MAC: Mines and Communities

Australian carbon tax treatment is unfair, claim coal miners

Published by MAC on 2011-07-18
Source: Reuters, PlanetArk

(But then they would, wouldn't they?)

It's not a particularly radical scheme - and one which will ultimately depend on the dubious marketing of carbon permits in around four years time.

However, the Australian government's plan to cut global greenhouse gas emissions has the mining industry in a tizzy. Coal mining companies are resorting to the kind of doom-laden predictions they made a year ago, when threatened by a "super profits" tax. 

In fact, according to one report, the scheme will see coal miners "like global giants Xstrata Ltd, Rio Tinto, BHP Billiton" being eligible for a A$1.3 billion compensation package.

And the tax will add an estimated average of only A$1.80 per metric ton to the cost of mining coal "at a time when coal prices are at near record highs..."


Australian carbon tax treatment unfair - coal miners

James Regan


11 July 2011

SYDNEY - Australia's powerful coal mining industry on Sunday warned it was being unfairly singled out under the country's new carbon emissions trading scheme, predicting it will lead to job losses and fewer collieries at a time when buyers are paying top dollar for coal.

Xstrata, one of the country's biggest coal mining companies, said it was "disappointed at the government's lack of genuine consultation" before unveiling its plan to slap a carbon tax of A$23 a tonne on its 500 worst polluters.

Australia, the world's biggest coking coal exporter, relies on coal to generate 80 percent of its electricity, accounting for 37 percent of national emissions. Coal is also one of the nation's top export earners, worth A$46 billion in overseas sales last year.

Around 40,000 people work in Australian coal mines and a further 100,000 indirectly, according to sector estimates.

Prime Minister Julia Gillard has announced coal miners, steel and aluminium manufacturers and other heavy emitters of carbon gas polluters would pay a A$23 ($24.70) a tonne carbon tax rising annually to A$25.40, before shifting to market-based emissions regime in mid-2015.

Australia is the rich world's worst per capita greenhouse gas emitter due to a heavy reliance on coal-fired power stations for electricity.

Under the plan, some sectors, including aluminium, zinc refining and steel making will be given free permits covering 94.5 percent of average industry emissions for the first three years.

Gillard has also called for the full or part-shut down of the most emissions intensive electricity generators before 2020, removing up to 2,000 megawatts of capacity and replace older coal-fired power stations with cleaner ones.

"The Government has appeased some industries for political expediency but has ignored the concerns of Australia's biggest export industry and all of the small business people and employees who depend on it for their survival," said Ralph Hillman, chief executive of the Australian Coal Association.

"The government and Greens are imposing costs that none of our international competitors face, and cannot be justified in transitioning the Australian industry to a low carbon future," said Mitch Hooke, chief executive of the Minerals Council of Australia.

"It will simply export investment, jobs, global market share and emissions offshore."

The coal sector is worried too that a A$1.3 billion compensation package unveiled by Gillard to help the worst emissions intensive coal mines adjust is inadequate.

"Our concern is how far that is going to go," said Dylan Byrne, partner, head of a national sustainability advisory group for accountancy BDO.

"There are potentially a lot of mines in parts of Australia that will not see any of that money," Byrne said.

Miners are complaining that the added cost to control emissions comes in the midst of an up-cycle in the market.

A benchmark price settlement negotiated by Anglo American was struck at $315 a tonne for the third quarter with Asian mills, just beneath a record high of $330 agreed in the second quarter. Australian thermal coal sells for around $122 a tonne.

Australia's top coal miners, including BHP Billiton, Rio Tinto and Peabody Energy each sell at around the same price.

At the starting point of A$23 a tonne, the tax would increase the cost of making coal by more than A$1.80 per tonne, according to the Australian Coal Association.

The leader of the Australian Greens party, Bob Brown, has infuriated coal miners by saying he would like to see the industry shut down altogether -- a move mining lobbyists predict would cost the economy between A$29-billion and A$36-billion a year.

Alternative energy interests hailed the Gillard plan, predicting it will lift interest in building more wind farms, solar power stations and recycling centres.

"We will see solar on steroids," said John Grimes, chief executive of the Australian Solar Energy Society.

