The managing director of Rio Tinto Australia, David Peever said that the federal government’s opinion that only ‘gassy’ coal mines needed carbon tax relief and non-gassy mines would be unaffected by the carbon tax was not viable.
The federal government has a plan to impose tax of $23 for each tonne of carbon emitted by the country’s 500 biggest emitters from 2012. The tax is to rise by 2.5% annually till it is replaced by a market based emissions trading scheme in mid 2015.
The tax impact on the viability of a mine tends to depend on not just the intensity of the emissions but also the expense of building and operating it. David Peever said that a study of 46 coal projects found that some non-gassy mines would not be viable without assistance.
Mr Peever was speaking at the Minerals Council of Australia Tax Summit when he said that the government had constructed the job package on the basis that ‘gassy’ mines require assistance and less ‘gassy’ mines don't. The real world was not that simple.
As per Mr Peever the pre-company tax internal rate of return was reduced to 12.1 % by the carbon tax. At this level it failed to exceed the hurdle rate and the investment will not be made. He also warned that in its current form the carbon tax would prevent coal mines being developed in Australia.
They will be developed in Indonesia, or Columbia, or Africa. Australia will surrender the taxes, royalties, the 300 construction jobs, the 150 ongoing operational jobs and associated economic development to our offshore competitors, he said. Mr Peever added that the government should take the time to go back to the drawing board and reconsider its approach.
The chief executive of Anglo-Swiss mining company Xstrata, Mick Davis has been known to describe the rate the government has set for its tax as "stupid". He has also added that it was designed to raise revenue rather than effectively address the issue of greenhouse gas emissions.