Australia's Carbon Price - A brief overview
WHAT IS IT?
The carbon price is a price placed on every tonne of carbon dioxide equivalent (CO2-e) emissions released by Australia’s biggest polluters.
Approximately 500 businesses will be required to pay for their pollution. It is meant to create a financial incentive to reduce CO2-e emissions, to encourage investments in renewable energy such as solar and wind, and to promote the use of cleaner fuels such as natural gas.
Australia’s carbon price mechanism is separated into two phases: a fixed price and a flexible price. The fixed price phase will run from 1 July 2012 to 30 June 2015. The flexible price phase, also called the cap-and-trade emissions trading scheme, will take effect from 1 July 2015.
The carbon price will apply broadly to the following sectors of the Australian economy: stationary energy, industrial processes, nonlegacy waste and fugitive emissions (other than from decommissioned coal mines).
For the transport sector, an equivalent carbon price will be applied through separate legislation, for example, the fuel tax credit (FTC) scheme – where there may be reductions in fuel tax credits, or in the case of domestic aviation fuel use – an increase in fuel excise. Heavy on-road vehicles over 4.5 tonne gross vehicle mass (GVM) do not have to pay a carbon price for fuel use during the fixed price phase, but may face a carbon price from 1 July 2014.
Emissions from Agriculture, Forestry and Other Land Use (AFOLU) will not be covered. Emissions from the combustion of biofuels and biomass, including the combustion of methane from landfill facilities will not be covered.
The fishery industry will not face a reduction in FTC and therefore will not pay an effective carbon price. The transport fuels used by light commercial vehicles and households are excluded. Activities that release emissions attributable to hydrofluorocarbons (HFCs) and sulphur hexafluoride (SF6) will not be covered.
The price for the 2012/13 financial year will be $23 per tonne of CO2-e; rising to $24.15 in 2013/14 and to $25.40 in 2014/15. Thereafter, Australia will transit into a flexible price cap-andtrade emissions trading scheme from 1 July 2015.
SOME BUSINESS OPPORTUNITIES AND IMPACTS
Small businesses (with an aggregated turnover less than $2 million annual turnover) will see their instant asset write-off threshold increase from $5,000 to $6,500 (for depreciable assets from the 2012/13 income year) and be able to access, via industry associations and nongovernment organisations, a $40 million Energy Efficiency Information Grants program. The Energy Efficiency Information Grants focuses on equipping businesses with practical measures to reduce energy costs. The Jobs and Competitiveness Program will provide $8.6 billion of assistance over three years to trade exposed industries. They include steel manufacturers, aluminium producers and cement producers, alongside the mining sector. They will receive either 94.5 per cent or 66 per cent of their permits free, depending on how carbonintensive their production is. The overall rate of assistance will be reduced by 1.3 per cent per year, and the entire program will be reviewed by the Productivity Commission in 2014.
The Clean Technology Program (CTP) will provide $1.2 billion of grants to manufacturing industries to help them improve their energy efficiency and adopt low-pollution technology. It also includes funds for clean energy and energy efficient research and development. The CTP is sub-categorised into three programs namely the (1) Clean Technology Investment Program, (2) Clean Technology Food and Foundries Investment Program, and (3) Clean Technology Innovation Program.
To qualify for such funding from the government under Programs 1 and 2, the company must assess its eligibility and then match the funding on a grant ratio basis (i.e. 1:1, 1:2 or 1:3 where the company matches on the right hand side of the ratio) based on the size of the grant applied for and the annual turnover of the company. Program 3 operates on a grant ratio of 1:1 but the eligibility criteria differs to those imposed on Programs 1 and 2. Applications under the CTP are now open.
Michel Moutia is a Principal Consultant with Risk Strategies. Michel is a certified practicing risk manager and Principal Consultant with Risk Strategies Pty Ltd, with over 20 years industry experience in safety, environmental and risk management.
Risk Strategies is a consultancy partnering business with expertise in improving performance and achieving strategic goals in sustainable business growth, safety, environmental management, workers compensation and business risk.
For other funding opportunities specific to your business or for more information regarding how the impose of a carbon price can be applied as a strategic opportunity for your business contact Risk Strategies Dr Samuel Phua or Mr Mike Juleff at: Phone: 03 9863 8402