Australia is the world's largest exporter of iron ore, black coal, alumina, lead and zinc and the second largest exporter of uranium. It is also a leading producer of bauxite, alumina, rutile, and tantalum, among other minerals.
Exporters such as steel producers and aluminium smelters will receive 94.5% of carbon permits for free, while moderate emitting exporters will receive 66% for free.
Here is an assessment of the impact on key Australian industries:
Coal
The Australian government estimates initially the average impact on coal mining will be approximately AUD 1.8 for each tonne of coal produced. However this amount is likely to be more for coal mines with higher fugitive gas emissions.
Australian Coal Association chairman Mr John Pegler said the carbon tax could force the premature closure of 17% of current black coal mines in Australia. He added that "The carbon tax will put at risk over 21,000 jobs within 10 years in coal mining and related businesses."
He said that underground coal mines in NSW face the greatest threat, with 12 of the 30 current mines at risk of premature closure.
Even if a mining or exploration company does not directly fall within the carbon price scheme, and is therefore not directly liable to pay the carbon price on their emissions, there will still be an impact on their cost of carrying out mining and exploration activities due to general cost increases likely to be caused by the introduction of the scheme.
Research suggests modest EPS impacts overall, with domestically focused coal miner Macarthur Coal feeling the pinch more than diversified miners Rio Tinto, Xstrata and BHP Billiton.
Aluminum
Aluminum smelting, a so called emissions intensive trade exposed industry, faces pressures from the carbon price.
Electricity comprises 30% of aluminum smelting costs. Predominantly powered by brown and black coal, Australia has some of the world's highest emissions generating electricity.
Producers argue the cost hikes would leave them struggling to compete internationally.
From a strictly environmental standpoint, some argue this is desirable on balance, because their output is likely to be replaced by facilities overseas with substantially lower greenhouse gas emissions intensity.
Australian Aluminum Association Executive director Mr Miles Prosser disagrees, saying that if a carbon price reduces production and investment in Australian facilities, the increase in production elsewhere could be less energy efficient. He added that "The increase in other countries' greenhouse gas emissions will wipe out any apparent reductions here in Australia."
Iron Ore
Every bit of iron ore used to produce a tonne of steel gives rise to an average of about two tonnes of greenhouse gas emissions, partly due to mining and transport, but mostly due to smelting and refining with coking coal.
Iron ore power houses Rio Tinto, BHP and Fortescue Metals Group have raised concerns over added costs associated with the carbon plan. Unlike in the aluminium sector there doesn't appear to be a threat to expansion in the sector.
Rio is accelerating a program to lift output by 50% to 333 million tonnes a year by 2015. BHP is aiming for a 37% rise in production to 220 million tonnes by around the same time and Fortescue is tripling output to 155 million.
Steel
A so called steel transformation plan provides AUD 300 million support package over the first four years of the carbon plan to minimize the financial impact on steelmakers.
BlueScope Steel, Australia's largest steelmaker, says 80% of its greenhouse gas emissions come form the use of coal and that its ability to abate these emissions is limited given a lack of alternative technology available
Electricity
Power generators such as Macquarie Generation, Delta Electricity and Great Energy Alliance Corp dominate the list of biggest polluters
Power suppliers believe pricing carbon will help retire the worst polluting brown coal power plants, but have also warned it puts at economic risk UAD 4 to AUD 6 billion in black coal plant assets.
The government plans to set up loan guarantees for electricity generators, to help the industry refinance loans of between AUD 9 billion and AUD 10 billion over the next five years.
Bill expected to boost trading in longer dated contracts in the country's AUD 20 billion a year electricity futures market.
LNG
While adding another layer to mounting costs in the liquefied natural gas sector, impact on new projects estimated to cost AUD 200 billion is viewed minimal.
The impacts of the tax will vary across projects as each LNG project emits different levels of carbon based on the amount of energy used to extract, cool, and transport the gas.
A carbon tax could hurt gas exporters, including Woodside Petroleum, because it will apply to emissions from the liquefaction process.
Clean Energy
Beneficiaries include Australian band of renewable energy companies, given that the government's creation of a AUD 10 billion fund to finance clean energy projects and technologies.
Listed clean energy stocks include wind power firm Infigen Energy and those with exposure to wind projects such as Transfield Services Infrastructure Fund. Major generators with large renewable energy investments include Origin Energy.
(Sourced from www.canberratimes.com.au)
