Yesterday, the Australian government revealed the details of its carbon tax.
As from 1 July 2012, carbon would be taxed at A$ 23 per tonne rising to $ 24.15 as from 1 July 2013 and $ 25.40 as from 1 July 2014. The carbon pricing mechanism will then move automatically to a flexible, market-driven approach on 1 July 2015. From this date, the carbon price will no longer be fixed, but will be set by the market.
The Government will allocate, free of charge, Australian carbon permits to the most emission-intense and trade-exposed industries. The most emission-intensive and trade-exposed activities will initially be eligible for 94.5% shielding from the carbon price. A second category of assistance will provide an initial shielding of 66%. The assistance rates will be reduced by a “carbon productivity contribution” of 1.3% p.a. to provide additional incentives over time to reduce pollution.
Nyrstar’s operations in Australia consists of the Hobart zinc smelter (annual capacity of approximately 260kt of zinc) and Port Pirie multi-metal smelter and refinery (annual capacity of 235kt of lead, 16m troy ounces of refined silver and approximately 45kt of zinc).
Under the terms of the plan, Nyrstar’s Hobart and Port Pirie operations have been deemed trade-exposed companies and hence have been provided with significant tax concessions. To offset the carbon tax, Hobart has been provided with the maximum assistance (free carbon permits, covering 94.5% of carbon costs) while Port Pirie will also receive the maximum assistance for its zinc smelting operations and 66% assistance for its integrated zinc/lead smelting operations.
In addition, Nyrstar will actively seek opportunities to access funding under various Government schemes inorder to further support sustainability initiatives at its Australian operations.
Conclusions:
As expected, the carbon tax scheme does provide for tax concessions for trade-exposed companies, significantly limiting the impact on Nyrstar.