Impact on businesses
With the carbon price impact directly related to the extent of emissions, organisations should ensure they can accurately and reliably measure and forecast their emissions and related carbon liability. This means assessing the current measurement methodologies for robustness to ensure that all calculations and judgements are fully supported and based on reliable and timely source data.
Although most private and middle-market clients reading this article should not be affected directly by the CPM, they may be impacted by the indirect flow-through of the carbon price. The extent of the flow-through will differ between products and industries. For example, increased costs higher up in the supply chain may mean higher prices for local businesses on input costs such as electricity, gas, transport and construction materials.
Any new contractual arrangements will require a review and any such price increases will need to be factored into the contract price (especially for long-term contracts).
How businesses manage their exposure to a carbon price, internally and in their supply chain, will become a major differentiating factor in the markets they operate in. Detailed understanding of the potential cost impacts and the price passed through from suppliers will help companies develop a strong, differentiated position in managing the impact of a carbon price.
Opportunity knocks for ‘green technology’ businesses
A carbon price will present opportunities for many organisations. Those with activities in the renewable-energy and innovative technologies sectors can expect to see increased demand for their products. Significant funding was identified within the policy package for innovation and energy efficiency, with the most important being the establishment of the Clean Energy Finance Corporation (CEFC). The CEFC will be set up to increase investment in renewable energy, energy efficiency and other low emissions technologies.
The CEFC may provide finance in the form of commercial loans, concessional loans, loan guarantees or equity. The CEFC will not invest in capture and storage technologies.
Individuals and households
In some good news for a lot of low income earners, there will be an increase in the tax-free threshold rising to $18,200 in 2012/13 and rising further to $19,400 in 2015/16.
Additionally, under the changes it is expected that approximately 50 per cent of revenue generated from the scheme will be used to compensate households, with the focus on low-to-middle income households.
The key aspects of the household compensation proposals are as follows:
- increases in family benefit payments, pensions and allowances to assist households to meet cost increases
- households will also be exempt from the carbon price on transport fuel use.
Conclusion
Despite the constant attention and hype the carbon tax has created recently, most people still do not realise how it affects them.
While the impact on most will not be direct, all taxpayers in particular businesses need to have a good understanding of their (and other parties in their supply chain) current emissions and energy use to be able to properly assess and mitigate the financial impacts.
Disclaimer
The views in this article are those of the authors and do not represent the views of Deloitte Private or Deloitte Touche Tohmatsu or any of its related practice entities. This article is provided as general information only and does not consider anyone’s specific objectives, situation or needs. You should not rely on the information in this document.
Endnotes
1 Legacy waste is waste that has been or would normally be deposited in landfill prior to the commencement of the carbon price. Emissions from waste deposited in landfill after 1 July 2012 is included in the CPM.
2 Fugitive emissions are emissions from the production, processing, storage, transport and distribution of raw fossil fuels such as coal.
