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Carbon tax now will save us later

Companies are already deploying emission-reduction measures.

Companies are already deploying emission-reduction measures.

AS THE next round of the United Nations Climate Change Conference prepares to open in Durban, South Africa, tomorrow, the world has been warned that the cost of not moving now to reduce carbon emissions will be a significant increase in cost in the future.

Australia has been both lauded and criticised for being a first mover with the introduction of our carbon tax from July 1 next year. Whether or not you think it's a good or bad thing, it's something we have to prepare for now.

If you're an investor you might be wondering about the effects of the tax on the stocks that you're looking to invest in.

Only 4 per cent of companies in the ASX 200 and NZ50 - the largest companies listed on the stock exchange here and in New Zealand - reported the risks associated with carbon pricing were high.

These findings come from a report by the Carbon Disclosure Project, an international initiative that sends information requests to ASX 200 and NZ50 companies each year and close to 6000 companies on a global basis.

The director of the CDP in Australia, James Day, says that while the findings may appear inconsistent with media reports, they are consistent with the information that companies have been disclosing to the Australian Stock Exchange.

A large proportion of the top 100 companies replied to the survey - 73 per cent - but when the next 100 largest companies are included that percentage drops to 50 per cent.

One of the more interesting findings from the survey is that more than half reported opportunities identified with the tax.

Only 500 companies of the 2227 listed on the Australian Stock Exchange will be affected by the carbon tax but many companies are trying to get their carbon emissions down. Even if they don't have explicit targets, more than 86 per cent said they had in place some kind of emissions reductions initiatives this year.

And once a cost is imposed on carbon emissions and a market is eventually created, it is likely that any company that has anything to do with emissions will become savvier. If something you had been doing for free suddenly had a cost, you'd become more cognisant of it, wouldn't you?

Many carbon reduction technologies or initiatives actually have a fairly fast payback period. Energy efficiency initiatives in building fabric, services and operational process report a median payback period of one to three years (see chart) according to the CDP report and annual savings across a raft of energy initiatives were estimated at $75 million by the companies that reported.

So all is not lost. If you're looking for less risky investment opportunities you might be better off looking at companies with tried and true technologies or products in carbon reduction, rather than untested alternative-energy sources. But there are definitely prospects worth examining before the carbon price comes into place.

Follow this writer on Twitter @Money_PennyP

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