By Elizabeth O'Shea

The Clean Energy Act 2011 and eighteen associated Acts became legislation on 8 November 2011. The cornerstone of this legislation is the concept of a carbon price and from 1 July 2012, Australia will have such a carbon price, which for the first year has been set at a fixed amount of $23/tonne. The carbon tax is payable by liable businesses on each tonne of carbon pollution they emit. It is believed that the most effective and economical way of reducing carbon pollution is by putting a price on carbon as it will encourage businesses to reduce their carbon pollution and thereby reduce the amount of carbon tax they must pay. Businesses can achieve this by investing in clean technology and finding more efficient ways of operating. The government have assured the public that the money raised from the carbon tax will not be used to reduce government debt, but instead will be used to:

• assist households with price impacts they face from the imposition of the carbon tax by cutting taxes and increasing payments;
• support jobs and competitiveness in industries affected by the carbon tax;
• build a new clean energy future.

So What Does the Carbon Tax Mean for You?

In order to answer this it is necessary to look at the impact of carbon tax under the following 4 broad categories:

1. Households Households are expected to see little impact from the carbon tax as it is not a direct tax on individuals as they will not emit sufficient carbon pollution to be liable for the tax. Whilst the price of certain goods that are reliant on carbon pollution for their production will go up, the government has promised that the majority of Australians will be compensated for this cost, and this cost increase will be relatively small for most items. Nine in 10 households will receive some combination of tax cuts and increased payments to help them with the cost of living impact of the carbon price.

2. Non-reporting Entities It is expected that 99% of businesses will fall into this category meaning that after 1 July 2012, their day to day operations will not vary significantly. These business will not be buying or selling carbon credits, will not need to report to government on their energy consumption and will not have to purchase licences to emit. The only real impact on these businesses (similar to households) is that they will likely incur a small increase in the cost of their inputs. The main issue they will have to deal with however is in relation to ensuring that they appropriately “pass on” the increase in the cost of their inputs as a result of the carbon price. The Australian Competition and Consumer Commission (ACCC) will be closely monitoring business behaviour in the lead up to the introduction of the carbon tax on 1 July 2012 in relation to claims the business (and it’s employees) are making about the impact of the carbon price on their business.

Basically, if businesses want to advise customers that the reason for a price increase is the carbon tax, they need to be able to justify that claim.

The ACCC has indicated that statements such as “Beat the Carbon Tax — Buy Now” or “Buy now before the Carbon Tax bites” will be monitored and any statement that exaggerates possible savings by purchasing before the carbon price takes effect will be investigated and prosecuted where appropriate. Similarly, businesses that wish to increase prices after 1 July 2012 and attribute the price increase to the carbon tax will need to ensure that they have a reasonable basis for doing so.

3. Reporting Entities The new legislation requires entities that emit or consume energy to report to government on their emissions or consumption. This means that whilst a business may not exceed the carbon emission limits, they may consume sufficient energy in the form of fuel, gas and power and will be required to report on this for the first time post 1 July 2012.

As a broad guide, any entity that uses 100 terajoules or energy is required to report. This translates to around 2.5 million litres of fuel — including gasoline, diesel, LPG and LNG — or up to 25 000 megawatt hours of electricity, or some combination of the two.

There will be some businesses in transport, manufacturing, waste management and other industries that may be required to report under the new measures.

4. Larger Emitters

It is estimated that there are about 500 of the biggest polluters in Australia who will fall into this category and thus will be required to pay for their pollution under the carbon pricing system. These businesses who are directly emitting more than 25,000 tonnes of carbon a year will be forced to pay the tax and also purchase carbon licences from 1 July 2012.

The introduction of the carbon tax system is a contention issue, but as Australians are the highest carbon polluters per person in the developed world it has been argued that action must be taken. It is hoped that the tax will encourage Australia’s largest polluters to move to cleaner energy solutions and will be the first step in ensuring Australia remains competitive in the global economy whilst minimising environmental damage caused by pollution for future generations.