When Julia Gillard announced the details of the proposed carbon tax on July 10, a nation of investors collectively raised and dropped their shoulders at the potential implications it is to have on the economy and, namely, the resources sector.
Questions were raised: Will the carbon tax put our resources companies on an uneven playing field with their global competitors? Will this mean the end of the global demand for Australian resources?
Forecasts were quickly made, some company chiefs shaking their heads, others, agreeing it is the right way forward.
Four days later, Standard & Poor's Ratings Services said there was no immediate impact on its ratings on Australian energy companies.
"We note that the scheme is yet to be passed through parliament," a spokesman said.
"We believe that the long-term impact of the tax on market competitiveness will differ between sectors. Companies that are solely focused on generation are likely to face more immediate challenges during the transition period, especially carbon-intensive coal generators and companies with near-term refinancing requirements."
The agency expects the industry as a whole to substantially pass through additional costs, as evidenced by recent regulatory outcomes that specifically enable companies to do so.
"In our view, the risks introduced by this new policy can be mitigated in the long term through careful planning, including managing the timing of investments in new generation or retirement of the more carbon-intensive plants. The management of these factors will be important for the medium-to-long term competitiveness of these companies, and therefore their rating stability."
Natural gas distribution company Limited
(ASX:ENV) doesn't believe the tax will have a material impact on its business. A spokesman said this was on the basis that it had always been understood that upon the introduction of a carbon tax, the company would be entitled to pass through any additional cost.
As the Australian Energy Regulator indicated the carbon tax would qualify as a ‘tax change event', it would enable Envestra to recover the additional cost through its network changes.
"Envestra also notes there could be an inflation effect on supplies purchased by the company; however, this is not expected to be material," the spokesman said.
Syngas Limited
(ASX:SYS) supported the carbon tax plan, and said the plan will support the delivery of Biomass to energy products under development by the company.
Earth Heat Resources Limited
(ASX:EHR) said it was pleased that the clean energy sector is now positioned to benefit most from the policy.
Alumina Limited
(ASX:AWC), like many companies, said it can't accurately determine the financial and operational impact until the finer details emerge.
The Australian Petroleum Production & Exploration Association (APPEA), which is the peak body representing Australia's gas industry, said that although the carbon policy does recognise the role of gas within Australia, it does little to protect the competitiveness of Australia's gas export industry. Rather, it does more to secure a strong future for liquefied natural gas (LNG) producers in Qatar, Malaysia, and Indonesia.
The association's chief executive, Belinda Robinson, said that while the Government is frequently willing to laud the role gas can play in reducing Australian greenhouse gas emissions, it is clear that this acceptance does not extend to export gas.
"The export gas industry rejects the politically motivated label of ‘big polluter' when for every tonne of emissions produced in liquefying natural gas, up to nine and a half tonnes are removed from the atmosphere when substituted for coal in customer countries.
"Whether used in Australia or exported, gas has a big part to play in reducing global emissions and there is no rational reason for a policy that sees Australian gas use increase but exports constrained."
A recent Macquarie Equities report found nine of the world's 10 most expensive (new and proposed) LNG projects are in Australia. The same report said: "Australian projects are not well placed if cost pressures continue to build".
Reports like this fuel backlash from the gas industry towards the government.
"Fiscal and labour cost pressures already make Australian LNG projects the most expensive in the world and the announcement hurts the industry's competitiveness even more; and without decreasing net global emissions," Ms Robinson said.
Steering away from energy and towards minerals, the reception to the proposed tax scheme has a different tone, albeit still disapproving.
Minerals Council of Australia chief executive, Mitchell Hooke, said the tax package was a very poor investment in Australia's environmental and economic future.
"It is an exercise in revenue-churn futility, not a credible or effective climate change policy," he said.
Considering no other nation has implemented an economy-wide carbon tax, Mr Hooke said it was a dangerous experiment with the Australian economy.
"It will impose the highest carbon price in the world, compromising the competitiveness of Australia's export and import competing sectors without environmental benefit.
"The design of this new tax scheme is wrong. Australian industry is being hit with the world's biggest carbon tax to fund a package that will not reduce greenhouse gas emissions."
The Minerals Council of Australia estimates that under the carbon tax package, the minerals industry will face costs of $25 billion between 2012 and 2020.
Mr Hooke fears it will export investment, jobs, global market share and emissions offshore.
"Ninety per cent of Australia's minerals exports receive no safeguarding under this scheme. They will pay the full carbon price ahead of all their international competitors," he said.
Likewise, the Association of Mining and Exploration Companies said that there will be much pain for little environmental gain under the proposed carbon pricing regime.
Chief executive Simon Bennison, said the carbon price combined with the fuel rebate reduction effectively results in double taxation of the mining and exploration sectors where they also meet the carbon tax threshold.
"The cumulative impact of the carbon tax and the proposed MRRT will detrimentally affect our international competitiveness.
"Whatever way you look at it, the Australian minerals exploration and mining sector will be faced with extra costs in doing business as a result of the carbon pricing mechanism."
Rio Tinto
(ASX:RIO) staunchly echoed Mr Bennison's sentiment. Managing director for Australia, David Peever, warned that the carbon tax is an unfair tax on exporters.
"We have to be careful about imposing policy experiments," he said. "The scheme places an arbitrary cost on Australian exporters that is not aligned with the cost being borne by competitors."
If the Labor government wins the support of the Greens and the independents and passes its legislation, the carbon tax will come into effect from July 1, 2012.
