CLIMATE SPECTATOR: Exporters' carbon tax indifference

Despite the hype about the huge effect it will have on business, a vast majority of firms in the exporting trade have made no plans to allow for the introduction of the carbon tax.

Climate Spectator

A new survey shows just 10 per cent of Australian exporting firms have bothered to factor the carbon tax into their business plans and for good reason – energy expenditure is not a major contributor to business costs.

Last week, global logistics company DHL released its annual Export Barometer which found that of the 785 exporting companies surveyed, only one in 10 had bothered to take the carbon price into account in their business planning.

According to DHL's senior vice-president Gary Edstein on ABC’s AM program: "Most of them said that there should be some government intervention or regulation when it came to carbon tax. But it seems that most of the respondents haven't planned or they obviously haven't increased the cost of their products or the price of their products.”

This may seem shocking considering the incredible media coverage of this issue and complaints from industry associations. But it shouldn’t really come as a surprise once you consider our chart of the week.

Energy will be the most heavily impacted factor of production by any carbon tax. The chart below profiles the energy intensity of the various parts of US manufacturing sector relative to their share of the value of production.

For sectors representing 90 per cent of the value of manufacturing output in the US, their energy expenditure represents less than 5 per cent of their value of production and the average is just 2 per cent. While this data is for the US, data from the Australian Industry Group, and the Australian Bureau of Statistics illustrates that the Australian manufacturing sector has a reasonably similar low energy intensity profile. I’d use this Australian data, but unfortunately it isn’t available as such an insightful chart

Source: US Government (2009) The Effects of H.R. 2454 on International Competitiveness and Emission Leakage in Energy-Intensive Trade-Exposed Industries

The reality is that manufacturing as a general rule just isn’t as energy intensive as we’ve come to believe.

And ultimately businesses don’t bother making business plans to cope with things that aren’t all that immediately important to their business.

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