Australian Business Warns Of Carbon-Trade Costs
Date: 22-Aug-08
Country: AUSTRALIA
Author: James Grubel
The Australian government plans to introduce carbon trading by mid-2010 to help curb greenhouse gas emissions, blamed for global warming, with compensation for consumers and help for businesses facing higher energy costs.
But the Business Council of Australia, which represents the country's 100 top companies, said emissions intensive export firms would need much higher than promised levels of government compensation to remain competitive.
"This is a significant challenge for companies," BCA President Greg Gailey told reporters, adding companies would have problems once a carbon price reached A$20 (US$17.40) a tonne.
If carbon was priced at the current European price of A$40 a tonne, he warned that half the firms surveyed would either shut down, move offshore or have to review their operations, with earnings falling 32-63 percent.
The council analysed 14 big exporters in alumina refining and smelting, cement, paper and steel making, lead smelting, nickel and petrol refining, and coal, zinc, glass and sugar.
Australia is the world's 16th biggest carbon polluter, accounting for about 1.5 percent of global emissions, but produces five times more carbon pollution per person than China and is the fourth-largest per capita emitter.
Australia is planning one of the world's biggest carbon trading schemes that will force companies to buy permits to cover their emissions, putting a market price on carbon that will encourage firms to clean up their pollution.
Under the scheme, Australia's big polluting energy firms will receive 30 percent of carbon permits for free, with hefty initial subsidies for other big polluters to be slowly phased out.
Companies with more than 2,000 tonnes of emissions per A$1 million in revenue would pay for only 10 percent of total emissions, while companies producing 1,500-2,000 tonnes of carbon would pay for 40 percent of their emissions.
"We believe the government may have to delay introduction by a year because of the complexity of the program," said Mark Chellew, managing director of cement producer Adelaide Brighton Ltd. "We're going to argue for a soft start."
Rod Pearse, managing director of Australia's top building materials group Boral Ltd, also raised concern about the proposed phase-out of assistance to heavy polluters.
"There is some question on the phasing down of the level of assistance as carbon prices increase," Pearse told reporters. "We're not sure how quickly that level of support might fade."
Engineering contractor Leighton Holdings Ltd Chief Executive Wal King said it would cost A$6 million a year just to carry out an emissions inventory, but he did not think the trading system would have a significant impact on the company.
"The extra cost will be passed on to our clients or the taxpayers," he told reporters.
The Australian Conservation Foundation said the business council's plan would seriously undermine efforts to curb emissions and damage Australia's climate change credibility.
(US$1=A$1.15)
(Additional reporting by Sonali Paul and Miranda Maxwell)
(Editing by Ian Geoghegan)