Carbon trading cost to hit SMEs hardest

SMEs may face paying a bigger share of the costs associated with the introduction of a carbon trading scheme than larger businesses with heavier emissions, a new economic analysis shows.

According to a study by consultancy McLennan Magasanik Associates reported in newspapers today, state and federal governments are likely to set up comprehensive assistance schemes to help businesses adjust to the higher energy prices associated with carbon trading.

There is also likely to be more assistance for businesses that face international competition with businesses in developing countries that have lower emissions targets, which is also more likely to favour larger business.

But, the report’s authors say, these programs are likely to be accessible mainly to larger businesses, leaving SMEs with power bills in the vicinity of $25,000 a year bearing a proportionally bigger hit to their bottom line.

Depending on the extent of the carbon emissions cuts pursued, a carbon trading scheme could see wholesale electricity prices increase by as much as 100%, according to the report. A relatively modest cut of 50% on 2004 greenhouse gas emission levels by 2030 would result in a rise of around 25% on current prices.

The cost of implementing new technologies, sourcing energy from expensive renewable sources, and the need to purchase carbon permits for larger emitters, would contribute to the price rises.

But the increase in prices is only likely to present serious problems to SMEs that are big energy users, primarily in the manufacturing industry, the report finds. On average, power makes up only 5% of an SME’s total cost base.