New at Castalia

Securing SMEs in Low Carbon Australian Future

The Australian Government is proposing to adopt an emissions trading scheme, known as the Carbon Pollution Reduction Scheme, to reduce Australia’s carbon emissions and take a leading role in international climate negotiations.

To date, much of the debate on the scheme has centred on addressing the unintended economic consequences associated with introducing a price for carbon in Australia, while no such pricing occurs in competitor nations. The Government has acknowledged this risk by including transitional assistance measures in the scheme’s design. However, the focus of the proposed assistance measures have remained relatively narrow, dealing with the effects of the scheme on the emission-intensive trade-exposed industries (EITE), consumers, and on coal-fired electricity generators. Limited attention has been given to how the CPRS will affect other trade-exposed sectors within Australia’s economy, or what measures need to be taken to deal with the loss of competitiveness in those sectors.

Commissioned by The Australian Chamber of Commerce and Industry, Castalia measured the likely effects of the proposed scheme on trade-exposed small and medium sized businesses—a key sector of Australia’s economy. The study found that implementing the scheme in its current form would erode the profitability of SMEs at marked levels, changing sector investment incentives, and harming employment. 

The study finds that revisions to the CPRS are required to ensure that all unintended economic impacts of the scheme are captured. It recommends that the proposed CPRS transitional assistance package be restructured to ensure adequate assistance for SMEs, if the scheme is to be implemented.

The full report, entitled “Securing SMEs in Australia’s Low Carbon Future: The Cost of the Carbon Pollution Reduction Scheme for Australia’s Small and Medium Sized Businesses” is available here

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