Preparing Your Business for the Carbon Tax

What is the carbon tax and how can businesses prepare for the impact of the carbon tax?

Now that the carbon tax has been approved by the Australian Senate, many businesses are starting to question the impact it will have on their future.

On an operational level, the introduction of the carbon tax will likely increase costs including: gas/electricity, key inputs (steel, aluminum, and cement), freight/transportation services (aligned with a reduction in fuel tax credits) and general accounting/compliance.

A key and compounding impact to business profitability will be higher business operating costs, including higher wages and salaries, and increased labour turnover; a result of the mining and resources sector impact on the labour market.

What is the carbon tax?

The carbon tax will become Australian law from July 1 2012 (the Senate voted 36 to 32 in favour of the bill).

The introduction of the government’s Carbon Tax Policy will see tax on pollution emissions. The related Clean Energy Future Bills plan to cut Australia’s emissions by 20% by 2020 and 80% by 2050¹.

The carbon tax is designed to facilitate cleaner energy and positively impact the global environment.

It is expected to stimulate more environmentally sustainable energy sources (e.g. wind and solar power), with a $10 billion government fund to encourage Australians to use renewable energy sources.

How much will it cost?

A fixed price per tonne of carbon at a cost of $23 a tonne will increase over the period until 2015.

It will then be replaced by a trading scheme where the market will set the cost. The tax is expected to raise about $24.5 billion in the first three years.

The carbon tax will lead to price increases as the additional tax will be factored into pricing and shared by the community.

What can businesses do to prepare for the impact of the carbon tax?

  • Strategic review to identify where to place efforts for product innovation. Businesses with high pollution emissions will need to review their product or service offering and product life cycle.
  • Identify performance improvements to stabilise and/or increase the return on investments.
  • Introduce productivity improvements (e.g. workflow improvement and lean six sigma methodology).
  • Review organisation structure and resource allocation to identify alignment of human resources with critical business success factors.
  • Attract and retain key expertise. Under climbing pay pressures, ageing workforce and mobility of Gen Y, businesses will have to compete for a ‘best in class’ workforce.

Internal Clean Energy Review

One of the key ways to prepare for the carbon tax is to conduct an Internal Clean Energy Review.

Here are some key questions businesses should ask when undertaking this review:

  • What is our position within the carbon tax scheme and what costs will we incur?
  • Are we eligible for any Government assistance to offset these costs?
  • Will the scheme have any impact on our current investments or future acquisitions?
  • What investments can be made in clean energy products?
  • Will the scheme trigger any asset impairment or revaluations?

It is recommended that businesses seek specialist energy law advice to accurately capture, quantify and record all carbon tax related costs.

This is particularly important if businesses are considering passing on costs to their customers.

By preparing early, businesses can reduce the impact of the carbon tax by establishing strategies to increase performance improvement.

Vantage Performance is an award winning, national business transformation and turnaround firm with proven success in solving complex financial, operational and people performance issues.

¹Australian Government 2012, Clean Energy Future, Canberra, viewed 20 February 2012, <>

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