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Carbon tax

July 2011

Recent media attention on the proposed carbon price has highlighted how regulatory change can impact industry, and in this section Peter Castellas hones in on the agribusiness perspective and possible implications.

Although there is uncertainty regarding the details of the Federal Government’s proposed carbon price, direct farm emissions have been excluded (for the time being) from coverage, and so farmers do not face the immediate prospect of paying a carbon ‘tax’. However, the input cost to farmers that are passed on by other businesses will increase as a consequence of the imposition of a carbon price. Farmers who operate in the export arena do not have the opportunity to pass on higher costs to consumers or to buyers in international markets. Therefore a carbon price will potentially have a direct bottom-line impact on farm business profitability, even without a carbon price being imposed on agricultural emissions. 

Agribusiness, with its unique position as both a producer and capturer of carbon, will no doubt have several challenges whichever way the regulations fall. There is however a real possibility that there will be an impost at some point and the timing points to the medium term.

Importantly for the agricultural sector, the Federal Government has also introduced legislation for the Carbon Farming Initiative. The Carbon Farming Initiative presents opportunities for low cost abatement and will establish a market for agricultural offsets for eligible land sector abatement activities. Permits are generated through sequestration or carbon abatement activities. Once verified, that credit can be traded in international and domestic markets. With a strong carbon price there will be a strong incentive for farmers to investigate carbon abatement initiatives. Therefore the agricultural sector can potentially benefit by generating new revenue streams under the Carbon Farming legislation.

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