CARBON TAX FAILS BUILDING INDUSTRY

Written by Melanie Toye, June 2012

The well talked about carbon tax is set to start on 1 July, 2012. The effects are unknown at this stage and the spike in costs associated with the tax is also unknown. Dismal predictions of the already slow construction and building industry are anticipated to plummet once the carbon tax begins.

On 3 June, 2012, the Master Builders Association of Victoria (MBAV) challenged Federal Government Climate Change Adviser, Ross Garnaut’s, claim in relation to the carbon tax being the most efficient way for reducing carbon emissions, ahead of action on efficiency standards.

MBAV Executive Director, Brian Welch, expressed concerns of Garnaut’s report claiming, “Increasing the cost of building materials will not achieve carbon reduction over the life of the home… Our concern is that in many cases, it may have the opposite effect if consumers choose materials that are less energy intensive to produce, but lack durability and quality. When applied to home construction, it fails the basic principle of encouraging owners and builders to reduce, reuse and recycle.”

A report completed by the Centre for International Economics advised the possible cost effects for the building and construction industry once the carbon tax is introduced. These involve the following measures:

• Flow through of cost increases to materials and other inputs used in building and construction including:
  
  -   Level of carbon price
  
  -   Flow through of carbon price to intermediate and final users (how much of the carbon price is absorbed by suppliers, and how much is passed on to users)
  
  -   Flow through of other emissions related costs
  
  -   Compensation for trade exposed (import competing) industries. This may have a limited effect on reducing costs in the short term
  
  
• Changes in services costs. This involves indirect flow through of carbon price to service costs and coverage of the carbon price (in particular, inclusion of fuel prices).
• Changes in labour costs relating to the overall effect of carbon price on real wages.

Welch said “Professor Garnaut’s report did not pass the ‘real world’ production test, particularly when it comes to the family home… A carbon tax is a blunt and inappropriate tool for the building industry. Emissions reduction policies need to recognise how a product is used, not just how it is produced.”