Coping with the carbon tax

by FM Media
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TIM PITTAWAY, principal at RSM Bird Cameron, provides advice on the issues that businesses should consider when it comes to the carbon tax.

Concerning the carbon tax, the main implication for management and boards is that carbon risks need to be integrated into decision-making and risk management processes throughout the organisation. Company directors need the skills and expertise to understand and respond to climate change-related risks.
Businesses that do not manage carbon risks appropriately will fail to become compliant with emerging legislation or will not manage to collect quality emissions data or produce quality disclosure. The areas business should be considering in their strategies include:

  • carbon risk management
  • compliance audit with existing and future carbon legislation
  • internal audit reviews of carbon reporting procedures, systems and internal controls
  • verification and assurance of emissions reports
  • tax and accounting advice for treatment of carbon permits and allowances
  • tracking ongoing developments in environmental regulations aimed at mitigating greenhouse gases
  • assessing the potential impact of global climate change on the company’s stakeholders
  • devising the appropriate mixture of risk management instruments required to lower climate change-related threats to acceptable levels
  • evaluating the company’s position in the technological landscape of sustainable energy
  • undertaking strategic acquisitions of advanced energy technologies
  • identifying possibilities for boosting energy efficiency within the organisation; and
  • formulating and executing strategies to exploit emerging growth opportunities in sustainable energy markets.

Businesses need to identify opportunities to improve the management and reporting processes in place to manage, collect and report on emissions, energy consumption and broader environmental performance. Systems for addressing the risks need to be put in place and continuously monitored.

RSM Bird Cameron advises the following issues should be considered:

1. Identification of primary liability under the proposed Clean Energy Legislation:

  • identify any facilities of the company as defined under the National Greenhouse Energy Reporting Act and the operator of any such facilities; and
  • determine the amount of emissions released by that facility that are covered by the Carbon Pricing Mechanism. If it is greater than 25,000 tonnes of carbon equivalent emissions per year, there is a registration requirement.

2. If the business has a primary liability under the Clean Energy Legislation:

  • identify the gross quantum of emissions and verify the accuracy of those emissions
  • assess whether any mitigation incentives are available, i.e. free carbon units, to reduce the primary liability
  • determine the indirect cost impact of supply chain into the business, such as electricity
  • model the impact of the direct and indirect costs of the Clean Energy Legislation; and
  • assess whether such costs can be passed onto customers either contractually or through market forces.

3. If the business does not have a direct impact or requirement to register:

  • determine the indirect cost impact of supply chain into the business, such as electricity
  • determine whether any mitigation incentives are available to reduce the overall cost to the business; and
  • assess whether such costs can be passed onto customers either contractually or through market forces.

4. Concerning industry assistance:

  • assess the availability of financial assistance such as through the allocation of free permits for emissions-intensive trade-exposed (EITE) activities under the Jobs and Competitiveness Program, the Clean Energy Innovation Program, the Carbon Farming Initiative and other grant programs.

5. Concerning financial reporting and taxation impacts:

  • consider appropriate accounting treatment for any carbon units acquired and surrendered
  • review the possible impairment of the value of affected assets
  • include greenhouse reporting needs in corporate governance framework corporate tax implications, including cashflow impacts as a result of having to acquire carbon units.

6. Regarding corporate governance and emissions measurement:

  • allocate responsibility for greenhouse reporting
  • assess emissions methodology and data; and
  • establish appropriate reporting and documentation systems and processes.

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