PRIME Minister Julia Gillard has been at pains to outline the detail in her carbon tax for voters she is attempting to insulate from her plan, but many of Western Australia’s major industry sectors, which face the direct impact from the impost, rema
PRIME Minister Julia Gillard has been at pains to outline the detail in her carbon tax for voters she is attempting to insulate from her plan, but many of Western Australia’s major industry sectors, which face the direct impact from the impost, remain uncertain about its impact.
Groups like those planning energy-hungry magnetite iron ore operations in WA are still negotiating with the government, which has already announced the outcome of negotiations with the largest and most vocal voices in industry.
While the carbon tax arrangements are not a secretly negotiated deal with just three individual companies as was the case with the minerals resource rent tax, it is clear that some entities such as steel makers BlueScope Steel and OneSteel have persuaded the government to deliver them a special compensation package.
But even in cases such as these, where compensation is known or special tax arrangements have been announced, there is little clarity about the long-term outcome.
For instance, LNG producers will initially receive up to 66 per cent of their emissions covered by permits, with this allocation decaying to 50 per cent.
Even the powerful LNG lobby is wondering what happens after a review of the rate in 2014-15, very much the short-term in an industry where it can take at least five years to start up a plant.
Emerging magnetite players like CITIC Pacific and Gindalbie Metals’ Karara joint venture, which are both due to start operations in the next 12 months, are awaiting news of negotiations between the government and Australia’s two existing operators, Grange Resources in Tasmania and OneSteel at Whyalla in South Australia.
Magnetite Network executive director Megan Anwyl said the industry was watching those discussions but also wanted to see a special category created to embrace WA’s emerging producers.
“The stable door has not yet closed,” Ms Anwyl said. The industry is clearly hoping for a similar deal to LNG, with at least 66 per cent of emissions covered by permits. It has previously estimated that a carbon tax at the rates revealed by the government would add an extra 10 per cent to operational costs.
LNG and magnetite both have similar messages with regard to their role in reducing the global carbon footprint.
The Australian Petroleum Production & Exploration Association argues that the high emissions of LNG production relative to other industry in Australia do not reflect its role in providing lower carbon fuel for foreign industries.
“The export gas industry rejects the politically motivated label of ‘big polluter’ when for every tonne of emissions produced in liquefying natural gas, up to nine and a half tonnes are removed from the atmosphere when substituted for coal in customer countries,” APPEA chief executive Belinda Robinson said.
MagNet argues along similar lines that emissions related to the energy-intensive magnetite production are only part of a total product lifecycle in which less carbon is emitted because this type of ore is more efficient in steel production.
Uncertainty surrounding the implications of the government’s new tax included another big emitter, Alcoa, even though alumina production has been consistently cited as an industry at risk to flight offshore.
This week, Alcoa said it was working through the carbon pricing detail but will need to see the detailed provisions in the regulations before being able to accurately determine the full implications for the company.
Winners from the carbon tax appear to be companies like Carbon Conscious, which had a strong share price performance early this week.
Another listed player in this space, Carnegie Wave Energy also had a spike this week, though it has yet to recover share price losses from earlier highs this year. Carnegie welcomed the government’s planned $13 billion investment in renewable energy.