Price exploitation might be a complex issue with the carbon
price, especially if the ACCC doesn't get any new legislative
The Federal Government has announced that it will give new
powers to the Australian Competition and Consumer Commission
(ACCC) to investigate and monitor the impacts of
carbon permits on prices for those companies which are required to
buy permits under the Government's scheme.
The Government's concern will be to guard against any
"price exploitation" by affected companies exaggerating
the impact on their prices of the increase in costs caused by the
obligation to purchase carbon permits.
The initial report suggests that the ACCC will not receive any
new legislative powers in this area but will issue pricing
guidelines and monitor the impact of the carbon permits on
For the ACCC to have any real teeth in this area will require
some legislative changes, as the old "price exploitation"
provisions which accompanied the introduction of the GST in 2000
expired some years ago and were removed from the Competition and
What's price exploitation? The experience with the
What will amount to "price exploitation" in this area
will likely be a matter of degree and require some judgment, which
may be complex in some cases.
When the GST was introduced, the concept of "price
exploitation" was to ensure that affected traders did not
increase prices by more than the amount required to comply with the
new tax requirements (which saw some old taxes removed and the new
GST introduced at a rate of 10%).
Under the carbon scheme, any price adjustments should only
reflect the net cost to the trader of purchase of the required
number of carbon permits.
With the GST, the ACCC was given power to investigate and take
companies to court if prices, adjusted to reflect the GST, were
found to be adjusted in a way that was "unreasonably
high", having regard to the change in tax and the surrounding
In 2000 the ACCC took an active role, issuing guidelines,
monitoring pricing, naming and shaming some companies and
publicising its powers – but did not take any trader to
Does the concept of price exploitation transfer easily to the
Applying this test to the purchase of carbon permits may be more
complicated than it was to the introduction of the GST because the
impact on prices will vary according to a number of factors,
the relative carbon intensity of particular goods and services
- indeed even the same products may have a different carbon
intensity depending on where and how they are produced;
the extent to which a liable entity receives compensation or
assistance under the Carbon Price Mechanism - this compensation is
intended to assist those activities which are emissions intensive
and trade exposed, so that they remain competitive in the
the capacity of any particular producer to reduce emissions,
and therefore liability under the Carbon Price Mechanism, or source
potential credits to meet scheme obligations.
In 2000 the ACCC was successful, as few exploitation concerns
arose with the GST. However the Act was toughened at that time and
the ACCC was able to threaten fines of up to $10 million for price
exploitation and to issue notices which required companies to prove
that they were not unfairly exploiting the adjustment to
Without these sorts of tough measures with the carbon permit
scheme, it will be unclear how effective the ACCC's role may be
in this area.
Nonetheless we expect the ACCC will issue detailed guidelines on
how it expects companies to reflect the cost of carbon permits in
their pricing and these guidelines will warrant careful attention
when they are being drafted and considered by affected
This legal update is an overview of existing eligible project activities and new project types proposed to be developed.
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