Australian business warns of carbon-trade costs

By James Grubel

CANBERRA (Reuters) - Australia's top business lobby warned on Thursday that plans for carbon trading would hit big company earnings in exporting sectors such as refining, cement, steel and paper making and the coal, zinc and sugar industries.

The Australian government plans to introduce carbon trading by mid-2010 to help curb greenhouse gas emissions, blamed for global warming, with compensation for consumers and help for businesses facing higher energy costs.

But the Business Council of Australia, which represents the country's 100 top companies, said emissions intensive export firms would need much higher than promised levels of government compensation to remain competitive.

"This is a significant challenge for companies," BCA President Greg Gailey told reporters, adding companies would have problems once a carbon price reached A$20 ($17.40) a tonne.

If carbon was priced at the current European price of A$40 a tonne, he warned that half the firms surveyed would either shut down, move offshore or have to review their operations, with earnings falling 32-63 percent.

The council analyzed 14 big exporters in alumina refining and smelting, cement, paper and steel making, lead smelting, nickel and petrol refining, and coal, zinc, glass and sugar.

Australia is the world's 16th biggest carbon polluter, accounting for about 1.5 percent of global emissions, but produces five times more carbon pollution per person than China and is the fourth-largest per capita emitter.

Australia is planning one of the world's biggest carbon trading schemes that will force companies to buy permits to cover their emissions, putting a market price on carbon that will encourage firms to clean up their pollution.