While large emitters and the general public have been vocal about their views on the predicted impacts of the recently released carbon tax, the impacts for Australia’s 1.9 million small businesses remain uncertain.
Many commentators have predicted that the cost of material inputs will rise as big polluters pass on the carbon tax; however, the magnitude of these price increases has not been quantified. Will the cost of material inputs increase by 3 or 4 cents, or 3 or 4 dollars? The Government has not released any detailed modelling showing the impact that the carbon tax will have on small business. Given that the impacts will differ between sectors, and as small businesses are so diverse, there is no one-size-fits-all model that can determine the carbon tax impact on the cost of materials.
What we do know is that small business will not have to measure or monitor emissions, pay the tax or buy carbon credits. This means that small business will not bear any additional administrative cost as a result of the carbon tax.
We also know that the carbon tax will have an impact on electricity prices, which are predicted to increase by an additional 10% in 2012-13. This increase will be in addition to already anticipated price rises, meaning that businesses should expect price rises in the order of 15-20% by the 2012-13 financial year. Further, the cost of purchased natural gas is expected to rise by 9% over the same timeframe. The Government has not announced funding assistance to small business to cover this impact. However, once small businesses start looking for ways to reduce electricity bills, they often find that potential electricity savings are not only possible, but much greater than expected. The opportunity for businesses to reduce electricity use by 20% (and therefore negate the price impact) is very real and, in most cases, will be the most effective way for many small businesses to mitigate carbon tax impacts.
Despite the lack of direct funding to pay for increased energy bills, the Government has announced a series of measures that will be available to assist small business in the move to carbon pricing.
- A $40 million Energy Efficiency Information Grants program will be established. Grants will be provided to industry associations and non-government organisations to deliver tailored information about the impacts of a carbon price on SME’s and community organisations and practical steps to manage these impacts.
- The instant asset write-off threshold will be increased from $5,000 to $6,500. Changes to business tax deduction allowances will assist business to invest in more energy efficient equipment. The threshold increase applies to businesses with a turnover of less than $2 million a year. The $6,500 deduction can be used for any asset purchase.
- The Clean Technology Investment program will provide $800 million in grants. The grants will support manufacturers to upgrade to less polluting equipment and cleaner technologies. Funding will be provided on a co-contribution basis, with industry providing three dollars for every dollar provided by the Government.
- The Clean Technology Innovation Program will provide grants of up to $200 million over five years to support business investment in renewable energy, low emissions technology and energy efficiency.
Passing the cost on.
Once the costs of the carbon tax are quantified, small business will be faced with the decision of whether or not to pass increased operating costs on to the consumer. The Government is certainly encouraging the passing on of costs, using the reasoning that households will be in receipt of compensation. There are, however, some things to consider about passing on costs. If you compete with international business, you should consider the impact on the demand for your products or services that will result from passing the tax on to your customers. For example, those in the travel and tourism industry are competing with businesses operating in a carbon tax-free environment.
Small businesses competing with other Australian businesses are well placed to pass on any costs associated with the carbon tax. Consumers are being compensated for the carbon policy and the impacts experienced by your Australian competitors will be similar to yours.
The introduction of carbon pricing in Australia provides a real opportunity for small business to explore energy efficiency. Australian businesses have consistently demonstrated what’s possible when new thinking is brought to existing situations; with many small businesses making significant energy savings by thinking outside the box.1 Energy efficiency programs tailored to SMEs are run by all State Governments, some of which offer subsidies for the purchase of energy efficient technology and equipment. All programs offer access to advice, case studies and support and are therefore well worth exploring as you make the transition to a carbon tax economy.
Kristine Dewar is a Business Sustainability Advisor at Carbon House, an innovative carbon advisory, projects and training firm based in Brisbane.
kristine.dewar@carbonhouse.com.au
www.carbonhouse.com.au
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