Carbon tax will eat car grants, says industry

LABOR'S latest grants to the struggling Australian car industry risk being undermined by its own clean energy plans, with millions of dollars of the subsidies to be eaten up by the carbon tax and higher electricity costs associated with the new regime.

Anger in the industry over the impact of the carbon tax - and the fact that domestic manufacturers will have to absorb the cost while many importers will not - has permeated negotiations as the government has sought commitments from Ford and General Motors Holden to continue their operations in Australia.

Manufacturing Minister Kim Carr clinched a deal with Ford in Detroit this week, agreeing to contribute $34 million of federal government funds towards a $103m package to improve the efficiency of its local cars and maintain its Australian operations to 2016.

But calculations based on Ford's previous emissions suggest that, when the $23-a-tonne carbon tax begins on July 1, its maximum bill for direct emissions may be $3.3m over the next four years.

It could also pay a maximum $19.8m in higher prices as the cost of the carbon tax is passed on by suppliers, particularly electricity providers.

The government is adamant the final carbon tax bill will be significantly lower for Ford and all other car companies because not all of its operations are in facilities that emit more than 25,000 tonnes of carbon dioxide, the liability threshold for the carbon tax.

The government also believes that Ford's indirect costs will be much lower as the full cost of the carbon tax price will not be passed on by suppliers of electricity or other components.

Federal Chamber of Automotive Industries chief executive Ian Chalmers said that the carbon tax was expected to cost the local manufacturers $50m-$60m over the next four years. He said this would have to be absorbed because many imported cars were not facing a comparable carbon pricing regime.

Opposition climate action spokesman Greg Hunt said Ford's potential carbon tax liabilities showed the "senselessness of the government's policies".

"On one hand, they are handing out taxpayers' money to supposedly protect jobs, while on the other they are taking back that money via the carbon tax," he said. "It is a ridiculous situation and will . . . put Australian jobs at risk."

Senator's Carr's rescue mission to Detroit comes as the local industry has been hit by the high Australian dollar, which has made foreign-made cars more attractive, and a global economic downturn that has stymied exports.

Senator Carr and the South Australian government are negotiating with General Motors to maintain its local operations, with a deal that could be as high as $100m. Based on the same emissions calculations, Holden's domestic operations could face a worst-case scenario of $3.1m in carbon tax over four years for direct emissions and $11.6m for indirect emissions.

Toyota, the only other local car manufacturer, faces up to $4.1m for direct emissions and $12.6m for indirect emissions. However, the actual carbon tax liabilities are expected to be much lower.

A spokeswoman for Climate Change Minister Greg Combet said it could be misleading to use company-wide emissions data, possibly aggregated from a few facilities, to determine the cost exposure of a particular facility. Facilities such as manufacturing plants will not have to pay the carbon tax if they produce less than 25,000 tonnes of CO2 a year. "Due to individual facility-level coverage thresholds, not all direct carbon emissions will be subject to liability under the carbon pricing mechanism," Mr Combet said.

"In addition, 'Scope 2' electricity emissions reported in states with highly emissions-intensive generators, such as in Victoria, will significantly overstate the cost pass-through of a carbon price. It is also important to note that key emissions intensive inputs into car manufacturing, such as aluminium, steel and glass, will be provided 94.5 per cent assistance in free permits under the Jobs and Competitiveness Program."

The South Australian Liberal opposition said yesterday any state taxpayer funds used to prop up Holden's ailing Elizabeth plant should be used as a carbon tax subsidy, as the company faced massive increases in costs from July.

Opposition industry spokesman Steven Marshall said Holden's South Australian plant, which builds the Commodore and Cruze, would be the first victim of the carbon tax when it came into operation on July 1.

Last June, Holden managing director Mike Devereux estimated a carbon price of between $20 and $30 a tonne would raise the company's costs by $40m to $50m.


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