<a href="http://www.greenlifestylemag.com.au/blogs/leon#">The Business of Green</a>

The Business of Green

Money matters in the green world, by Leon Gettler.

Business, Abbott and carbon futures

Green business

Credit: iStockphoto

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The passage of the carbon pricing regime this week in the House of Representatives is one of the biggest changes ever to the Australian economy. It’s right up there with the floating of the dollar and the introduction of the GST.

But the big question now is how will it affect business? Certainly business groups have campaigned against the changes but there was no way the Gillard government would back off, they had invested too much into the change. Many businesses out there thought it wasn't going to get up. I remember conversations with them where I said it would get up and they said, I’ll believe it when I see it, anything can happen. As a result, many don't have that good an understanding of what's in the package. It's a wake up call and there are lots of business people, none of them Labor voters, who are going to be on a steep learning curve.

Richard Denniss, executive director of the Australia Institute points to the rank hypocrisy of businesses. Remember for example when BHP boss Marius Klopper said it would kill the coal industry? Poor poor BHP.

In the same week that the carbon legislation was passed, the government approved the expansion of BHP Billiton’s Olympic Dam and BHP has agreed to $1.2 billion worth of preliminary spending on the project and is working out how much more to invest. So much for the end of the mining industry!

It’s a point taken up by Denniss. “The concept of irony just doesn’t do justice to the twists, turns, deceit and rank hypocrisy that has accompanied the long, slow road to the introduction of a price on carbon in Australia. It will be the end of the mining industry, we are told on page one of our newspapers, while the business pages are full of the expansion plans and record profits of the same companies doing the whingeing. It will drive manufacturing jobs offshore, cry the pro-pollution lobby, but don’t worry if the mining boom is far more effective at causing exactly the same problem. Any modest restructuring of the Australian economy associated with tackling a global problem is, it seems, to be avoided at all costs. But any major restructuring associated with a short-term boom in commodity prices is simply the price we must pay for progress, or the progress of those who own billions of dollars worth of mining shares at least.”

So what’s the impact on business? Giles Parkinson at Climate Spectator interviewed a number of people involved in the debate, including people from business and the view there is that this is just the beginning, we have a long way to go.

As Martijn Wilder, head of climate change practice at law firm Baker & McKenzie put it: “Past experience has shown us that until legislation is actually law, the majority of companies will not start to engage. But once it gets passed Senate, you will see an acceleration of a lot of activities. At the moment there is a lot of discussion about what can be done, investing in the carbon farming initiative, investment in renewables. Some of the very sophisticated players are moving quite quickly to secure their offsets and suppliers. But the majority of corporates will probably not engage on this before July next year.”

The Coalition says that they will get rid of the tax when they get to office. But as Smart Company editor James Thomson says, that would be a mistake because the legislation finally gives business some certainty. Small business wants to know what it will cost them so they can plan around it.

Thomson writes: “When SMEs get this information, they'll be able to better judge the impact of the tax and start preparing for July 2012 when the new regime will come into force. Exactly how much work will be involved in this preparation process is unclear, although pricing will need to be re-examined within most businesses. But once SMEs get ready and once the system is in place, I'm not sure whether small and medium businesses will actually welcome the prospect of the whole thing being repealed by an Abbott government. Repealing the carbon tax would result in SMEs chopping and changing systems, reworking forecasts and internal modelling and potentially restructuring parts of their businesses – and all of this just 12 months after having done exactly the same thing to get ready for the carbon tax start date. For SMEs, planning and strategising is hard enough at the best of times. Planning in an environment where political uncertainty is being heaped on top of economic uncertainty is ridiculous.”

It would be political suicide to repeal tax legislation after it's been in effect for some time, after businesses have invested in carbon minimisation and bought carbon credits, and after pensioners and households have been receiving compensation benefits.

There is also the little matter of needing a Senate majority if Labor lost the election. With a likely Greens majority in the Senate, it would take at least two elections for Abbott to make good on his “blood” pledge, and that’s assuming he’d still be around as PM.

That’s why the Coalition, for all its rhetoric, is unlikely to get rid of it. The new carbon pricing regime is an important change for Australia because for the first time in Australian history, our largest businesses will have to operate under a limit on the amount of carbon pollution they produce. There’s no going back.