Carbon’s $2m annual hit on Teys

Jon Condon, 12/07/2011


While processors are struggling with early interpretation of the Federal Government’s carbon tax initiative due to ambiguity in the detail, they all agree that the impact on the beef industry generally will be significant.

The Australian Meat Industry Council will meet today to discuss the carbon tax impact, and was not ready to issue a statement yesterday. However Teys Brothers AMIC member Tom Maguire said he could speak from his company’s own perspective.

Teys’ early calculations suggest that the rules and formulae behind the carbon tax could cost his company at least $2 million a year – possibly more. That’s based on the company’s two largest sites that will be permit-liable (producing 25,000 tonnes or more of carbon dioxide equivalent emissions per year) – Beenleigh and Lakes Creek, if the company was to decide to leave current circumstances unchanged.

“As we know the meat customer is unlikely to pay the bill, given the competitiveness of international trade at the present moment, so the cost is likely to be passed back to producers,” Mr Maguire said.

The government formula works on a per-site basis, rather than accrued processing capacity held by one company.

The glaringly obvious issue is that the Australian beef industry has committed tens of millions of dollars building larger and hence more efficient beef processing facilities in order to keep pace with international competitors through economies of scale. It is those sites that will be hit hardest under the emissions threshold.

“The Federal Government now appears hell-bent on penalising us for doing that,” Mr Maguire said.

“It is very difficult to justify the imposition of the tax when a similar tax will not be paid by our competitors like the US and South America in customer countries,” he said.

So where to from here?

“If nothing else changes, we have to pay the tax,” Mr Maguire said. “But part of the solution may be to look at research and development solutions to moderate CO2 output. But that comes at a substantial cost, and capital investment to integrate any solutions that might emerge.” 

About half the emissions from meat plants, for example, are waste water emissions in the form of methane.

“There is technology around that would need to be adapted to the industry, so the gas from the ponds could be either flared, or used for co-generation of energy. That’s expensive, but we are going to have to look at those sort of options,” Mr Maguire said.

“That wouldn’t happen overnight and we are talking multi-multi million dollar investments.”

While the Federal Government has announced a number of assistance packages to help industry adjust to the new regime, it remains unclear whether the export processing industry will qualify.

“To go ahead, the export processing sector must surely be part of any Government adjustment package, in the form of funding assistance for capital upgrades to reduce emissions,” Mr Maguire said.

Another large single-site export and domestic processor this week calculated the cost of carbon tax on their business to be about $3 a head.

The jury is still out about how many individual Australian abattoirs will be directly affected by the tax, as permit-liable businesses above the 25,000t threshold. Some reports suggest eight, but there is a suspicion within the Australian Meat Industry Council that the figure could be higher – partly because the formula for waste-water calculation has changed.

There are several Australian processors said to be on the ‘cusp’ of the 25,000t threshold to qualify for direct tax payment. They include Queensland sites Australian Country Choice, Cannon Hill; Kilcoy Pastoral Co, Kilcoy; and Northern Cooperative Meat Co, Casino, NSW.

But the issue is that every Australian processing plant will incur additional operating cost – not just those that are permit-liable. All plant will face hikes in the cost of electricity, boiler fuel and other inputs.

That will impact generally on Australia’s export competitiveness overseas, and also on domestic beef pricing.


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