What has been obscured by the carbon debate

The dreaded carbon tax came into being this week as the new financial year started. According to the most recent Fairfax/Nielsen poll, nearly one in three people are opposed to the tax while just over half think that we will be worse off under the new regime.

The government is betting that now that the tax has been introduced, it will become part of the scenery. It bases this view on history – the goods and services tax introduced in 2000 was much reviled initially but is now accepted as a cost of doing business.

Perhaps the carbon tax will go the same way. It is true that by any measure we should be well and truly over it by now, after all, while it only came in this week there’s been so much debate about it over the past few years that it feels as though it’s been around forever. And voter sentiment is fickle; the Gillard government got boxed into implementing a carbon tax precisely because of the way voters reacted when Kevin Rudd backed down from pricing carbon.

But what will really matter in terms of whether the tax is accepted is who will be more skilful at playing the political game, the government or the opposition. So far the opposition has had the upper hand and it is unlikely to let go of it.

Business reaction to the carbon tax has been mixed. A significant group, particularly those at the top end of town, have their head and hearts around it. For these companies, pricing carbon has been inevitable and the years of debate have given them time to adapt their business models and even gain sight of opportunities.

For others, particularly small business that are struggling in the current environment, the tax is just another impost that may make their end products more expensive in what is for consumers, now a global market. The potential for it to be repealed should Tony Abbott make good on his promise – indeed, his “pledge in blood” – to abolish it should he win at the next election, makes it even more confusing for business.

So let’s cut through the debate to make it clear for business. Like it or not, the amount of carbon emitted in this economy will be cut one way or the other. While Abbott makes noises about repealing the tax, and may do so, he’s already committed to a direct action scheme to reduce carbon emissions by 5 per cent by 2020. This will be funded by an emissions reduction fund that in effect will provide incentives for high-emitting industries to reduce their emissions. Getting high emitters to change their business processes will have a flow-on effect down the supply chain and an impact on smaller businesses.

BRW says the smartest option for business is to consider how to operate in a low-carbon environment. Think about the biggest risks and the biggest opportunities. While a change in government may mean a change in the mechanism used to cut carbon, it will not mean the end of the issue.

What is most ironic in the debate is that both parties accept the need to reduce carbon but have come up with widely different ways of approaching it. For a variety of political reasons they have avoided what most economists say will be the most low cost way of cutting carbon – using the market to establish price via an emissions trading scheme.

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