Carbon tax to hurt cashflow, help investment

There has been a mixed response to the Federal Government’s controversial carbon tax plan, which could see small businesses paying a fixed carbon price for five years from mid 2012.

Prime Minister Julia Gillard recently announced the outcome of the multi-party climate change committee, which involved government, Greens and independent MPs proposing a fixed carbon price from July 1 next year.

The system would run for three to five years before being superseded by a cap-and-trade model, also known as an emissions trading scheme.

The prime minister said every cent raised from the scheme would go towards assisting households and businesses to manage the transition and to fund climate change programs.

Under the fixed system the carbon price would increase annually at a pre-determined rate. The scheme would not apply to agricultural emissions and it is uncertain whether fuel would be included.

The carbon price is yet to be confirmed and federal climate change minister Greg Combet said businesses would be notified in advance.

During the 2010 election campaign Gillard promised there would be no carbon tax under a Labor government and opposition leader Tony Abbott has labelled the proposal an “utter betrayal” of the Australian people.

Abbott said the scheme would push up the average family’s power bill by $300 a year and fuel prices would increase by 6.5 cents a litre.

The Business Council of Australia says businesses will lack the certainty needed for future investment until further details, such as the scale of the carbon price and transition arrangements  are released.

Australian Industry Group chief executive Heather Ridout says lack of detail about the scheme means “the sharp end of the debate is yet to come”.

“These missing details will impact on key questions such as the continuity of electricity supply and preventing the erosion of competitiveness for large and small business,” she says.

The Australian Chamber of Commerce and Industry slammed the plan, saying was a blow for the competitiveness of Australian business, particularly SMEs.

The Australian Food and Grocery Council also expressed concern, saying any carbon price must not harm competitiveness of export and import industries.

Anna Skarbek, executive director of ClimateWorks Australia, says having a carbon price in the economy makes a huge difference to investors and organisations wanting to undertake emissions reduction activities.

“We need a carbon price to encourage larger scale investments,” she says.

Freddy Sharpe, chief executive of Climate Friendly, congratulated the government for “showing some backbone” with its carbon tax.

“The government should directly encourage energy efficiency and land-based carbon capture. Let new technologies and businesses bloom. Let old technologies and businesses change or move out of the way,” Sharpe says.