Processing

Industry seeks stronger Govt package for carbon support

Jon Condon, 02/02/2012

 

Meat processors will this month take a funding proposal to Federal Government that if agreed to, could conceivably bring every abattoir in the country below the proposed 25,000 tonne emissions threshold.     

Larger Australian beef processors facing millions of dollars worth of additional operating costs through direct carbon tax from July for emissions above the threshold are encouraged by this week’s Federal Government carbon abatement grants to the steel industry.

Climate change minister Greg Combet on Tuesday announced that steel manufacturer OneSteel will receive $64 million to help it prepare for the introduction of Government's carbon tax in July. Another manufacturer, Bluescope, earlier secured an advance for $100m in support of carbon mitigation projects, under the Government's Steel Transformation Plan (STP).

The Australian Meat Industry Council’s processing director Steve Martyn said under the Government guidelines, major carbon emitters like steel producers fell under the banner of emissions-intensive, trade-exposed industries.

Despite AMIC’s efforts to convince the Federal Government that meat processors fitted the same profile, they were not listed under the same classification, and hence did not qualify for the same depth of financial support, Mr Martyn said.

“It has been one of our key arguments all along: meat processing is a very low-margin, export-exposed business. But while many large export meatworks are over the 25,000 tonne carbon emission threshold for direct payment, in the government’s view they in fact do not emit enough carbon to attract the really significant financial support that the steel, concrete and similar large scale manufacturing industries are getting,” he said.

Asked whether the recent grants announcements to the steel industry provided any encouragement to larger beef processors facing higher costs, Mr Martyn said they did.

“One of the principal encouragements for us is that our estimates suggest there is somewhere between 14 and 18 red meat processing plants across Australia that will exceed the 25,000t carbon threshold.

“The industry is looking at putting in place a range of plant-by-plant mitigation projects that could possibly remove half of those fairly quickly from direct emissions tax payments, by lowering carbon output under the 25,000t figure,” he said.

But the industry needs solid government support to do that.

“Businesses close to the 25,000t threshold, and those at risk of becoming liable for direct emissions tax are the first priority. A business that might be below the carbon threshold this year might take a commercial decision to process 10pc more cattle next year, and suddenly be faced with a multi-million dollar carbon tax bill.”

Tom Maguire, chairman of AMIC’s Climate Change Committee, said the industry had spent a lot of time putting together an integrated, industry-wide strategy around responding to the carbon tax.

“We’re now in a position where we are about to say to Government, it is going to cost this much to level the playing field for the meat industry,” he said.

In using the term, ‘level the playing field,’ Mr Maguire was referring to circumstances that will apply after July 1 where larger, more efficient meat plants will accrue a direct carbon tax (calculated at about $6-$8 per beast slaughtered), which would unfairly disadvantage them in competing for livestock against smaller, untaxed processor competitors. Effectively, that would represent a tax on efficiency.

Ultimately, AMIC’s proposal to government would give all of those meat processing businesses likely to exceed the 25,000 permit-liable threshold the opportunity to put mitigation projects in place to come in under the limits, Mr Maguire said.

“It’s up to the individual companies as to whether they want to make the investment, but AMIC proposes to have a figure it can attach to that industry-wide estimate within a week, based in detailed discussions with economists and environmental engineers,” he said.

“We’re about to go to government and again point out the impact that the tax will have on the processing sector, and hence investment and regional employment.”

While the original base level of Government financial support for carbon abatement across the business community was $1 of Government funds for every $3 spent, AMIC’s argument is that there needs to be a more substantial investment made by government in processing to achieve outcomes, leading to a request for dollar-for-dollar subsidy.

Even with access to funds at that level, carbon mitigation projects at many meatworks could still cost tens of millions of dollars to implement, Mr Maguire said.

Waste water treatment, responsible for more than half of all emissions in red meat processing, is seen as one key area under examination for mitigation work to bring plants below the magic 25,000t figure.

“It’s encouraging to see the level of support for carbon abatement directed at the steel industry this week, but it is about time the Federal Government put the meat processing industry’s mind at ease, because it is the uncertainty that will do the damage. People have to make decisions about investments right now.”

The Federal Government needed to fully-recognise the contribution of the meat processing sector, particularly as a major employment and export business presence in rural and regional Australia, Mr Maguire said.

“In a two-speed economy like that being experienced in Australia today, the part of the economy that is not directly associated with the mining boom is feeling the impact badly from burdens like the high currency and pressures through diminishing international competitiveness.”

“The challenge for Government is to start becoming pro-manufacturing, and specifically agriculture-based manufacturing, if it wants these industries to survive,” he said.

AMIC plans to put its consolidated support package proposal to Government before the end of February.

Given the lead-time required to implement plant-by-plant mitigation projects – several years in some cases – it is now inevitable that the direct carbon tax from July 1 will have a significant cost impact on larger processors for some considerable time.

Producers can expect to see that factored-in in returns for livestock. It may also be reflected in lower competiveness for Australian beef in international markets, at a time when major international export competitors like the US and South America are cost efficiency-driven and currency-advantaged.
 

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