How Aussies are adapting to the carbon tax

This month, Australia introduced a carbon tax that will require about 300 mining, energy and other industrial firms to pay $24 USD for every metric ton of greenhouse gas emitted. The tax has received a mixed reception, but many regard it as an opportunity to improve energy and resource efficiency throughout the nation.

Ecomagination.com talked to Ben Waters, director of ecomagination for Australia and New Zealand, about how the tax will create new jobs, spur investment in renewable energy and speed the transition to a cleaner and more prosperous economy.

What have Australia’s historically low energy prices done to energy efficiency in the country?

Ben Waters: Due to the low costs of energy in Australia, we are one of the most carbon intensive developed economies in the world.

Australia is sitting on 700 years’ worth of coal. This has meant cheap power prices which haven’t historically encouraged energy efficiency. Work by economists Vivid Economics commissioned by GE showed that Australian businesses are generally less efficient than their peers in key trading partner economies such as U.K., Germany and the U.S.

The research also revealed that it is possible for economies to reduce carbon emissions while maintaining economic growth and prosperity. If we look at the experience of other economies that are already on the move towards higher carbon productivity, we can learn how to do this most efficiently.

Many businesses are generally supportive of curbing emissions but hesitate when it comes to signing on for a plan with specific costs. How do you get them to embrace a specific plan?

There is a need to act on carbon pricing. Government has legislated. Business should now swing into action and get on with making money and creating customer value in the new environment.

The time for policy advice is over; the time for action has arrived.

Countries and companies that embrace cleaner energy and use energy more efficiently will win. They will be quicker to respond to the opportunities for new jobs and new investment.

How have Australian businesses been adapting to the new carbon price?

Business is getting on with the job of reducing energy usage. A recent report, commissioned by GE and prepared by the Economist Intelligence Unit, highlighted that 85 percent of businesses directly impacted already have a strategy in place, with a further 6 percent in the midst of developing one.

More than half have developed broad strategies that encompass their external partners or supply chains, in addition to their own business, so we can expect to see a ripple effect or carbon abatement throughout the economy.

Now it’s about action, rather than policy.

The big opportunity for business is in improved productivity from lower energy usage and innovation aimed at cost reduction and growth.

This  article originally appeared on GE's Ecomagination site. It has been reprinted with permission.

Do businesses see a benefit to the regulatory predictability of having a carbon price?

Pricing carbon is critical to providing business certainty and unlocking the jobs and investment that will accompany the transition to a prosperous, cleaner and internationally-competitive economy.

Prior to the introduction of the carbon price, our research told us policy uncertainty was holding back investment in cleaner business strategies and technologies, and was the biggest barrier to business preparation to reduce emission.

Based on a survey of Australian businesses in 2011, two-thirds of respondents considered the unclear regulatory environment the biggest barrier to making further progress on carbon reduction. Also, some firms believed they were making poor investment decisions in high emissions technologies because they lacked have certainty on a carbon price, which would have made low-carbon technology more attractive.

Now that we have policy clarity, business is getting on with the job of reducing energy usage and therefore reducing emissions. An imminent price on carbon is working to change behavior and drive action.

Do you think that businesses will see significant gains from improving efficiency?

Australian businesses are finding innovative solutions to reduce emissions and adapt to a low carbon future. Our research tells us many businesses believe improving energy efficiency can drive business growth and increase innovation with new products and new markets coming into play.

We believe environmental success and economic success will be interdependent in tomorrow’s low carbon world, and improvement in Australian’s carbon productivity now can generate savings and growth in the long term.

Australian businesses spend $13 billion per year on electricity. The best-in-class businesses that focus on becoming more energy efficient will use 30 percent less than their competitors, giving them a real competitive advantage.

You tweeted recently a piece on how “quarterly capitalism” needs to be replaced by long-value creation. Do you think that’s what the Australian government has encouraged with the carbon price?

GE has been around 120 years. We want to be around at least that long again so we look for long term trends to shape our commercial strategy. Resource scarcity and the need to do more with less will be one of the megatrends that define the success of firms and economies this century. Our ecomagination initiative ensures that we are focusing on technologies that will help our customers do more with less well into the future.

GE has long been in support of an Emissions Trading Scheme (ETS) as the most economically efficient way to transition to a low carbon economy. The recent introduction of a carbon price is an important step in the right direction. However, in the long term, we believe this needs to be driven by the market in order to encourage innovation, research and development.