Two days after the federal government announced plans to scrap the floor price on the carbon tax and link its carbon trading to the European Union trading system in 2015, large Australian polluters said they prefer to be connected instead to the carbon trading systems of the U.S. and China.
John Hannagan, chairman of Rusal which is the world's largest aluminium producer, said Aussie carbon emitters would rather be linked to countries where its trading partners are located.
"If you are going to trade and link yourself to a trading system that's outside our major trading activity, what you are doing is adding to our cost and making us less competitive into the markets where we need to be extremely competitive," The Australian quoted Mr Hannagan.
He said by linking with the EU trading system, Australia will be handling over control of competitiveness of its economy to bureaucrats and politicians in Europe.
While Bluescope Steel Chairman Graham Kraehe called the removal of the $15 per tonne carbon floor price a small step in the right direction, he said the move completely fails to address the larger issue which is Aussie businesses struggling for the next three years to compete amid a high Australian dollar, high operating cost and excessive regulation while paying the highest carbon price in the world.
However, the office of Climate Change Minister Greg Combet belied the Opposition's claim, which the large emitters are citing, that Australia's $23 carbon tax is the highest in the world. Mr Combet's spokesman pointed to the $61 per tonner carbon tax on petrol collected by Norway, the $138 tax on heating fuel charged by Sweden, the $24 carbon tax of Sweden, fuel taxes ranging from $36 to $72 imposed by Finland and the $29 carbon tax collected by the Canadian province of British Columbia.
The spokesman added that aluminium and steel companies would actually not pay $23 but are given discounts of $1.30 a tonne.
Mr Combet explained that the removal of the floor price would not drastically affect the federal budget since its impact would be mitigated by fluctuations in currency exchange rates. He cited studies which said that cutting the carbon price to $15 in 2015 would affect government income that year by only 0.5 per cent.
Mr Combet added that Treasury modeling forecast a $29 per tonne carbon price in 2015, so the scrapping of the floor price would hardly affect Australia's fiscal position.
Coalition leader Tony Abbott warned that with the changes, if the EU carbon price will increase, it will devastate the Australian economy, but if it will go down, the federal budget will take a hit.
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