How the Carbon Tax May apply to Residential Building

1. FOR IMMEDIATE RELEASE
14 July 2011
HOW THE CARBON TAX WILL APPLY
TO RESIDENTIAL BUILDING
The Federal Government’s plans to introduce a carbon pricing mechanism will impact
across the entire Australian economy. The residential building industry will be
affected more than most.
Once the legislation is passed, facilities that emit more than 25,000 tonnes of carbon
dioxide per year will pay a fixed carbon tax of $23/t from 1 July 2012 – increasing to
$24.15/t in 2013/14 and $25.40/t in 2014/15, and then transition to an emissions
trading scheme from July 2015.
Around 500 facility operators will be required to pay the new carbon tax. For
everyone else, the tax will be embedded in the products they produced, such as
electricity, gas and other fuels, and in the primary materials such as steel, glass,
cement, bricks and aluminium. The cost will further increase progressively as they
pass through the various manufacturing and fabrication phases.
How much will it add to a new home?
As you would have seen in the press, on news websites and through radio and on
television over the past 3-4 months, HIA’s modeling work estimates that the
aggregate increase in cost of all the inputs (building materials, products, assemblies,
administration, etc) into an average new house and land package due to the carbon
tax will be between $5,000 and $6,000. Based on the details announced last Sunday
(including the initial rate of $23/t, zero impact on petrol and diesel for general purpose
and compensation rates for "emissions-intensive, trade-exposed" emitters), we
anticipate our final analysis will show an increase of between 1.2% and 1.4%.
When will we know for certain?
It’s impossible to know for certain what the cost increase will be exactly.
However, to provide the best possible estimate for members, HIA is analysing the
flow-on cost increase for each building material, product and assembly used in a new
house and land package, based on the details announced last Sunday. The analysis
follows each input though its various stages of production, manufacture and
fabrication and the fuels used at each stage (electrical, gas, coal, oil). It models the
energy consumption, embodied carbon and cost increase, based on the bill of
quantities for HIA’s Standard House design, to determine a realistic estimate of the
aggregate cost increase. Our final estimates will be available within the next two
weeks.
How can I pass on the cost increase?
Unlike the GST which applied a 10% tax immediately to every transaction on the
same date, under the carbon tax the cost of building materials, products and
assemblies will increase progressively as they pass through the various production
phases – some faster than others. Members should therefore factor in increases in
the cost of inputs on projects expected to continue over the transitional period -
around the proposed 1 July 2012 implementation date – and beyond.