Call for a Small/Medium Business Impact Assessment of likely carbon
prices and policies, and to factor any such business impacts into the
formulation of (Climate Change) legislation and regulations.
In a world of free trade, SMEs stand to be as adversely affected by energy
cost increases as large businesses because:
Although SMEs are not generally as highly energy-intensive as large heavy
industries, they may be extremely trade-exposed. The degree of trade-exposure
will influence the competitive sensitivity of a company to input-cost increases. A
company which is highly trade-exposed can therefore be severely (competitively)
impacted by energy cost increases, even if it only has moderate emissionsintensity. I believe that this may be a common situation for many SME’s,
especially those in manufacturing.
Additionally, although less common, some SMEs may actually be highly
emissions intensive, even though their total emissions may be quite low.
SMEs may also experience greater impacts from a carbon price because they
are less able to relocate to countries without a carbon tax/ETS, or to out-source
energy intensive processes to such countries, unlike larger corporations, which
generally have access to the far greater human and financial resources required
to do this.
Owners and staff of SMEs and family businesses will generally suffer greater
personal economic and psychological impacts if their businesses are adversely
impacted, compared to staff at large firms. “Whole family impacts” must be
considered, where multiple family members working in the same business may
all simultaneously lose their jobs/incomes, savings investment (in the business)
and often their homes (mortgaged to fund the business). This is a very different
situation to a large business executive or employee, whose salary, savings and
mortgage/home equity are separated, and who additionally is generally
guaranteed a suitable retrenchment pay-out and retraining if their employer
closes.
It has been mooted that the government may be considering the granting of
carbon tax exemptions/rebates/free carbon permits to large energy-intensive and
trade-exposed businesses. Policy decisions about such free permits/carbon tax
rebates should not ignore the SME sector, for the reasons explained above.
Additionally, to place a minimum emissions threshold on businesses (with
regards to who gets free permits/carbon tax exemptions/rebates), could be seen
as handing a government mandated selective competitive advantage to large
businesses over small.
95% of the Government’s Business Round Table on Climate Change represents
only large corporations (or their Associations). SMEs have been largely been
ignored, with only one organisation (out of 19) with any significant
representation/membership from/comprised of SMEs (the Australian Chamber of
Commerce and Industry). This is unsuitable given the contribution that this sector
makes to the economy and its potential exposure to a carbon price.
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An impact assessment would need to be modeled on a “real world situation” ie:
- Where our competitors like China, India & the US do not have a carbon price
- Where it is generally not possible for businesses to successfully “pass on” carbon
prices to their customers, if a similar imported product from a country without a
carbon price is cheaper.
- “Realistic” national economic/industrial/commercial conditions need to be
assumed, for instance that it is generally not possible to reduce labour (and
other) costs to compensate for increased energy costs, without adverse impacts
on the business.