a year.

Companies will be forced to either innovate their existing technologies or continue to pay the high taxes on the amount of carbon they release.  There are certainly opportunities on the horizon for those that choose to embrace a sustainable future.  Allen & York Sustainable Executive Search specialists support companies looking to move towards a sustainable business model; we partner leading global corporations across; mining and resources, engineering, renewable energy, waste and recycling, environmental and sustainability management.   For more information please visit http://www.allen-york.com/australia