Carbon tax
Introduction
With the release of the Australian Labor Party’s policy document “Securing a Clean Energy Future: The Australian Government’s Climate Change Plan”, the Commonwealth Government has stated its intention to introduce a Carbon Tax at a fixed cost-per-tonne on greenhouse gas emissions, starting on 1 July 2012.
The plan provides compensation to families, small businesses, agricultural producers and trade exposed industries through tax cuts and other measures, which will compensate for the added costs this system will impose on the economy.
The plan also includes Clean Energy Investment Funds which are intended to drive innovation. The Government’s intention is that this will incentivise technological and behavioural change to reduce Australia’s greenhouse gas emissions.
GrainCorp recognises the need to address the issues around climate change.
Whilst details of the proposed system are not complete, the Government has indicated that agricultural emissions (i.e. those occurring on farms and agricultural properties) will be exempt from the Carbon Tax.
However increases in costs associated with energy, some transport and handling costs (amongst others) have the potential to affect farmers severely. Modelling by the Australian Farm Institute shows that higher supply chain costs will reduce net grain farm income by between 8% and 29%.
Food security
More than any other sector Australian growers and farmers are particularly exposed to the risks associated with climate change through drought and desertification of farmland and increasingly ‘extreme’ weather patterns.
GrainCorp is already committed to addressing issues around climate change through an ongoing process of reducing our greenhouse gas emissions (primarily through energy efficiency initiatives within our manufacturing and transport sectors).
As such we welcome the Government’s proposals for clean energy investment funds and see these as an opportunity for Government to support initiatives within the manufacturing and logistics sectors to make them more energy efficient, less carbon intensive and further increase their competitiveness in international markets.
Australian grain producers are highly productive and receive few subsidies, unlike competitors in North America and the European Union. Increasing supply chain costs will reduce net farm income, and this will have an effect on the financial viability and sustainability of Australian grain growers. It is likely that the number of farmers willing to grow grain for lower returns will decrease, and, all else being equal, this will lead to lower grain production in Australia.
Export Competitiveness
Any carbon tax initiative that makes Australian exports uncompetitive also runs the risk of “carbon leakage” through production (and associated emissions) being driven to countries where a carbon tax is not paid.
This would represent a significant social and economic disruption within Australia, whilst not achieving the goal of reducing greenhouse gas emissions.
Therefore GrainCorp recommends that any price signal be designed so that it drives innovation (towards less carbon intensive production) within the Australian economy, but does not promote “carbon leakage” through driving agricultural production offshore.
As such, when the Government introduces compensatory tax cuts, we recommend that these be structured carefully, in consultation with industry bodies, to ensure they do not drive “carbon leakage” or Australian farming jobs overseas.
GrainCorp, as Australia’s one of the largest agricultural logistics provider, has already provided the Commonwealth Government with research data on the issue and stands ready to assist with advice on how tax reductions might be structured to ensure that the competitiveness of the Australian agricultural sector is not compromised.