Obviously, the carbon tax, which will be in troduced July 1 next year, has a greater impact on some companies rather than others. In fact, that’s the purpose of the carbon tax. It’s there to penalise heavy polluters and to encourage consumers and business to switch to lower pollution alternatives. The Gillard government makes great claims that the tax is only on the nation’s 500 worst polluters. So, that looks like the best place to start.
The bad guys
The big polluters basically come down to the big energy users, because the really big polluters in the country have been cracked down upon for years.
The first real corporate environmental laws were introduced at state level back in the 1970s. The major laws were focused on pollution and illegal waste disposal, but there was also a focus on marine laws, especially regulation of fishing. But there are numerous other laws including illegal vegetation clearing, logging, water theft and illegal trade in flora and fauna.
So, you’ll find it much easier to think of it as an energy tax. And, with coal one of the dirtiest of energy production methods, it’s no surprise that coal enterprises are the hardest hit.
For the big boys, it isn’t so bad. Citigroup says that with a carbon tax of $23 per tonne, BHP, Rio Tinto and Wesfarmers, the three biggest coal operators, are likely to see total profits fall by about 0.5%.
However, it’s the single-focus thermal coal miners that will be hit hard.
Analysts says that companies such as Queensland coal producer New Hope Corp and the NSW miner Whitehaven coal will take a sizeable cut in profits. The government is providing both companies with sizeable compensation packages.
Steel got the blues
The steelmakers are one of the most exposed to the effects of the carbon price. This is because steel requires a lot of energy to be refined.
Despite a large compensation package, steel stocks, most notably BlueScope Steel and OneSteel, have continued to lose ground since the announcement of the carbon tax.
Without compensation, OneSteel’s earnings would be down almost 15% in the 2012-13 financial year, while BlueScope’s earnings would be facing a whopping 60% drop.
Aluminium, also a heavy user of energy in the refinement program, will drain away profits for its producers. Most notably, Alumina is facing a 20% cut in profits, but will benefit from a compensation package the near term.
The impact on the energy sector is particularly evident in the liquified natural gas space. Analysts have said that companies such as Woodside Petroleum and Santos face a large increase in costs.
However, the government’s compensation packages mean that much of the costs will be shifted to the taxpayer.
Woodside has said that it is pleased that the compensation is in line with that offered in the original emissions trading scheme back in 1999.
As for the retailers, such as Origin Energy and AGL, some analysts believe they could benefit from the carbon tax.
This is for a couple of reasons. First, they can easily pass any costs on to the consumer, and second, the government’s subsidies for green energy mean they can take advantage of government funding to improve their energy production mix.
Mixed deal for transport
The picture is mixed for transport companies.
Airlines were particularly hard hit because fuel accounts for such a large proportion of their costs.
Qantas said the new tax would cost it $115 million it the first year and warned it would need to raise prices by at least $3.50 per ticket.
Virgin said costs would rise by $45 million and it would raise prices by $3 per ticket.
On the other hand, rail operators could experience some benefit from the carbon tax.
The construction sector is also likely to feel the effects of the new carbon regime.
Building material companies have been notably vocal about the effect of the carbon tax, because of highly price competitive overseas competitors and the easy availability of substitutes.
On the Australian market, the two companies most likely to suffer in the materials sector are Boral and CSR.
Cement maker Adelaide Brighton and building materials producer Brickworks are two more companies that are in the firing line. Both companies have warned that the carbon tax would reduce 2012-13 profits.
Not all losers
Of course, it’s not all bad for the carbon tax. Some shares instantly appreciated on the news.
Unsurprisingly, the best performing sector of the market since the carbon tax’s announcement has been the alternative energy space.
When the details of the carbon tax were announced, many alternative energy companies rocketed 20% higher over the next few days.
Ceramic Fuel Cells, a maker of low emissions energy cells, jumped 15% on the next day of trading, while West Australian wave energy developer Carnegie Wave Energy soared 23%.