kpmg carbon-price-for coal mining industry -july-2011
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7/30/2019 KPMG Carbon-price-For Coal Mining Industry -July-2011
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On Tuesday 8 November, 2011 the Australian Senate passed
the Clean Energy Future legislative package, which includes
the introduction o a carbon pricing mechanism into the
Australian economy commencing 1 July 2012.
The carbon price mechanism will apply to all companies
producing at least 25,000 tonnes o CO2 per year rom
scope 1 emissions (excluding electricity and uels used or
transportation). The mechanism includes ugitive emissions
and is thereore likely to impact most coal miners in Australia.
This actsheet provides an overview o carbon price
mechanism and what it means or the coal mining sector.
More detailed inormation can be ound in our publication
Australias Climate Change Plan How it will work and the
implications or business.
Fixed price phase (1 July 2012 30 June 2015)
Notatax,butoperateslikeatax.
$23,$24.15then$25.40pertonneofCO2-e respectively
forrst3years.
75percentofpaymentdueby15June,withtheremaining
25 percent due the ollowing February.
Cannotuseinternationalpermitsinthisperiodanduseof
domesticoffsets(ACCUs)isrestrictedto5percentofan
entitysliability.
Floating price phase (1 July 2015 >)
Marketpricewithceilingandoorforrst3years
(until30June2018).
Treasurymodellingsuggeststhatthepricewillbe
$29in2015risingto$37in2020.
Ceiling:$20aboveinternationalpricesrisingby5percent
in real terms per annum.
Floor:$15risingby4percentinrealterms.
Paymenteffectivelyby1Februaryinthefollowingyear.
Canuseinternationalpermitsforupto50percentofliability
(this limitation is removed in 2020). There is no limit on the
surrender o ACCUs.
Coal excluded from Emissions-Intensive Trade-Exposed
(EITE) assistance
The coal sector will be denied access to the EITE program as
wasthecasewiththepreviouslyproposedCarbonPollution
Reduction Scheme.
Liable entities
Theentityliableisgenerallytheonewithoperationalcontrol
overthefacility.Foranunincorporatedjointventure(UJV),
where no-one has operational control, then the liability will be
allocatedtotheUJVparticipants.Theremaybeprovisionsto
effectivelytransfertheliabilitybyagreement.
Fuel credit reduction to duplicate a carbon priceThere will be changes to the uel tax credits or o road use
in mining, processing and or power generation to duplicate a
carbon price based on emissions intensities. This will change
annually during the fxed price phase and 6 monthly during the
exiblepricephasetoreecttheaveragecarbonpriceduring
that period.
The reduction in Fuel Tax Credit or diesel will be 6.2 cents per
litrein201213risingto6.9centsin201415.Thiswillbe5.5
centsperlitreforpetrolrisingto6.1centsin201415.
Assistance for coal mines with high emissions
(only 25 mines) $1.3b over 6 yearsThegovernmentestimatesthatatacarbonpriceof$23per
tonne CO2-e,thecostpertonneofcoalwillbeabout$1.40for
theaveragenon-gassymine.Butthiswillriseto$7.40per
tonneofcoalfortheaveragegassymine(and$25pertonne
o coal or the gassiest).
In order to alleviate this cost the government has announced
assistanceof$1.3billionover6yearsforexisting,butnotnew,
mines.Itisexpectedthat18minesinNSWand7minesin
Qld will be eligible.
Eligible mines must have a ugitive emissions intensity o 0.1
tonne o CO2-epertonneofsaleablecoal,basedon200809
data. Assistance will be or up to 80 percent o ugitiveemissions above 0.1 tonne o CO2-e per tonne o saleable
coal. This assistance will be capped, based on the higher o
2007/8or2008/9productionlevels.
Carbon price factsheet for the Coal Mining Sector
2011KPMG,anAustralianpartnershipandamemberrmoftheKPMGnetworkofindependentmemberrmsafliatedwithKPMGInternationalCooperative(KPMGInternational),aSwissentity.
Allrightsreserved.TheKPMGname,logoandcuttingthroughcomplexityareregisteredtrademarksortrademarksofKPMGInternational.LiabilitylimitedbyaschemeapprovedunderProfessional
StandardsLegislation.July2011.QLDN07995MKT.
