Is it time to panic about the Carbon Tax yet?

With the launch of the Carbon Tax you need to be well prepared for it. There are two aspects for businesses – what costs are going to increase / how to manage these and secondly how (and if) these costs can be passed on to customers.

Nuts and bolts of it

As part of the government’s Clean Energy Future Plan, the carbon tax was 1 July 2012. Only 294 of Australia’s largest polluters will be required to pay a price on carbon, fewer than the 500 initially earmarked for the scheme. These polluters have been busy for the last few months modelling the effect on there business and are ready to pass these costs on to their customers.

The government intends to reduce these impacts through a range of tax changes, offsets and business support. For example, 50% of the money generated from the carbon tax will be used to compensate households for any increase in the cost of living, via tax cuts or increases to family benefits or social security. The rest will be reinvested into clean energy technology and renewable energy projects.

What and by how much are costs going to increase?

The impact with regard to the additional costs a business pays will be difficult to ascertain. Every business will be different in terms of their energy intensity. To predict the impact on a business depends on what the business is and the supply chain of that business.

Although most businesses won’t directly pay a carbon price, it will have a flow-on effect to a number of energy related goods and services such as fuel and electricity. Plus all their usual suppliers will face these increases too, and seek to pass these extra costs on in the form of higher prices for goods and services supplied.

Business owners must recognise that although the carbon tax will have flow-on effects to goods and services they need, there are practical steps that can be taken now to minimise the impact.

What can we do?

There are a number of strategies to implement to try and manage the new carbon tax:

1. Review your current expenses and those incurred over the past year to identify energy-intensive costs that will be affected by the inevitable energy price rises, such as fuel, electricity and gas business travel, freight and waste removal and try and understand where additional costs may be incurred.

2. Explore ways to reduce your consumption of goods and services expected to be directly and indirectly affected by the carbon tax eg switch to solar power, smaller vehicles, upgrading equipment etc.

3. Look at paying suppliers early at pre-carbon tax rates.

4. Have an energy audit undertaken.

5. Investigate the potential for access the $10 billion clean energy fund and other incentives that the Government is offering. See http://www.cleanenergyfuture.gov.au/helping-business/business-and-a-clean-energy-future/

Can we increase our prices?

The above steps will prepare you by having identified additional costs and put you in a good position to justify any price increases you will need to implement. The ability to pass on these costs will depend on whether your customer will accept these or look to the market for a better deal. Remember if you do not increase your prices on you will be facing extra costs with no additional income.

There is the Australian Competition and Consumer Commission website for information including a telephone hotline for carbon price complaints and inquiries. See http://www.accc.gov.au/content/index.phtml/itemId/1039050#toc14

With environmental responsibility becoming increasingly important in customers’ eyes, also consider how you can best promote initiatives to reduce your carbon footprint eg your website, email signature, newsletters and social media avenues.

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