While the carbon tax poses little immediate threat to the Australian mining industry, experts believe it is another constraint making Australia a less attractive investment prospect for foreign companies.
The carbon tax, which will be implemented on July 1, will require 500 heavy polluters to pay $23 per tonne of carbon they produce and, according to the most recent projections, more than 80 of the 500 businesses listed to pay the carbon tax are mining companies.
Companies and industry experts are concerned the scheme will ultimately weaken the industry and its ability to ensure multinational investment in Australian minerals.
In the meantime, individual mining companies have developed schemes to reduce emissions but increasing production is the priority — prompting calls for a national minerals policy.
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Damien Giurco, associate professor and research director of the Institute of Sustainable Futures at the University of Technology Sydney, told Crikey the main threat the mining industry faced was the nature of mining companies operating in Australia.
“The concept of an ‘Australian mining industry’ is not as dominant today as it was several decades ago — now Australia hosts several foreign-owned multi-national companies and if conditions are better elsewhere they will invest there,” Giurco said.
Giurco said Australia faced immense pressure from the global mining community: “Depending on the commodity, there is competition from Africa, Mongolia, South America, Afghanistan.”
Rio Tinto believes the carbon tax will limit Australia’s ability to compete with international suppliers. According to spokesperson Bruce Tobin: “The Australian government’s carbon tax will undermine the nation’s international competitiveness and hurt Australia’s export-competing industries, potentially limiting jobs and investment growth.”
Tobin says Australia’s greenhouse gas emissions accounted for 1.3% of total global emissions and Australia’s carbon tax of $23 per tonne is too high in comparison to China’s recently proposed $1.50 per tonne carbon price.
“Any scheme should recognise the competitiveness issues faced by our trade exposed industries and that many of our trade competitors will unlikely face substantial carbon pricing for some time,” Tobin said.
The carbon tax is not the only challenge the Australian mining industry faces. In addition, the mining tax legislated last week will affect about 30 mining companies and is aimed at raising $10.6 billion in three years.
Giurco says the mining industry will also be hit by a decline in the diesel rebate, which uses public funds to subsidise fuel bills, and the skills shortages.
“Skills shortages requiring truck drivers to be paid well over $100,000 are a greater factor,” he said. “Labour is a higher cost than energy, which is leading to developments in mine automation using driverless trucks and trains. The declining productivity of the industry facing declining ore quality (currently disguised via high prices being paid for commodities) is a longer term issue, for the industry and for Australia.”
There are conflicting claims about potential job losses as a result of the carbon tax. The Construction, Forestry, Mining and Energy Union argues that due to skills shortages no miners are likely to lose their jobs.
CFMEU Nation Research Director for the Mining and Energy Division, Peter Colley, says employment will remain secure.
“There is strong growth in employment in the mining industry, so the carbon tax will not cause any loss of jobs,” Colley said. “There is a shortage of skilled mineworkers and companies want to bring in cheaper labour from overseas — in some cases many thousands of workers.”
As opposed to cutting jobs, mining companies have undertaken numerous emissions reduction strategies to offset the impact of the carbon tax on the industry. BHP Billiton’s 2011 Sustainability Report outlined a plan to spend US$300 million between 2008 and 2012 to the development and research of low emissions technology, fund internal energy projects and to support local communities and employees in reducing emissions. Company spokesperson Fiona Martin says investing in low carbon alternatives is a priority.
Rio Tinto outlines similar strategies, with quantifiable goals as well as reduction targets. The company aims for a 6% reduction in carbon emissions intensity by 2013 and a further 4% reduction by 2015 compared with carbon emissions intensity in 2008. (Carbon emissions intensity is a ratio of carbon dioxide measured against economic output.)
Results have already been observed. Rio Tinto noted a 3.8% reduction in greenhouse gas emissions between 2008 and 2011.
Damien Giurco says the industry had been proactive in implementing carbon emission reduction schemes already but these will be overshadowed by the scale of emissions.
“There are already cost savings to be made in reducing energy use through energy efficiency, however, realised efficiency to date has been limited — often staff are focused on increasing production as a higher priority,” he said. “The reduction of greenhouse gas emissions by mining companies as a result of the carbon tax will be dwarfed by its overall rate of expansion.”
The CFMEU is also aiding the mining industry in reducing emissions, according to Peter Colley.
“There are some ‘gassy’ (high methane) mines that may be significantly affected,” he said. “The CFMEU has helped negotiate a package that ensures that those mines continue. They will receive a combination of free permits plus assistance to reduce emissions through technological innovation.”
Giurco said a number of industries could be affected indirectly by the carbon tax on the mining industry: “The high dollar, strengthened by the mining industry, is a bigger factor affecting tourism, education and manufacturing,” he said.
Australia needs a model to manage its mining industry for the future, he argues.
“My strong view is that Australia needs a national minerals policy — we have one for water, waste and there is currently a draft energy white paper prepared, yet there is no strategic view of how to realise long-term benefit from Australia’s mineral resources beyond the dig and sell model,” Giurco said.
“For Australia to remain competitive and also the Australian mining industry, we need to invest in innovation in mining and mining services (software, technology, know-how) as well as sectors beyond mining — in the decades ahead Australia will need to be good at more than mining.”