Carbon Tax in the Australian Industries


Ladies and gentlemen, I wish to provide an analysis of the impacts, advantages, disadvantages and recommendation for the carbon tax on the Australian manufacturing industry. The impacts of carbon taxes on the manufacturing industry in Australia cannot be underestimated. Big corporations certainly play an important role in the growth and development of the Australian economy, and they are becoming increasingly popular. The reasons for this are not particularly hard to discern. Big corporations are of significant benefits to regions, with job generation, knowledge spillovers, economic multipliers, innovation drivers, and cluster developments. The exact effects of carbon tax policies on these big corporations in Australia have generated heated debates in the recent past. These have been precipitated by the impacts of carbon taxes on the growth and development of the Australian manufacturing industry. Imposing further tax on such an important sector in an economy remains a concern to industry players.

Macro and Macro Economic Impacts

On Macro Economic Impacts, all carbon price modeling, including modeling of previous carbon price designs, shows limited impacts at the national macroeconomic level.

The Commonwealth Treasury modeling indicates that the macroeconomic impact of the carbon tax on the Western Australian economy is relatively minor.

However, Gross State Product (GSP) is estimated to be 0.3% lower in 2020 and 2.8% lower in 2050 when compared to a scenario without a carbon tax.

The emissions intensity of Western Australian output is estimated to decline under the carbon tax, from around 0.4 kg CO2-e/$ in 2010 to around 0.2 kg CO2-e/$ by 2050.

The analysis of the Micro Economic Impacts reveals that macroeconomic impacts can be described as relatively minor.

There is insignificant reduction in emissions domestically; and the transfer of income from Australia to other countries that occurs due to the need to purchase international permits

Impact of carbon Tax on Australian Steel Industry

In the Steel industry, the impact of carbon industry remains real and a major concern to industry players.

This is an industry where a bigger proportion of revenue is derived from domestic manufacturing, carbon tax would definitely work against the Steel manufacturers.

In February 22, Mr. Plummer, the Chief executive at OneSteel noted “If we have a carbon tax at $20 a tone, then that would be a drain of about $20 million to $30 million on OneSteel.”

The case in no different from BlueScope, whose stock has fallen about 28 per cent this year versus 17 per cent for OneSteel.

The uncertainty presented by carbon tax puts Steel manufacturing company at a time when the entire economy is grappling with challenges posed by the strengthening of the Australian dollar.

Impact of Carbon Tax on the Car Manufacturing Industry

For the car manufacturing industry, the carbon tax would directly impact on the industry itself, not the consumers.

Toyota Australia argue that carbon tax is expected to raise their manufacturing costs by $15 million per year, this translates to approximately $112 per each locally manufactured car.

The $150-a-car carbon bill to impact Aussie motor company bottom lines, not consumers

In fact, the strong competition from imports is expected to force Australia’s three motor manufacturers to absorb the extra cost of the carbon tax – estimated to be between $112 and $150 a car – rather than try to pass it on to customers.

Industry players argue the tax will further erode the profitability of the manufacturers, who are “bleeding from the eyes” due to the high value of the Australian dollar that aids importers and discourages exports.

The Airline Industry

The Australian Airline industry is not spared by the impacts of the carbon tax.

Industry players argue that setting goals for capping emissions remains a viable path because carbon tax will disproportionately distort the aviation industry. This is because the airline industry is one of the biggest consumers of fuel.

Qantas alone spends $3 billion on aviation fuel, which could easily transfer over to sustainable fuels, as opposed to levying more taxes on a struggling industry facing stiff competition and other regulatory measures.

In brief, Australia should not go it alone on a carbon tax that will negatively affect airlines and instead invest in sustainable fuels to help beat emissions.

Advantages of Carbon Taxes

The underlying reasons for the introduction of carbon taxes was aimed at capping greenhouse emissions.

It results to less polluting by ensuring reduction of carbon dioxide emissions.

They can ensure higher levels of safety for workers in the manufacturing industry.

They are permanent incentives aimed at carbon emission reduction and do not shift with market dynamics.

Carbon taxes are not influenced by strategic behavior of manufacturing firms that are aimed at benefitting from changes in industry regulations.

Carbon taxes are transparent and economically efficient. This forms the underlying reason behind the ability to have wide coverage.

They are critical sources of revenue. This may enhance the capacity of the Australian government to reduce taxes in some areas, or make use of carbon taxes in other critical areas of the economy.

Disadvantages of Carbon Taxes

The understanding is that carbon taxes have the following disadvantages

Carbon tax encourages outsourcing, off-sourcing and near sourcing as companies struggle to control costs.

Political vulnerability makes the coming of the best outcomes in question. The level at which carbon taxes have the capacity to produce best outcomes remains unknown in the beginning. This may call for a number of adjustments before the best outcomes are achieved.

The examination of the same applications in Europe, where lobby groups have managed to gain exemptions on heavily affected manufacturers.

Carbon taxes negatively impacts on foreign investments. It raises tax levels for manufacturing industries and may lead to mass exodus and relocation to areas that do not have such tax policies.

It has failed to attract support international as the best choice in dealing with the issue of greenhouse gas emissions (Kelly, 2011). In fact, international community seems to prefer other strategies in achieving a balance between internal trade and environmental control.

The carbon taxes are considered retrogressive and thwart economic gains recorded in the past decades.

It is seen that despite the ability to present numerous advantages, it is encompassed by a number of limitations that raises questions on its ability to significantly play a role in the reduction of greenhouse gas emissions.


Hammerton, R. 2011. Car-makers ‘to wear carbon tax cost’. Web.

Harper, A. 2010. Carbon tax bad for airlines: Qantas boss. The Sidney Morning Herald. 2010. p. 4.

Kelly, J. 2011. Carbon tax: Coal and steel among big polluters getting assistance. The Australian, 2011. P. 6b.

Parliament of Australia. 2010. Carbon Taxes. Web.

Shanahan, D. and Balogh, S., 2011. No warming to climate plan. The Australian, P. 6.

Wilson, L., 2011. Carbon tax effect on key industries negligible says Treasurer. The Australian, P. 4b.

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