The Effect of the Australian Government's Carbon Tax on the Stockland Property Development Company. In respect of ETS, Stockland needs to face the potential regulatory change in its financial reporting and operating activities. The main regulatory sources

Authors Avatar

  1. Introduction:

As the global economy is shifting, The Prime Minister of Australia Julia Gillard outlined the Government’s plan to cut pollution on 24th February 2011 in order to tackle climate change and deliver the economic reform. Australia needs to move to a clean energy in the future. As per the announcement, the carbon price commences on 1 July 2012, subject to the ability to negotiate agreement with a majority in both houses of Parliament and pass legislation in 2011. The corporations with the highest levels of pollution will have a very strong motivation to reduce their pollution. As a result, it will incur additional expenses a lot for the corporations. However, it seems that currently, carbon tax is the only assessable way to control the pollution and to protect our environment.

An initial fixed carbon price will provide businesses with a stable and predictable platform to transition to a ‘cap and trade’ emissions trading scheme that will be linked to international carbon markets. This will give businesses time to understand their carbon liability and begin the transformation in a prospectus way.

The following sections of this report will review some significant strategies and effects of carbon tax on Stockland. In addition, the study also examines about the impact of ETS on the company’s income statement and financial statement position (also known as B/S). The final part of the report will focus on the necessity of the carbon tax in respect of the government.

1.1Company overview

Stockland is one of the largest Australian property development groups, which was founded in 1952 as a residential developer. It was listed on the Australian Stock Exchange in 1957 and diversified into commercial developments in the 1960’s. The company is well reputed for operating in a various range of business which includes management of , residential community, apartment, retirement living, retail, office and industrial assets around Sydney, Melbourne, Brisbane and Perth and so on. Stockland has delivered solid results of 9.6 % improvement in Underlying Profit despite the continuation of unsettled economic conditions. Through strong performance in a consistent manner, Stockland is a key player in their respective sector both in Australia and overseas. The following discussion is based upon announcement of carbon tax associated with emission trading scheme.

  1. Carbon tax:

A carbon price is a price which implies the cost on pollution of the operating activities of the corporations. It is the cheapest and fairest way to cut pollution and build a clean energy economy. The best way to stop businesses polluting and get them to invest in clean energy is to charge them when they pollute. 

Initially, Government is committed to reducing emissions by 60% of 2000 levels by the year of 2050.According to carbon disclosure project, 2010, Stockland recognises that energy efficiency presents the biggest and most cost-effective means to reduce GHG emissions. To help set targets for improved energy efficiency and reduced emissions, thus it began work on a carbon abatement cost curve. To put it simply, this means the implication of carbon tax that achieve emissions cuts at the lowest cost across of the company’s portfolio.

It is generally argued that carbon tax will effect on the GDP of a business. Stockland’s cost curve is based on evidence from energy reduction projects (including those identified via the federal government’s Energy Efficiency Opportunities program) to reduce emissions and energy use analysis across its portfolio. The methodology assesses the projects over a period of four years and demonstrates the average cost of abatement if each action is implemented cumulatively.

2.1Possible effects of carbon taxes:

Firstly, the house constructions have lower intensive pollution on the environment. However,  it may effect in a different way in the global market. As the operating activities of Stockland related to the construction of houses, apartments, shopping centres; thus carbon tax will imply on their operational materials such as, cement, rod and other related appliances. As a result, the cost of these products may take the rising movement. Secondly, for the implication of carbon tax; Stockland may include an additional expense in transportation cost. Furthermore, Electricity bill may take an upward trend due to the carbon tax.

Join now!

However, in order to reduce the electricity bill, the company can use the energy saving elements like bulbs, using of central air conditions with the automatic power switched systems and others. Stockland has incorporated the cost curve methodology into its Climate Change Action Plan target-setting function. This will enable the organisation to set an emissions reduction target and have an accurate, reality-based estimate of the costs associated with achieving that target. 

  1. Emission Trading Scheme (ETS)

3.1 Overview of ETS:

Due to the greenhouse effect organizations are more concerned about the carbon trading in the international market. Emissions Trading ...

This is a preview of the whole essay