Carbon Emissions Green Paper
On 16 July 2008 the Federal Government released its Carbon Emissions Green Paper (Paper). The Paper sets out the blueprint for a National Emissions Trading Scheme (Scheme) to be introduced by 2010. In essence, the Scheme will require industries that generate carbon pollution to purchase permits for every tonne of greenhouse gas that they emit. A copy of the paper, along with fact sheets, is available at http://www.climatechange.gov.au/greenpaper/index.html.
The Paper does not directly consider the Scheme’s application to the automotive manufacturing industry in Australia. However, it would appear from the Paper that automotive component producers will not be required to purchase permits. The Scheme will affect a number of input costs for automotive component producers. The Scheme will apply to fuel. However, for the first 3 years of the Scheme the Government will reduce fuel taxes on a cent for cent basis to offset the impact on fuel prices associated with the introduction of the Scheme. This mechanism will be reviewed at the end of three years. Consequently, for at least three years, the Scheme will not affect transport costs associated with the manufacture of automotive components.
The two main areas where the Scheme will affect manufacturers, including automotive component producers, is in respect to electricity and raw materials. The electricity generation, mining and steel production industries are all emissions intensive and will be required to purchase carbon permits. This will increase the cost of their products which will be passed on to end users such as automotive component producers.
The paper makes it clear that the Scheme is projected to cause a 16% increase in electricity prices and a 9% increase in gas prices by 2010-2011. Absent any agreement with OEM’s to absorb price increases resulting from the implementation of the Scheme, automotive component producers will be left to absorb these costs. This will potentially have a detrimental affect on the competitiveness of the automotive component sector in Australia as against other countries which do not have carbon trading schemes.
The Paper provides stakeholders with the opportunity to make written submissions to the Government in relation to the development of the Scheme. The closing date for making submissions is 10 September 2008. Submissions can be forwarded to emissionstrading@climatechange.gov.au
