Carbon price of $23 a tonne a triple whammy for miners: BDO

IT’S official, a carbon price of $A23 a tonne will be introduced come July 1 next year, with industry to receive $9.2 billion in support over three years, but one business advisory group has warned it will not be nearly enough and will only add further price pressures to miners.
Carbon price of $23 a tonne a triple whammy for miners: BDO Carbon price of $23 a tonne a triple whammy for miners: BDO Carbon price of $23 a tonne a triple whammy for miners: BDO Carbon price of $23 a tonne a triple whammy for miners: BDO Carbon price of $23 a tonne a triple whammy for miners: BDO


Staff Reporter

With the industry already reeling from the new Mineral Resource Rent Tax and grappling with the high exchange rate, Brisbane-based BDO Sustainability Advisory group head Dylan Byrne told ILN's sister today’s carbon tax announcement was effectively “a triple whammy” for the mining sector.

As expected, around 500 of the highest polluting businesses will pay the carbon price, which will rise by 2.5% every year until July 1, 2015, at which time it will be replaced by a market-based emissions trading scheme.

“I think whilst the government is trying to sound like it is being generous, if you look at the assistance, particularly for the coal industry for example, there will be many areas that will fall outside the industry assistance package,” he said.

Byrne was referring to the $1.3 billion in incentive packages unveiled in Canberra today by Prime Minister Julia Gillard, climate change minister Greg Combet and treasurer Wayne Swan to coal mines to reduce carbon emissions, along with a $300 million package for the steel sector over four years to support jobs by promoting innovation over four years.

The government said the carbon price would also add about $1.80 per tonne of coal produced but “gassy” mines would face “significant” cost pressures.

Companies that fail to meet “emissions intensive, trade exposed” criteria would receive $1.2 billion in grants to start investing in low-pollution capital equipment.

An Energy Security Fund would also be established for pay for the closure of Australia’s most polluting electricity generators.

The government’s goal is to remove 2000 megawatts of capacity from these generators before 2020 and replace them with cleaner power generators, namely gas.

The assistance package for high-polluting industries would be through free permits, and would apply to aluminium smelting, steel manufacturing, flat glass making, zinc smelting and pulp and paper making.

While fuel is exempt for individual car owners and small business, diesel for heavy vehicles like semi-trailers, received a two-year moratorium, but from 2014 would have to pay for carbon.

“From what we know about the sector, the package will only flow through to specific regional areas where a lot of these gassy mines are situated, so areas like Queensland will fall outside the assistance criteria,” Byrne said.

“It is too early to say if any mines will be forced to close down, but there will price pressures on the mining companies, particularly the producers.

“We are already starting to see some evidence from the next layer down, so companies that are supplying the miners are already under price pressures and, in some cases, the big miners have already asked them to reprice their services.”

He also questioned whether it was enough.

“The package is being sold on a $23 a tonne carbon price, but what is going to happen to these industries when the price gets to $30 or $40 a tonne?” Byrne asked.

“A lot of these assistant packages would have gone by then. I just question if there are enough carrots out there over and above the block assistance that has been announced.”

To appease households, the government also unveiled a raft of assistance measures including a rise in the tax free threshold from $6000 to $18,000 and up to $338 per year extra for single pensioners.

Taxpayers with incomes below $80,000 will receive tax cuts with a further guarantee that no one will pay more income tax.

An average household will pay an extra $9.90 per week while average assistance will be $10.10 a week.

The government’s target is to achieve 20% of renewable energy by 2020.

Agriculture has been totally excluded.

The scheme will be administered by a new Climate Change Authority which will be chaired by former Reserve Bank of Australia and Treasury Secretary Bernie Fraser.

A $10 billion Clean Energy Finance Corporation to fund new clean energy technology will also be established, along with an Australian Renewable Energy Agency to manage a $3.2 billion clean energy budget.

There is also a $40 million program for remote indigenous communities for clean power supplies, like solar panels and wind turbines, while nearly $1 billion will be directed towards a biodiversity fund to help farmers and community groups look after the ecosystem and eradicate invasive species.

Gillard said four million Australian households would be better off; six million would receive assistance to cover the entire price impact, while eight million would get some assistance.

Dubbed the Clean Energy Supplement, compensation will be equal to a 1.7% increase in pensions, allowances and family payments.

This will equate to up to $338 extra per year for single pensioners and self-funded retirees, up to $510 per year for pensioner couples combined, up to $110 per child for a family that receives Family tax Benefit Part A, up to $69 extra for families that receive Family Tax Benefit Part B, up to $218 extra per year for single income support and $390 per year for couples and up to $234 per year for single parents, on top of increased family payments.