Australia’s parliament on Tuesday passed a landmark carbon tax legislation that will force the top 500 polluting companies to pay A$24 per tonne for carbon emissions from July 1 next year.
The Clean Energy Act, which includes investments in renewable energy sources, would result in the continent country cutting its carbon emissions by 160 million tonnes in 2020 — equivalent to taking 45 million cars off the road, and continuing to cut emissions each year to achieve an 80 per cent reduction over the 2000 levels by 2050. “We will do this by putting a price on pollution, fostering renewable energy technologies, encouraging energy efficiency and creating opportunities to reduce pollution on the land,” Prime Minister Julia Gillard said. “Today, Australia has a price on carbon as the law of our land. This comes after a quarter of a century of scientific warnings, 37 parliamentary inquiries and years of bitter debate and division.”
The Senate passed the tax by 36 to 32 votes after the Australian Greens Party supported the Gillard-led minority Labor government. Earlier, the 18 Bill package had passed the Lower House of Parliament by a narrow margin of two votes. The opposition Coalition led by Tony Abbot has vowed to rescind the tax if it comes to power in the next election scheduled for 2013, arguing that the tax would cause job losses and raise the cost of living.
The controversial tax has divided politicians and community in a country that accounts for 1.5 per cent of the world’s emissions, but has one of the developed world’s highest per capita rates of carbon emissions largely due to its reliance on coal for generating electricity. Mining and energy firms, airlines and steel-makers are among those expected to be hardest hit by the tax.
The carbon tax will have an impact on the Gujarat NRE owned and operated two underground coal mines in the Southern Coalfields of NSW. The company earlier said in a statement that the potential impacts of the carbon tax were expected to be around A$2.70 per tonne of coal produced. However, the direct impact of the tax will be minimised and it is not expected to impinge on future growth of the company.
“We have strategies in place that will reduce our total greenhouse gas emissions,” said Arun Kumar Jagatramka, chairman and managing director of Gujarat NRE Coke Limited. “The development of new underground roadways separate from the old and existing mine workings, supports the sealing off of these old workings and prevents waste gasses from being included in our mine’s ventilation system.”
“In the future, the company is committed to utilising ventilation controls, the sealing of old mining areas and gas drainage techniques that will allow the capture and flaring of gas,” he added.
Gujarat NRE also expects that it would be eligible for government assistance via the Coal Sector Jobs Package, which will assist in reducing the overall impact of the tax.
The government has promised A$1.3bn to support jobs in coal, with an additional A$70m earmarked for research into low-pollution technology and an additional A$300m over four years to support the steel industry. By 2015, the tax will be flexibly priced under a market-based emissions trading scheme.
As Bryan Granzien, chief executive officer of Tata Steel Resources Australia Pty Ltd, said the carbon tax would place additional competitive pressures on the Australian Operations against alternative investments in other parts of the globe. “Additional costs will put pressure on the viability of some investments in the future,” he told Business Standard. “Tata Steel is a global business. We will source raw materials in those countries where the commercial and governance requirements are best met.”
The Australia India Business Council believes the carbon tax will have little or no impact on inwards investment by Indian companies in Australia, and -- export of coal, iron-ore and gold by Australian companies will be largely unaffected.
This is primarily because Australia-India trade is not made up of energy-intensive products, according to the council’s Western Australia chapter president, Eli Bernstein. The energy-intensive phases of the iron ore value chain, namely the fabrication of steel, is to be completed in steel plants in India and therefore will not be subject to carbon tax. That said, the price and affordability of magnetite, a form of iron-ore the processing of which requires 10 times the energy input as hematite, may be somewhat affected, Bernstein told Business Standard.
A move to cleaner energy also heralds opportunities for joint India-Australia research and development as well as commercial collaborations on renewable technologies and energy efficiency programmes. Australia’s Treasury modelling shows that by 2050, the renewable energy sector (excluding hydro), will be 18 times larger than it is today -- as a result of the government’s Clean Energy Future plan.
“The demand for gas, with half the carbon output of coal, will also rise,” Bernstein added. “Western Australia, with its large reserves of gas, is well positioned to benefit from this. We look forward to the day when Australia is able to export uranium to assist India in reducing its dependence on coal.”
One Indian company in the initial exploration stage of coal projects in Australia told Business Standard that carbon tax would “certainly impact” the marginal mining projects and “will be a negative for future investments” in mining projects.
India had introduced a carbon tax of Rs 50 per tonne on coal produced in and imported to India from July 1, 2010 and pledged to reduce carbon emissions per unit of GDP by 20 to 25 per cent from the 2005 levels by 2020.