The grocery industry is lobbying for a carbon tax to be applied to imports as a way of protecting local manufacturers competing with nations that do not have emissions trading.
Food industry manufacturers are not likely to benefit from the compensation promised by the Rudd Government for emissions-intensive sectors that are exposed to trade competition, such as the aluminium, steel and paper industries.
The Government’s green paper suggests that 30% of permits will be granted to these industries free of charge.
However, the submission by the Australian Food and Grocery Council (AFGC) has said that this would be harsh for businesses with just below the lowest threshold for assistance — that is, businesses emitting 1500 tonnes of carbon for every million dollars of revenue.
“The activity will face a significant increase in costs and will rapidly lose market share to the existing importers, or other producers in export markets,” the submission said. “The viability of current facilities would be threatened and potential future investment put on hold.”
It argued that an import tax would be fairer than handing out free permits to just a few industries and noted that the proposed initial allocation of free permits still leaves emissions-intensive industries having to buy emissions permits for any new investment, putting them at a competitive disadvantage.
The Government’s green paper considered the idea of carbon taxes and of exempting exports from the impost of emissions trading, but concluded it would be too complicated.
In the case of an import tax, it said it would require tracking all the inputs used in the production of imports to work out how much embedded carbon they contain.
Working out what the carbon content is in a manufactured item using components from various countries would be too difficult, the green paper said.
It also opposed the idea, advanced by one of the founders of Access Economics, Geoff Carmody, for treating carbon like the GST, and rebating payments made by exporters.
Industry response to the green paper has emphasised the need for global agreement if Australia is to avoid being undermined by business competition.