Carbon tax could hit Australian food industry, says AFGC

Under the proposed carbon tax legislation, the federal government plans to tax the nation's 1,000 biggest polluters for carbon emissions July 1, 2012.

The scheme will be implemented over a three- to five-year period after which it will switch from a fixed price system to a cap and trade system. No price has yet been decided upon for the fixed price system.

The federal government in its official communications has continually indicated that the carbon tax would not affect the food industry in Australia, as food manufacturers were not in the top 1000 polluters.

The Australian Food and Grocery Council (AFGC) has termed that a gross misjudgment and in a statement has said that a carbon tax will impact costs all the way through Australia’s supply chain, from farm to fork.

The council warned that the country’s food industry is already under pressure from rising input costs from energy, wages, water, and transport, as well as high global commodity prices and supermarkets forcing down retail prices.

It said that food manufacturers will again be impacted right across the supply chain by higher costs for transport, power, and refrigeration, for example, due to the carbon tax.

According to the council, food and grocery prices are expected to rise between 3 and 5 per cent under the carbon tax, as per company-based modelling on emissions trading based on the previous carbon tax model.

Products requiring the most energy to manufacture would see the biggest cost increases such as baked goods, dairy sugar and paper products like nappies, the council said.

The council also said that the federal government would have to ensure that Australian-manufactured food and groceries will not be made less competitive as a result of the carbon tax.

If the carbon tax puts Australian food manufacturing at a disadvantage, it would ultimately result in exporting of Australian food manufacturing jobs, the council warned.