"We are finally penalising pollution and rewarding clean energy. That will deliver substantial investment in solar power and position Australia as a solar nation," Grimes said.

Simon Bennison, chief executive officer of the Association of Mining and Exploration Companies, disagreed: "Australias sovereign risk continues to take a battering, to the detriment of investment, whilst key trading competitor countries continue to emit high levels of carbon dioxide and not incur the same carbon pricing costs as their Australian counterparts," he said.

(Editing by Ed Davies)

Australia Carbon Tax Hits Miners, Airlines

By Michael Perry


12 July 2011

Coal miners, steel firms and airlines were sold off on Monday a day after Australia's unpopular government introduced a carbon tax scheme, while power suppliers warned the tax could risk A$4-6 billion in assets if banks tightened financing.

But economists said the tax on the top 500 carbon polluters would have little impact on economic growth, which is riding on the back of China's appetite for its mineral resources.

Prime Minister Julia Gillard on Sunday unveiled her long awaited climate policy which will see big polluters, including steel and aluminum manufacturers, pay a A$23 a metric ton tax from mid-2012. That will rise by 2.5 percent a year before moving to a market-based trading scheme in 2015.

"The nation's future needs to be a clean energy future. We've opted for the cheapest way of cutting carbon pollution," said Gillard, as she kicked off a nationwide campaign to sell the tax, opposed by most Australians.

Australia's parliament twice rejected attempts to price carbon in 2009. But Gillard, with the support of Green and independent MPs, hopes the latest carbon tax will see her Labor party regain political momentum ahead of elections due by 2013.

Green groups hope the tax package will aid global efforts to fight carbon pollution, largely stalled since U.S. President Barack Obama last year ruled out a federal climate bill during his present term. Outside the European Union, only New Zealand has a national carbon scheme.

Australian stocks were heading for their biggest fall in nearly a month on Monday, dropping 1.5 percent, with coal miners, steel and transport firms such as Macarthur Coal, Bluescope Steel sharply down as investors digested the impact of the tax.

Australian airline shares also tumbled. Qantas said the carbon tax will cost it an estimated A$110 million to A$115 million, while Virgin Australia said it was likely to face a cost impact of A$45 million in fiscal year 2013.

Both airlines said they would pass on the cost to passengers.

Clean energy firms are expected to be the winners from the carbon tax and an associated A$10 billion ($10.7 billion)clean energy package initiative. Geodynamics soared 25 percent and Infigen Energy rose 5 percent on Monday.

Australia Relies on Coal

The scheme, likely to be passed by parliament this year, aims to cut emissions by 5 percent off 2000 levels by 2020. Australia is the developed world's worst per-capita greenhouse gas emitter due to its heavy reliance on cheap coal for power.

Power suppliers said the tax would help retire the worst polluting brown coal power plants, but warned it also put at risk A$4-6 billion in black coal plant assets.

"Our sector has assets that...last 40 to 50 years and have payback periods of 20 to 30 years and are constantly having to be maintained and reinvested in," said Brad Page, chief executive officer of the Energy Supply Association of Australia.

"When it comes to refinancing these facilities, which occurs every few years, the banks will take a very hard view on this. These black coal facilities may struggle if that refinancing is not available to them."

The government plans to set up loan guarantees for electricity generators, to help the industry refinance loans of between A$9 billion and A$10 billion over the next five years.

Power suppliers and manufacturers have warned of rising prices due to the carbon tax. To compensate, the government said more than A$24 billion to be raised from pollution permit sales over three years will go to households through tax cuts.

"Carbon Tax Experiment"

Under the scheme, coal miners like global giants Xstrata Ltd, Rio Tinto, BHP Billiton would be eligible for a A$1.3 billion compensation package.

The tax is estimated to add, on average, a mere A$1.80 per metric ton to the cost of mining coal at a time when coal prices are at near record highs above US$300 a metric ton.

But Rio Tinto said Australia should not impose a price on carbon before its competitors.

"We have to be careful about imposing policy experiments on the Australian economy," said Rio Tinto managing director Australia David Peever.

UBS said, however, it remained a good time to buy Australian mining stocks as issues such as European debt worries, Chinese economic tightening and U.S. quantitative easing were abating.

(Editing by Ed Davies and Miral Fahmy)

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