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AFGC: Australian carbon tax could hit food industry supply chain

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The government’s proposed carbon tax law may have drastic effects on the Australian food supply chain, says the Australian Food and Grocery Council (AFGC).

From 1 July 2012, the government intends to tax the country’s 1,000 biggest polluters for carbon emissions in a fixed price scheme of A$23 (US$24.64) per tonne of carbon dioxide that will be implemented over three to five years, after which it will switch to a market-based trading system in 2015.

Prime Minister Julia Gillard said during a news conference announcing the plan that “"As a nation, we need to put a price on carbon and create a clean energy future... This has been a difficult debate that has brought us to this moment. But we are here now and now is the time to get this done."

By 2020, according to Gillard, the carbon tax plan would reduce emissions by 5% over 2000 levels, and would cut 159 million tons of carbon pollution.

While the government says the carbon tax will not affect the food industry in Australia, as food manufacturers are not amongst the top 1,000 polluters, the AFGC insists the carbon tax will impact costs throughout the supply chain, from farm to fork.

With the food industry already having to deal with rising input costs from energy, wages, water, and transport, as well as high global commodity prices and supermarkets forcing down retail prices, AFGC says its members will face additional pressure from higher costs because of the carbon tax, for example for transport, power and refrigeration.

The council estimates food and grocery prices to increase by 3-5% under the carbon tax, as per company-modelling on emissions trading based on the previous carbon tax model.

Products requiring the most energy to manufacture would see the biggest cost increases such as baked goods, dairy sugar and paper products like nappies, the council claims.

AFGC is urging the government to ensure that Australian-manufactured food and groceries remain competitive even if the carbon tax does go through, warning that it could otherwise ultimately lead to a loss of local food manufacturing jobs.

So far, the government has only offered tax cuts to low and middle-income households, as well as increased state pension and welfare payments, to help its people manage any rising costs that may result from the carbon tax.



1 PBIA May2015 web


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