Ongoing uncertainty over carbon pricing

Ernst & Young have released a report, part of which makes comment regarding uncertainty over the current Carbon Pricing Mechanism (CPM).


The report states that with plans of the potential new federal government to repeal the carbon tax while the present government plans to accelerate the carbon pricing mechanism, businesses currently find themselves in limbo.


“It’s no surprise then that businesses find themselves in a ‘holding bay’, delaying strategic decisions or investments because they are uncertain about the future existence of a carbon price or the structure of any alternative carbon policy – particularly in the short-term,” the report reads.


While there is a live debate about the respective merits of the two policies, one point is clear: the ongoing debate means ongoing uncertainty about the future policy environment in which businesses will have to operate. This uncertainty is damaging, especially in the electricity sector, as businesses require a level of certainty to plan and invest for the future. Australia urgently needs to agree on a policy framework for responding to the challenge of climate change.


“Appropriately designed, carbon pricing is the most effective way of achieving least-cost abatement, particularly in the long-term. It can drive the cheapest abatement options across the economy, and avoid many of the administrative burdens and inefficiencies found with more interventionist government policies.


“As a matter or urgency, the incoming Government will need to clarify the new carbon rules for business under its respective policies. It will also need to consider how it will achieve Australia’s commitment to meet the agreed 2020 emissions reduction target.


“In addition, both parties must commit to supporting companies that have already taken or are currently taking abatement activities.


“It is also critical that any changes to policy leverage off the effort already invested by the business community in assisting the set up of the CPM (and in some circumstances the previously proposed Carbon Pollution Reduction Scheme).”


Ensuring Australia’s economic sustainability: Government Agenda — 2014

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