As the Australian government finalizes details of a proposed tax on carbon dioxide emissions, leaders of the nation's mining industry Wednesday launched a concerted attack on the plan, claiming it will increase sovereign risk and threaten future investment.
Peter Johnston, chairman of the Minerals Council of Australia, said the plan to price carbon is the most significant structural change to the Australian economy in a generation, but the government--as it did a year ago with a proposed super profits tax on mining--is heading down the wrong policy path again.
The proposed scheme will cost the minerals sector A$25 billion in the period to 2020, making it "the most costly carbon price scheme in the world," and represents a huge drag on the sector and its ability to invest in carbon abatement technologies, Johnston told the council's annual conference, while expressing frustration at the poor level of consultation with the industry.
Australia's minority Labor government is planning a carbon tax from July 2012 with the aim of cutting emissions and pollution and boosting investment in renewable energy and low carbon-emitting industries, subject to the federal parliament passing the legislation.
Details will be unveiled ahead of formal legislation in the calendar second half.
The government plans to tax carbon emissions from the top 1,000 emitters and use the funds raised to compensate households and some industries.
On Tuesday, the government's top climate change adviser, Ross Garnaut, recommended the government should set a fixed price on carbon in a range of A$ 20-A$30 a metric ton, rising by 4% in real terms a year. A fixed price of A$26 a ton on carbon would generate some A$11.5 billion in the 2012-2013 fiscal year, Garnaut said.
Mick Davis, chief executive of Xstrata PLC (XTA.LN), one of the world's top- five diversified miners, said a tax on carbon will deter investment.
Noting that sovereign risk is important, Davis said the major diversified miners can prioritize new investments in the most favorable jurisdictions.
These typically offer a stable, predictable and ethical investment climate for the long-term commitment required by the industry, he said.
Projects in more risky countries are inevitably delayed while investment in more stable regions proceeds, he said.
"A sudden imposition of carbon prices, or in this country taxes, has the potential to deliver a shock to capital-intensive industries, especially those that are trade exposed," he said.
"Amongst the range of risks facing us, public policy and its potential unintended or intended consequences are perhaps the most challenging. The carbon debate in Australia is one immediate and important example."
Industry has a legitimate and important role to play in helping to shape a carbon policy to achieve the important objective of reducing emissions without leaving a legacy "that impairs Australia's vibrant, vital and globally competitive mining industry," he said.
Seamus French, chief executive of Anglo American PLC's (AAL.LN) metallurgical coal and minerals unit, said any carbon action taken by Australia must fully protect export industries or it will cost investment and jobs.
He wants a phased approach to the introduction in Australia of any price on carbon and emissions trading scheme as this gives exporters time to prepare and offers a smooth transition without the dislocation of Australia's planned approach.
"This is a multi-generational reform and we need to get the right solution, not the expedient solution," he told the industry conference.
