Carbon pricing: the benefit for business

The debate around Carbon Pricing, and the currently shelved Emissions Trading Scheme (ETS), rages on.

This week and for some time now Origin Energy's Managing Director Grant King has been presenting a vociferous view on what the failure of placing a price on carbon will achieve for the Australian energy industry.

Origin Energy places the simple premise that without a carbon price in place (essentially a tax) that coal will remain the most economically viable fuel to generate electricity with - and presently also the dirtiest.

The observation is that all other generation methods, including gas, become cost prohibitive when compared to coal.  What this means is that for the short and medium term, the Australian energy industry will struggle to invest in new generation projects away from new coal fired power stations.

To put the development of new gas fired, nuclear or renewable generation methods back on the table, a carbon price of around $20-40 per tonne needs to be put in place.

Tim Wolfenden, CEO of Make It Cheaper: "Where customers are concerned, this issue is immensely confusing.  They are simply being told that this is a tax, it will increase the cost of consumer goods and electricity, and consumers see taxes as being bad.

On the flip side, without clear direction from the government, Australia will remain heavily dependent on coal in the short and medium term.  So whilst the rest of the world moves ahead with exploring new generation methods, Australia will be left behind.

Equally, as demand for coal within the export market continues to grow, it will have an undoubted impact on the price of coal within Australia, driving it upwards."

There are two choices:

1) Take the hit of increased electricity costs over the next 15 years by putting in place carbon pricing, and therefore create sustainability of supply, and more certainty in pricing, or

2) Keep the status quo, don't invest, and be faced with an enormous bill in 15-20 years time, a bill that future generations will have to foot

Wolfenden comments: "This is an issue that has been poorly explained to the Australian consumer, over simplified by the opposition, and now there's a great big stop sign in-front of investors."

Businesses need clarity, both in terms of investment, put also in terms of how their cost base will change, and the impact it will have on their bottom line. At the moment there's just too much uncertainty."