Life As Carbon Tradies

Last year the Federal Government released a white paper outlining its policy on what Australia can do to cut greenhouse gas emissions. The Carbon Pollution Reduction Scheme (CPRS) lies at the core of the Government’s policy. Brian Welch explains.

What is the CPRS?

In short, from 2011 the Federal Government will begin taxing emissions of greenhouse gases. This is expected to increase the cost of energy intensive building materials by discouraging emissions while raising funds to develop low-emitting technologies and industries. The CPRS was originally intended to commence in 2010 but poor economic conditions meant Prime Minister Kevin Rudd announced that the CPRS would be phased in from 1 July 2011 “to manage the impacts of the global recession.”

Materials prices and living expenses

The building industry works with materials that required large amounts of energy in their production, including concrete, bricks, glass, steel and aluminium. Much of the energy used to create these materials is sourced from coal-fired power stations that produce greenhouse gas emissions.

When the CPRS begins, these greenhouse emissions are estimated to cost around $20 per tonne of carbon dioxide emitted into the atmosphere. This cost is expected to be passed down the supply chain, with suppliers, retailers, builders and their clients likely to experience a change in the cost of materials.

The Federal Government also predicts that there will be a modest increase in the overall cost of living when the scheme is introduced. An increase in household electricity bills of around $4 per week is expected for a $25 carbon price. This added cost may encourage consumers to make their homes more energy efficient.

More information is needed

You are not alone if you feel that your understanding of the issue is somewhat lacking. The Master Builders ‘Building Trends’ survey of Victorian members revealed that over 41 per cent of Victorian builders rate their understanding of the proposed CPRS / emissions trading scheme as ‘bad’ or ‘very bad’.

Unfortunately not much information appears to be currently available, especially on what individual building materials will be affected. Of great concern is whether manufacturers might elect to close their operations in Australia and move off shore.

More education needs to be provided if the construction industry is to successfully manage the transition to a CPRS economy. For example, it is unclear what phase-in measures are being considered, such as the legal rights of builders who have worked with quoted prices that could be subsequently affected by CPRS driven price rises.

Encouragingly, the Government has announced its intention to establish a Climate Change Action Fund (CCAF) that aims to assist small businesses to adjust to the CPRS.

Increased demand for ‘green products’

The purpose of the CCAF is to facilitate the transition of businesses to a low carbon economy. It will do this by providing partnership funding for a range of activities, including investment in innovative new low emissions processes.

The $1.4 billion fund should also assist small businesses with investing in energy efficient equipment like hot water systems, insulation, lighting, heating and air conditioning. For this reason, retailers should know what products and services they can offer the growing number of customers looking for greener products.

Besides the environmental benefits of reducing greenhouse gas emissions, there will be other opportunities from the CPRS. Manufacturers of materials that do not involve major emissions (like the timber industry) may find their products are less expensive and therefore more competitive. Also, builders that specialise in sustainable or green building in both commercial and residential sectors may find they have a competitive advantage.

‘Trade-exposed’ businesses

You may have heard that the government will allow some businesses to be exempt from the carbon tax. While many businesses will be able to pass-on most of the new costs, certain ‘trade-exposed’ industries may not be so fortunate. This is because they sell products in international markets that compete against enterprises that may not be constrained by comparable schemes.

For example, certain products containing steel or aluminium may not be able to compete as effectively in an international market because their overseas competitors do not pay a carbon tax. The Government has proposed providing free permits to the most emissions intensive ‘trade-exposed’ activities within industries.

Brian Welch is the CEO of the Master Builders Association of Victoria. The Master Builders Association of Victoria is offering its members the chance to complete the ‘Green Living’ course that provides answers to these sort of questions. Similar courses are offered in Queensland, Western Australia and Tasmania. The courses are not restricted to builders. Visit www.mbav.com.au for more information. Visit www.climatechange.gov.au to read the CPRS Whitepaper and the Government’s climate change policies.