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Carbon price primer: What does Australia's carbon price mean for businesses?

The Clean Energy Bill passed in 2011 and started in July 2012 states that the carbon price will be paid by liable entities, such as companies which have facilities that emit 25,000 tonnes or more of carbon pollution per year.  With this being the case, it has been found that around 500 entities will have mandatory liabilities under the carbon pricing mechanism.

To determine liability, the carbon pricing mechanism will draw on information reported under the National Greenhouse and Energy Reporting System, an established measurement system for greenhouse gas pollution developed under the Howard Government.

However, the carbon pricing mechanism will not apply to agricultural emissions and legacy emissions from landfill facilities.

So, if your organisation falls as a liable entity, the Bill calls for a fixed carbon price for three years, starting at $23 per tonne of carbon pollution.

This scheme does intend on providing a cap on carbon pollution within Australia. These caps are intended to guarantee reductions in carbon pollution and to more efficiently enable Australia to achieve the long term target of an 80 per cent reduction from 2000 levels by 2050, removing more than 17 billion tonnes of carbon pollution out of the atmosphere between now and 2050.

The Bill makes provision for the Australian carbon pricing mechanism to interact with credible international efforts to reduce carbon pollution. This gives liable parties access to a broader range of opportunities to lessen their payment amount, which helps contain costs and promote international action on climate change.  However, only robust, environmentally credible international units are allowed to be used for compliance.

Controversy of the Carbon Tax

There has been a mixed reception to the Carbon Price in Australia.  The opposition climate action spokesperson Greg Hunt is trying to reinvent economics and history to claim that a carbon price is unnecessary for the success of renewable energy in Australia. Hunt proclaims that “the new tax will raise every family’s cost of living; it will make every job less secure but it won’t help the environment”. Australia’s mining firms, airlines, steel makers and energy firms are among those expected to be hardest hit by the Clean Energy Bill and are most likely to agree with the views of the opposition.

Meanwhile, it has also been argued by a group of almost 300 Australian businesses, called Businesses for a Clean Economy, that the carbon price scheme will drive innovation and keep the country internationally competitive. Responding to Greg’ Hunts views that the Carbon Tax will raise the cost of living; the Treasury estimates the carbon tax will only add about 0.7 per cent to consumer prices in 2012-13 and that there are compensation packages in place worth $AUD15 billion over the first four years that will be delivered in the form of tax cuts and welfare and pension increases.

The impact on jobs

The Government proclaims that there is nothing more important to families than having a job. It intends to take special measures to support jobs and keep Australia competitive internationally. Therefore, it has been suggested that there will be provision for certain industry assistance measures, which will ensure that Australian industries are in the best position possible to manage a smooth transition to a clean energy future.

The Jobs and Competitiveness Program will assist emissions-intensive, trade-exposed industries in making that transition to a low-emissions economy, while protecting Australian jobs and competitiveness. It will allocate around 40 per cent of the revenue raised by the Carbon Bill mechanism to this purpose. It will aim to underpin a successful energy market transition and maintain investment in new energy sources and infrastructure.  The good news is that the Government will seek to close around 2000 megawatts of highly polluting generation capacity by 2020.

The writer, Victoria Kenrick works at Allen & York, a leading Energy Recruitment Consultancy that is particularly focused on Renewable Energy, Low Carbon and Climate Change, as well as Sustainability, BREEAM and Waste to Energy.

For more information on Allen & York, click here.

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