Carbon Pollution Reduction Scheme

There is a common myth that the Carbon Pollution Reduction Scheme (CPRS) announced recently by our federal government is only the concern of big business. This is incorrect; the Carbon Pollution Reduction Scheme (CPRS) will affect every organisation, business and individual, no matter what size.

The Carbon Pollution Reduction Scheme (CPRS) works by mandating that every organisation or facility that emits a significant amount of greenhouse gas has to report and purchase a permit for every tonne of CO2-e it releases. Organisations that meet the threshold of 125 kilotonnes as a whole, or 25 kilotonnes of CO2-e, will be captured. This includes most electricity generators, mining companies, large property trusts and other ASX 200 companies.

As compliance parties, organisations must take the requirements of the Carbon Pollution Reduction Scheme (CPRS) seriously. Failure to do so can result in fines to the CEO itself, albeit the risk is small if you understand and follow the rules.

If a company does not comply, the risks are great. High energy users could see the cost of permits passed on to them as the scheme allows compliance parties to do so on existing contracts, resulting in a great increase on the cost of providing goods and services. If an organisation has existing contracts, they may no longer be financially viable as increased costs may take up the entire margin.

Companies with high energy consumption and low margins should carefully assess the cost of the Carbon Pollution Reduction Scheme (CPRS) and how it will affect their business going forward. In the worst case, contracts or previous business plans may no longer be viable.

At $20.00 per tonne, the cost of electricity for the average resident in NSW will rise nearly 10%, or a little over 2c per kWh; but for businesses who are generally charged a cheaper rate the percentage may be far greater.

The Carbon Pollution Reduction Scheme (CPRS) presents both opportunities and risks for organisations. Companies that are well prepared, understand the cost increases and the risks in exitsing contracts and have determined their Marginal Cost of Abatement Curve, stand to benefit as they mitigate the financial impacts of the Carbon Pollution Reduction Scheme (CPRS) and become more price competitive. Companies that are not prepared risk having contracts becoming unviable; having great cost increases for energy and energy intensive products and, in the long run, risk going broke.

For more information about the CPRS, please visit www.noco2.com.au/web/page/cprs.