Wrote this piece for The National Times, but they held it then spiked it. Happening a few times lately and it’s pretty friggin’ annoying. However, for readers of this blog – all 6 of you – here’s the dubious benefits of my pondering on the carbon emission trading scheme (don’t call it a tax…)
Most of the bleating about price hikes after July 1 is generated by those very people who will be putting the prices up. And they are those that emit the most carbon pollution. Sniff a rat here? How about a lot.
For all the ranting about how prices will inevitably go up after July 1, few have taken the time to note that if they do, it won’t be because of some universal law of existence. It will because big, largely profitable, companies choose to put them up. Someone, somewhere has to actually change the numbers and raise prices.
Energy companies, miners, big players in big industry are among those on the government’s list of so-called “liable entities.” These are the organisations which will be required to pay $23 per tonne of carbon emitted after 2015. Until then, they will be given various tax breaks, free carbon permits, and lots of soft cushions.
If carbon pollution was murder, this is like giving a serial killer lots of money and asking him to stop bumping people off sometime within the next few years. If you don’t mind. Would be great.
One big energy provider announced earlier this year that it will be aiming to raise electricity prices on the average annual household power bill be $150 year because of the “carbon tax”. For this company, net profit after tax last year was $559 million. The company’s revenue increased by 7%. A company statement crowed about how “mass market gross margin increased because of a combination of tariff increases in all states and a net increase in customer numbers.” As a result of this, its retail energy division increased its profits by 17% to $373 million.
Let’s unpack all that. A profit of half a billion dollars. A margin increase – that is, greater proportional gains from revenue – based on, in part, price increases. That’s us in the margin, by the way. If you’re an a customer of this company, you contributed to that profit. You may feel great about that. But, this company, after already increasing prices before the “carbon tax” wants to do it again. Probably repeatedly.
So this company, among those crying poor as July 1 approaches, is not a company that’s struggling. Nor are its suits. Eight senior executives at this company received an increase of around 10% on base salary in the last year, to $5.6 million, presumably to help them pay their power bills. That’s an average of around $700,000 each, or 13 times the average wage. So, for every $100 dollars to the average Joe/Josephine gets in the pay packet, they will get $1300.
The reason I haven’t named this company is because many other companies could throw up similar figures. I only use these stats to make a point. I don’t want to single anyone out because this is not isolated. These figures are repeated.
One other thing this company has said is that overall energy usage among its customers dropped in the last year by 5%. In terms of carbon pollution, and in relation to individual responsibility, that’s maybe a good thing. But, this company puts this figure in its list of Key Challenges. For them, this decline must be stopped. Our collective taking of some personal responsibility must be reversed. In fact, this is at odds with the company’s agenda. Again, this is not isolated.
This week, I received a letter from my power company, another company from that above. In it, I was informed that my energy tariffs were about to go up by 3c per Kilowatt Hour. That’s an increase of around 14%. Overnight. The letter also informs me that any increases due to carbon pricing would not be identified in future bills, but simply embedded in the bill itself.
This company saw its profits increase by 15% to $673 million. Its directors received a collective remuneration increase of 25%, to a total of $6.1 million.
Both these companies are displaying what I would suggest is pure greed. Both are hugely profitable and both have seen their profits grow in the last years. Again, these companies are not alone. Many so-called liable entities – those required to pay for carbon usage – are both profitable and growing.
Profits are of course, quite fine, ethical and legal. Shareholders expect them, consumers accept them, governments are run on them. But over-large profits cannot last. A fairly damp mining super profits tax notwithstanding, it is not something that can realistically be legislated. Companies are of course entitled to try for whatever profits they think they can get. But we stakeholders aren’t necessarily obliged to bow to them.
The carbon scheme creates, among other things, an opportunity to re-assess what a fair rate of profit is. The jacking up of fees and prices, which many companies will try on is generally connected to unrealistic profit goals and upon a denial of the responsibility that industry carries, if for no other reason than that it has made massive amounts of money over the decades by polluting the atmosphere.
The Australian Competition and Consumer Commission is mandated to charge entities who are proven to have raised prices beyond a level considered commensurate with the carbon scheme and to potentially fine them to a maximum of $1.1 million. How such transgressions are measured seems unclear. For instance, if companies are going to bury any price hikes into their fees and tariffs, like the company noted above, then who will be able to extricate the actual increase purported to be from the carbon pricing scheme?
The $1.1 million maximum fine is small amount for most of us, but a fairly piffling amount for big companies. This legal channel looks a lot like a very narrow, stuffy and dark corridor leading nowhere.
As the figures above suggest, many companies could effectively wear whatever cost increase that may arrive via the carbon scheme without putting up prices. The spurious claim that they cannot bear any cost increases and remain viable should be held up to the light and their profit goals scrutinised in the light of public opinion and framed with social and environmental parameters.
Just what is a fair profit and how much that scale should slide given circumstances remains so far undefined. As prices creep and jerk upwards at the bidding of largely profitable companies from July 1, perhaps its a debate worth having.