Carbon Tax, Business and Trees

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-By John Boley

At time of writing, it would appear that the first effect of Australia’s new policy to avert a climate catastrophe will be felt in July with the introduction of carbon pricing, described by Canberra as “the most environmentally effective and economically efficient way to reduce pollution. This means our economy can continue to prosper – without our pollution continuing to grow.”

It is ironic to say the least that the debate over the Carbon Tax has generated more hot air than most of the companies that will pay it. That the debate has been so heated and – by any objective assessment – largely hysterical is a measure not only of the extreme economic implications of emissions trading but also of the recognition on both sides of the argument that the issue is, after all, an important one.

It is also ironic that the level of knowledge of what carbon pricing actually means is low, both with the consumer and with business. For example, there is much talk about the 500 companies that will be liable from this month to pay under the carbon pricing scheme – but did you know that just fewer than 50 companies operate in more than one state? For the rest, the government estimates that approximately:

• 135 operate solely in New South Wales and the ACT
• 110 operate solely in Queensland
• 85 operate solely in Victoria
• 75 operate solely in Western Australia
• 25 operate solely in South Australia
• 20 operate solely in Tasmania; and
• fewer than 10 operate solely in the Northern Territory.

Of the 500 businesses (again, government estimates):

• around 60 are primarily involved in electricity generation
• around 100 are primarily involved in coal or other mining
• around 40 are natural gas retailers
• around 60 are primarily involved in industrial processes (cement, chemicals and metal processing)
• around 50 operate in a range of other fossil fuel intensive sectors; and
• the remaining 130 operate in the waste disposal sector.

These numbers are estimates only, and are largely based on emissions data reported under the National Greenhouse and Energy Reporting (NGER) scheme. Most Australian businesses liable under the carbon pricing mechanism are businesses that already have reporting obligations under the NGER Act. The rest of the estimated two million businesses in Australia, Canberra says helpfully, will not have to pay the $23 per tonne charge.

But they will be affected by any price rises charged by the 500. For this reason, “more than half” the money raised is set to be ploughed back to those whose bills are bigger as a result. All sorts of businesses are facing a dilemma – do they dare to pass on the increased costs to their customers or must they – indeed, are they even able to – absorb the higher charges?

Generally, according to advice from the Australian Competition and Consumer Commission (ACCC), businesses can choose to pass on their extra costs by increasing prices. But if businesses claim their prices have gone up or are about to go up because of the carbon price, they must ensure their claims are truthful, have a reasonable basis and do not mislead consumers or other businesses.

“If you are a business, making such claims in your advertising and promotional material, or in sale pitches to customers, you should be careful not to overstate the impact of the carbon price on your prices. If you choose to make a claim about the impact of the carbon price, make sure you have confidence in the claim. The type of information you should have regard to before making a claim about the impact of the carbon price will depend on the type of claim made,” says the ACCC.

The ACCC offers some advice for businesses on how to deal with carbon-price related cost increases:

• Your supplier is entitled to increase its prices as it sees fit – it is business as usual. Leading up to and following the start of the carbon price, the same legal obligations not to mislead or deceive apply.
• Like any other claim, if your supplier makes a claim about the impact of the carbon price or why its price has increased, the claim should be truthful and have a reasonable basis.

You can pass on increases, says the ACCC, and you may even tell your customers they are caused by the carbon tax. But, “if you intend to rely on information from your supplier when making claims about the carbon price to your customers, you need to assess whether it is reasonable to rely on the information. Before making a claim you should consider:

• any explanation your supplier has given you about the impact of the carbon price, and any other factors (unrelated to the carbon price) that have contributed to their price increases.
• whether the price increases are consistent with the carbon price impact as predicted by other sources such as the government, your industry association or other professional advisers.
• what your contracts with your suppliers say about price increases.
• the impact of any carbon price related rebates or assistance available to you or your suppliers.

Meanwhile, at this time of uncertainty, it is good to see the University of Western Sydney’s Hawkesbury Institute for the Environment has embarked on a decade-long project to subject Australian bushland to heightened CO2 levels and altered rainfall patterns consistent with a “business as usual” global increase in greenhouse gases – just in case Canberra’s much-vaunted emissions reduction plan doesn’t work. The study is funded by federal government ($40 million) and the university itself ($15 million).

For its Eucalyptus Free Air CO2 Enrichment experiment a team led by Professor David Ellsworth has built six steel and fibreglass ring structures, each 28 metres high and 25 metres in diameter, in native woodland in Richmond, New South Wales. They contain a series of sensors to provide concentrated carbon dioxide to the trees in the rings.

The idea is for this to mimic an atmosphere where CO2 is at 550 ppm – some 40 per cent higher than current levels, which is the estimate for 2050 if no significant action is taken to rein in carbon emissions, and which would entail a temperature rise of around 3 degrees celsius – in order to see how the environment would change for living things, including humans.

The plan is for a computer-controlled system to modulate the amount of CO2 pumped from the rings, to account for environmental variances. The team will use a 43 metre high crane to study the impact on all parts of the eucalypts, including soil bacteria and fungi, the growth patterns of the tree canopy and the insect life in the foliage.

Professor Ellsworth told media recently that the study “will give us a window into how biodiversity will behave in futuristic conditions. Heightened CO2 levels have been shown to initially aid plant growth, but previous studies have shown this can last as little as a few months. To put it crudely, plants want a balanced diet. CO2 is part of that diet, but they also need nutrients that aren’t depleted.”

He and the team say the project will have important information for the rest of the world, not just Australia. “I really hope the big players, like China and the US, are paying attention to research like this. If we don’t want to be saturated by carbon in 2040 or 2050, the international community really needs to be in its final run of cutting of emissions right now,” said Professor Ellsworth.

Making Sense of Management

Management is the art, or science, of getting things done through people. Sounds fairly straightforward – except for the fact that people are not robots waiting to do our bidding. People have their own minds, motivations, and goals. So how do managers keep operations – and the people behind them – running as planned?

December 19, 2018, 5:15 AM AEDT