blog Market Intelligence /marketintelligence/en/news-insights/blog/alumina-ltd-exposed-australian-carbon-tax content esgSubNav

In This List

Alumina Ltd exposed to Australian carbon tax

Blog

Asset Owner Perspectives on Climate Change Measurement, Management, and Reporting in Australia

Blog

ESG & Technology: Impacts and Implications

Blog

Essential Energy Insights - October 2021

Blog

Essential Metals & Mining Insights - October 2021


Alumina Ltd exposed to Australian carbon tax

Highlights

Trucost has looked at some of the implications of the 2012 carbon tax for companies in the ASX 200, based on their emissions in Australia. Trucost analysed 66 companies that publicly reported national emissions data and represent 74% of the value of the Index by market capitalization.

Alumina Ltd is among ASX 200 companies most exposed to carbon costs. Although the Government will provide assistance to trade-exposed businesses, firms that are less carbon-intensive than sector peers will find it easier to pass on carbon costs.

The Australian Government's plans to introduce carbon pricing in July 2012 will lead to the one of the world's largest emissions trading schemes. The Clean Energy Legislative Package passed by the Senate earlier this month will set an initial fixed price for carbon at A$23 (€17.2) per tonne of greenhouse gas (GHG) emissions, measured in carbon dioxide equivalents (CO2e). Trucost has looked at some of the implications of the 2012 carbon tax for companies in the ASX 200, based on their emissions in Australia. Trucost analysed 66 companies that publicly reported national emissions data and represent 74% of the value of the Index by market capitalization. If these companies were to pay A$23 per tonne for all of their direct emissions from fossil fuel use at operations in Australia, carbon costs could total more than A$1.7 billion. If their electricity suppliers pass on 50% of their own carbon costs in higher electricity prices, the companies could incur a further A$355 million in carbon costs for their emissions from electricity purchases. Chart 1 below shows variations in potential carbon costs in Australia relative to turnover allocated to domestic operations in eight ASX 200 sectors. Companies with below average exposure to carbon costs are best placed to pass on the tax and maintain competitiveness compared to peers.  
Chart 1: ASX200 sectors with highest exposure to carbon costs in Australia
   Companies identified as most at risk from the domestic tax on carbon are listed in the table below.   Table 1: Top 5 companies based on carbon costs relative to revenue fotw chart The Australian Government's policies to provide financial assistance to emissions-intensive, trade-exposed industries have not been included in this analysis. Between 66% and 94.5% of allowances could be allocated free of charge, depending on business activities. Companies that are more emissions intensive than the allocative baseline for their activities are likely to face higher carbon costs than less emissions-intensive sector peers. Carbon efficiency relative to sector benchmarks could increase - or reduce - carbon risk. More detailed exposure to carbon costs can be modeled under different scenarios, taking into account factors such as declining levels of assistance, carbon price rises and exposure to carbon costs under different emissions trading programmes. By 2015, an emissions trading scheme with a flexible price starts in 2015, emissions could cost around A$29 per tonne. This compares with €9.7 per tonne under the EU Emissions Trading System, and NZ$ 13.3 (€7.7) per tonne under the New Zealand Emissions Trading Scheme, which could eventually link to the Australian system.1 Exposure to carbon costs will increase unless companies reduce emissions from operations and energy-intensive suppliers. Two of the five most exposed companies are in the Basic Resources sector, which currently accounts for over two-thirds of GHGs emitted in Australia by ASX 200 companies. With demand for raw materials growing globally, reducing emissions in this sector will be important for Australia to meet its target to reduce national carbon emissions by at least 5% compared to 2000 levels by 2020. _______________________________________________ 1 Spot prices, see Point Carbon http://www.pointcarbon.com/