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MINERALS COUNCIL OF AUSTRALIA www.minerals.org.au
Minerals Council of Australia What the Repeal of the Carbon Tax means to Investor Confidence
An interview with Sid Marris, Director of Industry Policy By: J. Landry 2
Q2 2015 | InternationalResourceForum.com
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Sid Marris joined the Minerals Council of Australia in May 2008. As Director of Industry Policy, he has responsibility for a wide range of policy issues of importance to the Australian Minerals Industry including Climate Change and Energy, Infrastructure and Transport, Workplace Relations as well as contributing on trade, economics and innovation matters. J. Landry spoke with him exclusively on what the repeal of the carbon tax means to the Australian mining industry.
Sid Marris, Director, Industry Policy, Minerals Council of Australia
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Minerals Council of Australia
J. Landry: What was the immediate effect of the carbon tax introduction? Sid Marris: The carbon tax was a $7 billion hit to the bottom line of companies across the country, this is almost the same as increasing the company tax burden by 10 per cent in one go. By the time it was abolished after two years it had taken $15 billion through either charging permits or adding to the cost of diesel fuel used by businesses. JL: What are were the problems with the scope and reach of the carbon tax? SM: The minerals industry has always argued that measured transition to a low emissions global economy required a global agreement that included reduction commitment from all major emitting nations, encourage least cost emission reduction through market mechanisms that did not impinge on the competitiveness of the internationally traded sector and involve substantial investment in a broad range of low emissions technologies and adaptation measures. The carbon tax fundamentally sought to put Australia much further ahead than any other nation, with a scheme that covered 60 per cent of all emissions at a price that was almost three times the European scheme. JL: How did this compare with the European scheme and its graduation of this process? SM: The European scheme is a good point of comparison. That scheme will take twenty five years to develop. Emissions coverage is only 45 per cent, and even many firms are only required to buy permits for half their emissions and some still have generous exemptions from the full impact of the scheme for several years to come. JL: Which industries were hit hardest by its introduction? SM: For mining companies in remote locations that depend on diesel fuel for all their energy, the carbon tax was a big burden. Even though 4
there were some exemptions for emissions, intensive trade exposed industries such as aluminium and metals refinery. They still faced a cost impost not faced by their international competitors. The coal sector actually qualified under the government own rules to receive exemptions from the full cost of the scheme but that was arbitrarily denied. Critics try to characterise these arrangements as hand outs, but that is completely mislead, they are an exemption from the full cost of tax being added on to business. JL: How did this undermine competitiveness in Australia? SM: Australia’s mining industry are price takers. The international price is set so any impost from government such as a carbon tax cannot be passed on to customers. Australia’s costs structure is already higher than other countries, with labor costs for some areas 50 per cent higher than equivalents in the United States. JL: What do you think should have been done with the tax revenues? SM: The impossible choice created by the carbon tax was that it was meant to give a price signal to change behaviour but it was levied at such a rate that companies were starved of the funds they needed to invest in research, development and deployment. The Government saw the tax as a way of redistributing money in the community and decided to over compensate households for the effect of the tax, again at the expense of research and development. JL: Does the repeal boost investor confidence now? If so, in what ways? SM: There is an immediate boost to confidence from the repeal of the carbon tax. A $7 billion hit to the economy has been avoided this financial year alone. The challenge of climate change remains a dilemma for business but in many ways the overreliance on what was just a revenue raising measure gives a chance re-start the discussion. IRF www.minerals.org.au
Q2 2015 | InternationalResourceForum.com
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