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kpmg.com.au
Coal Mining Abatement Technology Support package
$70 million over 6 years
$70millionover6yearshasbeenallocatedforresearch
on abatement in the coal sector.
Introduction of the Minerals Resource Rent Tax
and potential synergies
In addition to the carbon price mechanism, the Australian
GovernmentalsoproposestointroducetheMinerals
Resource Rent Tax on 1 July 2012.
For those impacted, the legislative requirements o both
policies should be careully considered in the lead up to the
implementation date o 1 July 2012 and beyond, to ensure
potential synergies in the structure, operations, people and
reporting procedures are identifed, where possible.
For urther inormation about the Minerals Resource Rent
Tax, please reer to our Resource Taxation webpage ound
on kpmg.com.au.
KPMG,withdeepindustryknowledgeinthecoalsectoris
able to provide companies with specialist skills in tax, transer
pricing, fnancial modelling, valuations, accounting, risk
management, greenhouse gas emissions data reporting
and assurance and transaction services.
Next steps
Companies operating in the coal mining sector need to
careully consider the impact o the carbon price mechanism
on their fnancial accounts, tax liabilities and other important
metrics, such as the share price, and prepare a response
plan which includes operational actions and a stakeholder
inormation plan.
Financial reporting impacts
The most immediate fnancial reporting implication arising
fromtheClimateChangePlanisthepotentialimpacton
asset impairment testing. The impact on fnancial reports
willdependonthedirectorsviewastowhethertheycan
reasonably estimate the impact o a carbon price mechanism
on the recoverability o the carrying amounts o these assets.
The carbon price mechanism will lead to additional recognition,
measurementanddisclosureofissueswithinentitiesnancial
reports. Reporting entities are thereore encouraged to ensure
they have sufciently robust and auditable systems and
processes in place to acilitate the fnancial reporting process.
Tax implications
The cost o acquiring a permit will be deductible on acquisition
and consideration or sale o a permit will be assessable
income.However,arollingbalancemechanism,whichis
similar to the treatment o trading stock, will eectively deer
the deduction arising on purchase or any permits held at theend o the tax year.
The compliance year or the carbon price mechanism will
endon30June,forcompanieswithasubstitutedaccounting
period there will be a dierent year-end or taxation and
carbon compliance purposes.
A number o other accounting and tax considerations
will need to be considered to achieve optimal results or
accountingandtaxpurposes.Theseinclude:
abilitytoforecastandmeasureemissionsaccurately
consequencesofover-surrenderingcreditsinaparticularyear
abilitytobringforwardcreditswithafuturevintage (subjecttoa5percentcap)
impactoncashtaxesofthebalancingchargeunderthe
rolling balance mechanism at year-end
nancialyear-endfortaxpurposesandthebenetof
delaying a cash outlay until the latest possible time.
Contact us
Michael Bray
Energy & Natural Resources
T:+61392885720
Helen Cook
Energy & Natural Resources
T:+61892637342
Grant Wardell-Johnson
Tax
T:+61293357128
Nick Moffatt
Climate Change & Sustainability Services
T:+61892634833
10 July 2011
Policy announcement
Early August
Legislation tabled in house
8 November
Passage of legislation
31 July 2011
Draft legislation available
Mid September
Legislation tabled in the senate
1 July 2012
Introduction of the carbon
price mechanism
The inormation contained herein is o a general nature and is not intended to address the circumstances o any particular individual or entity. Although we endeavour to provide accurate and timely
inormation, there can be no guarantee that such inormation is accurate as o the date it is received or that it will continue to be accurate in the uture. No one should act on such inormation without
appropriate proessional advice ater a thorough examination o the particular situation.
2011KPMG,anAustralianpartnershipandamemberrmoftheKPMGnetworkofindependentmemberrmsafliatedwithKPMGInternationalCooperative(KPMGInternational),aSwissentity.
Allrightsreserved.TheKPMGname,logoandcuttingthroughcomplexityareregisteredtrademarksortrademarksofKPMGInternational.LiabilitylimitedbyaschemeapprovedunderProfessional
StandardsLegislation.July2011.QLDN07995MKT.
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