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On
July 1, 2012 The Australian Government introduced a "Tax on Carbon". The tax
covers the majority of the economy with few exceptions.
The
price established by the government is $A23/ton. This price is fixed with a 5%
increase each year for the first three years and then the tax will convert to
an emissions trading scheme.
The
global warming effect of synthetic greenhouse gases is being addressed by
imposing an "Equivalent Carbon Price" to synthetic greenhouse gases. This means that importers of synthetic
greenhouse gases, including importers of equipment containing these gases will
be liable to pay the equivalent carbon price (tax).
To
arrive at the value of the tax the importer multiplies the $A23/ton by the
Global warming potential of the gas. Thus, for R404A the tax will be $A75/kg.
There
are two points that make this tax a large burden on the air conditioning and
refrigeration industries and their customers.
- The tax
is applied at the point of import - like an import duty - and thus becomes a
cost of doing business with each step in the commerce chain adding their
appropriate margins.
- The tax
is anywhere from 3 to 8 times the actual imported values of the refrigerant.
A Simple Example
With no tax-
Cost
at point of import $1.00 leads to a selling price to the end user of say $3.00.
With
a carbon Tax -
Cost
of the product $1.00 plus a tax of say $4.00 = Cost to the importer of $5.00. Apply
the same margins and the selling price to the end user is now $15.00
The
objective of the tax is to encourage better maintenance, thus lower leak rates
and to encourage the transition to low global warming potential refrigerants.
Both
of these objectives are appropriate but there are some pitfalls:
- There
will be more on the jobsite recycling of refrigerants on existing equipment and
if this is not done properly there may be issues with the equipment's
performance and reliability. For example if the refrigerant is a blend such as
R410A it is very difficult o ensure the recycled refrigerant has the same
characteristics as new R410A. Further, refrigerant could be contaminated and
the process of recycling on the jobsite may not do a suitable job in cleaning
up the refrigerant.
- There is
more potential for organizations marketing alternative refrigerants e.g.
Hydrocarbon refrigerants to convince people to replace their fluorocarbon with
a hydrocarbon. Because equipment is designed to operate on a particular
refrigerant this approach will lead to less than optimum performance and
because hydrocarbon refrigerants are flammable the potential for serious
accidents is increased.
- For new
installations this tax will encourage a move to lower GWP refrigerants. As
always the decision on the refrigerant will be influenced by the investment
strategy of the purchaser, which should take into account issues such as first
cost, safety and overall system efficiency.
The
following links to fact sheets from the Australian Government's Department of
Sustainability, Environment, Water, Population and Communities have further
information.
THE EQUIVALENT CARBON PRICE ON SYNTHETIC
GREENHOUSE GASES IN THE (RAC) INDUSTRY
HOW THE EQUIVALENT CARBON PRICE WILL
AFFECT SYNTHETIC GREENHOUSE GASES
APPLYING AN EQUIVALENT CARBON PRICETO
SYNTHETIC GREENHOUSE GASES
CALCULATING THE EQUIVALENT CARBON PRICE ON
SYNTHETIC GREENHOUSE GASES
Editor's Note: CR4 would like to thank Greg Groppenbacher of GEA Consulting for contributing this blog entry.
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