On this occasion, I wanted to find out who will be the most affected by this tax, established in July 2012. I am not an economist or business analyst, nor do I have any specific political persuasion regarding the carbon tax, rather, I have collated information from various sources, to bring it to you in a way that is easy to understand.
Emissions Trading Scheme
Many businesses must be wondering how this tax will impact their bottom line and if this, in fact, can be passed on to customers, whether it will be too much to justify within that framework, or even if it is beyond their control.
Carbon pollution emissions by big companies will be penalised and beginning at a rate of $23 per tonne. After three years, it will move to an Emissions Trading Scheme, where the market sets the size of the penalty.
What is Emissions Trading? The NSW Environmental Authority explains on their website, "Emissions trading is a market-based scheme for environmental improvement that allows parties to buy and sell permits for emissions, or credits for reductions in emissions of certain pollutants."
"Under such a scheme, the Environment Protection Authority (EPA) first determines total acceptable emissions and then divides this total into tradeable units (called credits or permits). These units are then allocated to scheme participants." www.environment.nsw.gov.au
So, who will be the hardest hit?
The big players
The carbon tax will hit about 500 of our largest businesses. The mining and manufacturing sectors will be most affected by the carbon tax.
BHP Billiton and Rio Tinto are some of the leading carbon emitters among the public companies in Australia. The amount of tax they are expected to pay is actually very small in contrast to the huge profits these companies make. Although, smaller mining organisations may not find it so easy to deal with the rise in operating costs. (www.switzer.com.au)
The airline industry is one of the biggest emitters of carbon dioxide, meaning Australia's two major airlines will be significantly impacted by the new tax. However, it is likely that the airlines will pass on most of their carbon tax costs to their clients with increases in ticket prices.
Companies that manufacture and supply building and construction will unquestionably feel the pinch of the carbon tax. The government has provided incentives for manufacturers to assist in making their operations more efficient and to research and create new lower-emitting technologies.
Utilities will rise but most companies are likely to pass on additional carbon costs to customers.
In terms of their massive profits, the carbon tax will have little effect on major banks. Interestingly, the banking sector is evaluated as one of the most environmentally conscious in Australia. Some experts are reporting that the financial services sector could even benefit from the introduction of the carbon tax.
In 2009, Seb Walhain, the global head of energy and commodities at Holland's Fortis Bank Nederland stated (of the carbon trading scheme in Europe), "Carbon soon will become part of the regular business for banks."
Agriculture and Farming
In theory, agriculture is exempt from the carbon tax. Realistically, it could cost farmers millions in the first year alone. Chief executive of the Tasmanian Farmers and Graziers Association Jan Davis said, "While diesel fuel used for road transport is exempt until after 2014, there is no exemption for diesel fuel used for shipping.
Business research and information provider IBISWorld says the annual cost to Australian agriculture will be $3.2 billion. A report released by the Australian Bureau of Agricultural and Resource Economics and Sciences found that dairy would be toughest hit because of its sizeable electricity use.
While farmers will not pay a carbon price as such, they are likely to be hit by higher electricity prices and transport costs, and lower prices for their produce as big food processors pass on their own carbon price costs. http://www.smh.com.au/environment/carbon-tax-to-hit-dairy-farmers-the-hardest-20111220-1p3yz.html#ixzz20vcT6JNx
Will it work?
While the outcome from the new system will not be known for years, much research has been conducted and gives us an idea of which companies will likely suffer the most from the carbon tax, and which will find it easy to pass on costs to consumers.
The Government is promising to financially alleviate and assist some of the impacted companies and businesses with a spread of billions of dollars. The question is, how much will be required? There are very valid and mixed thoughts on how the whole scheme will alleviate or reduce the greenhouse effect and we await the outcome. It remains to be seen whether voters will support the Government in this tax at the next election.
Belinda Croft is married to Russell and she has a son BJ, 11 years. She has a heart and passion for God, writing, creativity, mission and social justice.
Belinda Croft's previous articles may be viewed at www.pressserviceinternational.org/belinda-croft.html