Carbon and Clean Energy Briefings
Net Balance helps our clients develop flexible action plans to prepare for the impacts of the carbon price.
We have experience:
The Clean Energy Act 2011 and an Australian carbon price
The Clean Energy Act 2011 and eighteen associated Acts became legislation on 8 November 2011. The legislative package sets out the instruments to implement the Clean Energy Future plan (released 7 July 2011) and its centrepiece, a carbon price. This means that Australia will have a carbon price from 1 July 2012.
The carbon price
The carbon price will be $23 at commencement, and will increase by 2.5 per cent per annum for three years – the period known as the ‘carbon tax’. The price will therefore be $24.15 in 2013-14 and $25.40 in 2014-15.
On 1 July 2015, the transitional fixed price period will end and the carbon price will become a cap-and-trade emissions trading scheme with a floating price. The price will then be set by the market.
There is uncertainty how the market will react at the end of the transitional period, and if the price will rise or fall. To provide a degree of certainty to the market, a price floor will be set at $15 (rising by 4 per cent in real terms per annum), and a price cap will be set at $20 above the expected international price in 2015-16 (rising by 5 per cent in real terms per annum).
The implications of the carbon price
Most businesses will not be directly liable – only those with facilities that emit more than 25,000t CO2-e per annum will be directly liable. Directly liable firms may increase their prices in order to compensate for the carbon costs they incur. The remainder of the Australian economy is likely to feel the impact of the carbon price to the extent that directly liable entities increase prices to compensate for the carbon costs that are passed on by firms throughout the economy.
The extent of the possible carbon price pass-through is difficult to estimate, as it will be unique to each organisation. Some of the factors that will determine estimates of price changes include market concentration and competitiveness, proportion of local versus imported manufactured products, and levels of government assistance via allocation of free carbon units or other industry support.
This means that in some economic sectors and industries, energy and resource efficiency will become increasingly important to maintain competitiveness.
Overall, the impact of the carbon price on the whole Australian economy is expected to be minimal. Treasury’s modelling projects that the economy will continue to grow, with real national income growth to rise an average 1.1 per cent a year (compared with a business as usual 1.2 per cent per year to 2050).
Other future price increases may be confused with the carbon price, but are in fact separate. For example, electricity prices are likely to continue to increase due to increasing transmission and distribution charges – independent of the price of carbon.