Canberra helps steel makers in new carbon tax regime

The argument that there is little the steel industry can do to radically cut greenhouse gas emissions in the next few years is valid. Australian steelmakers have used it to ensure that the proposed carbon tax there has only a minimal effect on the industry in its first phase. However, the protections are intended to run out in time, and the industry will have to begin looking for radical solutions to its emissions now if it wants to avoid heavy costs at a later date.

SBB 12 JulyAustralia’s steel industry has emerged relatively unscathed from Canberra’s new A$23/tonne (US$24.6/t) carbon tax, which takes effect in July 2012. Both BlueScope Steel and OneSteel welcomed the government’s decision to protect the sector from 94.5% of the new carbon price.

As part of a new steel transformation plan (STP), the Australian government will commit A$300m to the sector over four years to help steel companies transition to the new carbon tax. Canberra has also called for an independent review to assess the impact of the tax and other factors on the country’s steel sector.

BlueScope chief executive Paul O’Malley said the STP on carbon “removed one significant hurdle” for the steel producer, which is already battling high raw materials prices, weak domestic demand and the high Australian dollar. O’Malley lobbied furiously against an earlier version of the tax, saying it would have cost BlueScope some A$500,000 to A$1m over the first eight years.
OneSteel chief executive Geoff Plummer said steelmaking technology constraints meant there was little the sector could do to reduce emissions. He said the STP would allow the company to remain competitive for the next four years.

The $300m compensation package still needs to be signed off by the Greens, who hold the balance of power in the Australian senate, but is likely to be passed in its current form.

CLSA steel analyst Scott Hudson told Steel Business Briefing that the financial impact on the steel companies in the near-term looked “negligible.” However, there was some uncertainty around how coal producers may eventually pass on tax-induced cost increases to their customers, he said.


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