Ernst & Young: Carbon price uncertainty undermining investment

Large global accounting firm, Ernst & Young or EY, has released a report arguing that the political uncertainty surrounding carbon policy is undermining investment in Australia.

EY Climate Change and Sustainability Leader Mathew Nelson said, “The incoming Government must provide longer-term regulatory certainty in the pricing of carbon. This will incentivise business to reduce carbon emissions in the most efficient way and support the transition to a low carbon economy.”

According to the report industry has been left in a state of limbo, unclear about what the rules will be surrounding controlling carbon emissions.

The opposition has stated a full repeal of the Carbon Pricing Mechanism (CPM) is one of the first actions it will initiate if elected, while the Rudd Government has suggested it will accelerate the CPM to its flexible pricing scheme earlier than originally planned. As an obvious consequence, EY conclude that businesses are delaying strategic decisions or investments because they are uncertain about the future existence of a carbon price or the structure of any alternative carbon policy — particularly in the short-term.

Nelson observed, “This uncertainty is damaging, especially in the electricity sector, as businesses require a level of certainty to plan and invest for the future. Australia urgently needs to agree on a policy framework for responding to the challenge of climate change.

While there are concerns that pricing carbon could harm international competitiveness, Mr Nelson noted, “We are not alone in our commitment to reduce carbon emissions — our largest trading partners have or are looking to put in place measures to do the same”.

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