Treasurer Chris Bowen announced changes to the carbon price yesterday, saying companies that currently pay a fixed $24.15 for every tonne of carbon pollution will pay a floating price from July 2014, forecast at between $6 and $10 a tonne.
But the mining and resources industry are not satisfied with the Rudd government’s move to a decreased floating price, with the major lobby groups still advocating for the carbon tax to be abolished.
Minerals Council of Australia CEO Mitch Hooke said in a statement moving to a floating carbon price a year early is not enough for the minerals industry.
He added changing the carbon scheme is not only about the price but the structure of the policy itself. He is calling for the scheme to be abandoned immediately.
“Simply dropping the carbon tax and adopting Europe’s carbon price at some time in the future does not go far enough,” Hooke said.
“Unlike Australia’s carbon pricing mechanism, the European scheme protects the international competitiveness of trade-exposed industries, it has a phased approach to permit auctioning and it excludes fugitive emissions from coal mining.”
Shadow mining minister Ian Macfarlene recently used the Minerals Week to outline the Coalition's plan for energy and resources.
He said the Coalition government would scrap the mining tax and the country would return to the Howard years with less sudden change.
“Both the carbon tax and the Minerals Resource Rent Tax are a drag on the Australian energy sector and make investments less attractive than in other countries where these taxes don’t apply.”
The Australian Petroleum Production and Exploration Association, which represents oil and gas companies like Woodside and Santos, agrees with the Council, the SMH reported.
“While the move to a floating price may represent a short-term lowering of the price facing liable entities, Australia is still imposing a cost on its gas export industry that will not be borne by any of its LNG competitors,” APPEA spokesman Michael Bradley said.
Research group RepuTex said earlier this year abolishing the carbon tax without applying other industry changes would put the brakes on investment in Australia's renewable energy sector.
Renewable energy would not be a viable investment option without the $23 per tonne carbon price and the renewable energy certificate of about $32 per megawatt-hour, the research said.
UBS suggested in a recent report the carbon tax would cut $US42 million from GlencoreXstrata, Rio Tinto, BHP Billiton and Anglo American’s revenue in 2014.
According to UBS analysts, the carbon tax has most affected the coal industry, as companies pay an average $1.50 to $2 a tonne, and gassy mines pay between $5 and $6 a tonne, less the benefit of free government permits.
“We estimate the carbon tax just on the coal operations impacts GlencoreXstrata’s 2014 earnings by about 2.5 per cent, while for Rio Tinto, BHP and Anglo it is about 1 per cent,” the analysts said.
The Queensland Resources Council said the Rudd government’s shift does not assure resources companies in Queensland they are going to fix other flaws that are making the state less competitive.
“Fundamentally for Queensland’s coal industry, will Australia’s carbon pricing scheme continue to apply to fugitive emissions from coalmines, unlike any of Australia’s international competitors?” it asked.
They also asked if the government will leave in place arrangements where European Union politicians are in charge of Australia’s floor price. They also want to know if the government would lock Australian firms into buying at least 50 per cent of their carbon permits locally.
This would stop Australia from curtail greenhouse gas emissions at the lowest possible cost, QRC said.
The QRC estimated recently about $50 billion worth of coal projects have been stranded. Chief executive Michael Roche said that figure includes more than a dozen projects.
"There is talk that Kevin Rudd might move from the carbon tax to floating carbon price. That would be an excellent move as well because at the moment the coal industry is subject to a carbon price of $24 per tonne of CO2.
"In Europe it's $6, so four times as expensive in Australia as in Europe for the cost of buying carbon," he said.
Deutsche Bank analyst Tim Jordan said changing to an ETS would have an impact on hundreds of companies that pay the carbon tax but the economy at large would remain unscathed.
He added shifting to a floating price would mean lower electricity prices and would offer weaker investment signal for low-carbon investments, he said.
Jordan also said the shift would see a decrease in gas and hydro generation and a rise in coal-fired generation. Companies had reduced coal-fired generation over the past year since the carbon tax was brought in.
Generation from renewable energy sources have increased to about 23 per cent of the total in the national electricity market in the year to June, up from about 19 per cent a year earlier.
Energy program director with Grattan Institute Tony Wood said a floating price may not necessarily result in lower prices as Europe looks to absorb extra supply.
But business groups such as Ai Group are pleased with Labor’s shift, saying it could save costs for businesses ‘struggling with high energy prices and lost competitiveness’, while still committing to decreasing carbon emissions.