Reducing your carbon tax risk
Wednesday, March 2, 2011/
There is currently a furore over the Gillard Government’s plan to put in place a carbon tax from July 2012.
I don’t want to add fuel to the political debate, but it’s important to outline how you can best minimise your carbon risk into the future.
The concept of a price on carbon, a carbon tax or an Emissions Trading Scheme (ETS) is to make producers of greenhouse gas (GHG) emissions pay for the amount of GHG they emit.
The concept is that when a cost is attached to GHG emissions, businesses will do their best to minimise this cost by reducing their GHG emissions. Whether it is a tax, an ETS or any other name politicians and business leaders choose to use, is part of the detail, not the concept.
Currently, the Gillard Government has really only given us notice of the desire to implement the concept and very little detail has been offered. As with any major policy, the devil will be in the detail.
I believe that a carbon price will only be effective if it actually costs the big polluters in line with international market prices for carbon emissions.
This means little to no compensation for the fossil fuels industry and other primary GHG producers. If we compensate the big polluters, why would they stop polluting?
If this happens then the cost of energy, fuel and many other goods will go up. This cost will be passed onto you and I. Hopefully low-income households will be assisted in meeting these costs.
We really have little idea of what this will mean for small businesses until we get more concrete evidence of the details.
What we do know, however, is that the price of energy will go up in the future regardless of what happens with a price on carbon.
We also know that the majority of our GHG emissions as a country come from coal-fired power stations which supply most of the energy us small business owners use. Therefore, a price on carbon equals further increases in energy prices.
Carbon risk is the level of risk your business has in relation to a changing carbon price and climate change related activities.
The insurance sector, for example, has a carbon risk related to the increased amount of severe weather events which cause damage to properties in certain areas. This is why many insurance companies will not insure farmers in far North Queensland.
For small businesses, energy prices are often the main factor in carbon risk. Another big factor is how well are your suppliers mitigating their carbon risk? If their prices go up, your costs go up too.
What can you do about it?
There are a number of things we can do to mitigate carbon risk:
- Reduce your energy usage as much as possible through energy efficiency measures.
- Reduce the amounts of waste your business produces.
- Purchase efficient appliances and vehicles that use less energy and fuel.
- Consider purchasing accredited GreenPower. As a test for carbon risk, if your business cannot sustain itself paying the additional cost for 100% accredited GreenPower then you are possibly over exposed to carbon risk.
- Consider investing in solar PV generation as a way of future proofing against energy price rises.
- Ask your suppliers what they are doing to mitigate their carbon risk and decide whether or not it is enough for you to feel comfortable. If not, shop around until you find a supplier that is minimising their carbon risk.
- Start measuring your carbon footprint and working towards reducing it.
Businesses should only be worried about this if they are huge energy users or if they not prepared to do anything about it.
Alternatively, there will be many opportunities that arise from taking action in response to a price on carbon. As always, a successful operator will turn problems into opportunities through utilising smart solutions.
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