The Carbon Tax will come into effect on the 1st of July 2012. The tax is designed to reduce greenhouse gas emissions by placing a price on the amount of pollution released by the biggest polluters in Australia.
Who will have to pay the tax?
The Clean Energy Regulator will name companies who meet a threshold of liability for greenhouse gas emissions. It was initially thought some 500 companies, councils and organisations would qualify, but it now appears that number will be closer to 400.
In an initial list released on the 4th of May, BHP Billiton, Rio Tinto, Loy Yang, TRUenergy, International Power, Alcoa and La Trobe University were among some 248 organisations named, including our client Onesteel. These entities will be required to pay a price for every tonne of CO2, nitrous oxide or methane they emit from July 2012. The full list can be found here.
What impact will this have?
Any impact on small or medium sized businesses will come indirectly via an increase in the cost of goods and services provided by emission-intensive industries. The Government anticipates that this cost will further be passed on to the consumer.
In an effort to quell fears of declining consumer confidence the Government will provide $14.9 billion in household assistance. Small businesses with less than a $2 million annual turnover will see their instant asset write off increased from $5000 to $6500 and be able to access grants related to energy efficiency information.
There are also six streams of industry assistance available for companies affected in emission-intensive industries like steel, oil and gas, mining and construction. There is a range of funding available from research into cleaner energy; to packages to assist with the competitive overseas market; and initiatives to protect Australian jobs.
How does it work?
The Government has set carbon pricing at a fixed rate for the first three years:
• From 1 July 2012, $23/tonne
• From 1 July 2013, $24.15/tonne
• From 1 July 2014, $25.4 /tonne
Thereafter the government will set an annual cap aimed at being consistent with Australia’s downward emissions trajectory. From July 2015 onward it will be possible to trade and auction carbon units. It is thought that for the three years following the fixed price period, there will be a transitional carbon price ceiling and floor to manage volatility. As this will be introduced in coming legislation it is hard to predict what financial impact there might be on businesses, households and the economy from July 2015.
What is a carbon unit?
A carbon unit must be surrendered to the Clean Energy Regulator for every tonne of CO2, nitrous oxide or methane emitted. Surrendering a carbon unit involves paying the carbon price:
Three types of eligible carbon units can be surrendered:
– Units issued by the Clean Energy Regulator
– Australia Carbon Credit Units (ACCUs) issued under the Carbon Farming Initiative. The Initiative allows the agricultural industry to create carbon credit units by actively reducing emissions, or by removing carbon from the atmosphere and storing it in soil or trees. These credits can be sold to liable local or international entities.
– International units – however the Government may disallow these if they are deemed ineligible on the advice of the CCA. These cannot be submitted until after July 1st 2015.
Please Contact Bayston Group if you have any questions about the Carbon Tax.