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Qantas, Anglo Say Australian Carbon Tax Boosts Fares, Risks Jobs

July 10, 2011

July 10 (Bloomberg) -- Qantas Airways Ltd. said it will raise airfares and Anglo American Plc warned coal-mining jobs and investment are at risk after Australia’s government unveiled the country’s first levy on greenhouse-gas emissions.

Polluters will pay A$23 ($24.74) per metric ton of carbon emissions as the government seeks to wean the nation off its dependence on fossil fuels, Prime Minister Julia Gillard said today in Canberra. Australia, reliant on coal to generate 80 percent of its electricity, will require about 500 businesses to pay the charge and will more also than double aviation fuel excises.

“What is proposed is not good public policy in the best interests of Australia, rather an expedient act of political opportunism,” Seamus French, the head of Anglo American’s metallurgical coal business, said in a statement today. “The carbon tax puts at risk current and future coal investments in Australia, the jobs of 40,000 direct employees and the jobs of 100,000 contractors, suppliers and other workers indirectly employed by the coal industry.”

Qantas, Australia’s largest airline, said it can’t absorb the cost of the tax, while budget carrier Virgin Blue Holdings Ltd. said higher fares in Australia are “inevitable.” The Australian Coal Association said overseas buyers of coal may switch to other nations and force the closure of mines at home. It joined London-based Anglo in warning that Gillard’s tax threatens jobs.

The excise on aviation kerosene, the fuel mostly used by airlines, will rise by 6.604 cents a liter to 10.16 cents a liter in 2014-15, according to the government’s proposal.

Compensation Plans

Australia expects to raise some A$27.8 billion in three years by making polluters pay an initial A$23 per ton charge, increasing the price by 2.5 percent a year, plus inflation, Gillard said today in Canberra.

The government will provide A$9.2 billion over three years to assist the biggest-polluting businesses such as aluminum smelters, steelmakers and pulp manufacturers. It will also provide about A$47 billion ($50.5 billion) through 2020 to help households meet higher costs, reduce job losses and spur investment in renewable energy.

“Moving to a clean energy future is not simply about making sure our existing industries can continue to prosper,” Climate Change Minister Greg Combet said today on the Labor Party’s website. “It’s also about laying a platform to allow the clean energy industries and jobs of the future to develop and grow.”

Coal miners will get A$1.3 billion, with the biggest polluters getting assistance over six years.

‘Futile Loss’

That’s not enough, Anglo American said. It’s almost impossible to measure emissions and the technology to reduce them won’t be available for at least a decade, French said in his statement.

Gillard, Australia’s least popular prime minister in 13 years, is counting on the Greens Party and three independent lawmakers to pass her program. Opposition leader Tony Abbott has said he’ll repeal the law if he comes to power.

Her proposal is “a futile loss of jobs” because it won’t affect global emissions, according to Ralph Hillman, executive director of the Australian Coal Association.

“You’ll see a crimping of the growth of the coal industry,” he told Sky News. “Even if there is growth, there will still be mine closures.”

The carbon tax may cost as many as 2,700 industry jobs in Queensland, said the Queensland Resources Council. The state is the world’s biggest exporter of coal used to make steel.

Extra Costs

Aluminum producers estimate Gillard’s plan will impose extra costs of A$120 million on the industry in its first year, rising to A$400 million in 2020. The policy will put local producers at a disadvantage to overseas competitors, the Australian Aluminium Council said today.

“Not only will Australia be discounted as a site for new facilities but existing operations will find it hard to attract the capital needed to maintain viability,” Miles Prosser, executive director of the council, said in the statement. “If we lose that investment, it costs Australia, but global greenhouse emissions don’t reduce.”

Power generators facing losses in the value of their assets will receive A$5.5 billion in assistance, Gillard said in Canberra. The government will provide loan support to electricity suppliers and payment for the closure of plants to remove as much as 2,000 megawatts of capacity by 2020.

While that offer may help energy producers reduce emissions, some generators will receive nothing and still see their asset values diminished, Brad Page, chief executive officer of the Energy Supply Association of Australia, said in a statement.

--With assistance from Gemma Daley in Canberra. Editors: Garfield Reynolds, Paul Tighe

To contact the reporter on this story: Angus Whitley in Sydney at

To contact the editor responsible for this story: Paul Tighe at

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