How will the Carbon Tax Repeal Bill impact Australian Manufacturing?

By Damien Jovica
Phone: 1300 667 263 

The Carbon Tax has been repealed by the Australian Federal Senate. With the $24 per tonne of carbon tax eliminated, how much will Australian businesses and manufacturers save and how will this impact the renewable energy sector?

Most large companies would have entered into electricity contracts that were either carbon inclusive or carbon exclusive. Energy retailers were offering some attractive carbon inclusive rates.

To explain the difference, carbon inclusive is a rate included in the energy rate charged by the retailer (around 1.6 - 1.8 cents per kilowatt hour) and carbon exclusive means that the carbon rate was separate to the energy rate charged by the retailer, (between 2 and 2.3 cents per kilowatt hour).

Your average manufacturer will consume between 1 and 5 Gigawatts of electricity. Larger companies, such as paper mills, use around 20 Gigawatts. Using a simple equation, we can see how much the carbon tax was adding to the bill of a company using 1 Gigawatt on a carbon exclusive contract with 2 c/kwh:

$0.02 x 1,000,000 (KwH) = $20,000

It's not so simple for carbon inclusive contracts depending on the carbon rate included into the energy rate, their terms and conditions, the length of the contract etc.  More recent contracts had conditions favourable to the end user when it came to carbon, earlier contracts signed 2 years ago may not have conditions where the carbon rate can be taken. There's also new government legislation with further amendments from the PUP with protections for the consumer, so energy companies pass on the savings.

I always believe there are 5 taxes in a Victorian electricity bill; Carbon, LRET (Large-scale Renewable Energy Target), SREC (Solar Renewable Energy Credits), VEET (Victoria Energy Efficiency Target) and GST. So with carbon soon to be gone, what about the other levies for renewables and what impact does this all have on the renewable energy industry now that the policy is on Direct Action?

There’s a lot of uncertainty in this industry at the moment and investment is at its lowest levels since 2001. In an economy that needs momentum, renewable energy is  an exciting sector with innovation and opportunities.

This sector has the potential to create employment and growth in adjacent sectors including manufacturing and infrastructure too, but, without favorable government policy, it will be difficult to realise the potential of the renewable energy industry.

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