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.
Editor's Note: CR4 would like to thank Greg Groppenbacher of GEA Consulting for contributing this blog entry.
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