Rio, Woodside urge Australia govt to modify carbon tax

Two of Australia's largest natural resources firms criticised on Monday the government's plan to put a fixed price on carbon emissions, with Rio Tinto warning that without major changes, the scheme could be potentially disastrous for businesses.

Global miner Rio Tinto said the government must offer more generous compensation under the carbon scheme, while the nation's largest oil and gas producer, Woodside Petroleum, said it should be exempt completely.

A compensation offer under discussion since 2009 was no longer a reasonable basis for talks, Rio said, as it was now clear that any international emissions lowering plan was all but a "distant mirage", and Australia must avoid putting local firms at a disadvantage over international rivals.

"Businesses unable to pass a carbon price through to customers, which is most businesses competing in international markets, would simply have to absorb it," said David Peever, Rio's Australian managing director.

"Depending on the magnitude of the carbon price, this may be manageable when market conditions are favourable and margins are healthy. But when the cycle turns down, it will inevitably be disastrous," Peever wrote in The Australian newspaper.

The Labor government last month unveiled its third model for curbing emissions, opting for a fixed price on carbon from July 2012, but has yet to lock in an actual starting price and other details that big business and investors are looking for.

Prime Minister Julia Gillard, whose predecessor Kevin Rudd was dumped last year after two failed attempts to address climate change, said polluters would pay a yet-to-be-determined fixed price, then move to a market-based system within five years.

The plan has put Gillard's one-seat minority government under intense political pressure, with the majority opposition conservatives promising to reject it and warning consumers it will lead to higher electricity and living costs.

The influential Australian Greens, who help support Labor in the lower house and have a strong voice in the upper house, said the claims of Rio and other "big polluters" should be rejected by the government.

"We should be looking at the real world and when it comes to compensation, it shouldn't be claims by these big corporations," Party leader Bob Brown told local television.

Brown said compensation claims by emissions-heavy industries should be assessed by an independent arbiter or review process, to ensure corporates did not use their political influence to escape costs and leave taxpayers to make up the shortfall.

Treasurer Wayne Swan at the weekend conceded that voters -- already split 50-50 over the government -- were confused by the government's carbon tax plan and tried to alleviate mounting concerns, promising it would not be like a "traditional tax".

"It is not deducted from your pay packet, it comes from the big polluters," Swan said.

Rio has estimated the company's annual carbon tax bill would be about A$154 million if the tax was set at A$20 a tonne for every tonne of carbon pollution.

Rio's export operations would have faced an additional A$3 billion cost over 10 years from a carbon emissions trade scheme proposed in 2009 and which offered almost A$50 billion in compensation to industry and mining over the first decade.

Rio Tinto's Peever, a member of the government's consultative business roundtable on climate change, called for "real world" modelling of industry transition being forced by the carbon price.

"We must also ensure that investment and job losses do not become an unintended consequence of an otherwise well-intentioned national determination to play our part in mitigating climate change."

Woodside Petroleum, meanwhile, said it should be exempt from paying any carbon tax.

"Woodside believes the company's trade-exposed exports should be exempt from any price on carbon, given the absence of an international agreement on pricing greenhouse gas emissions," it said.

"The company accepts the government's intention to put a price on emissions associated with products consumed domestically such as natural gas, but recognises this will lead to an increase in costs for consumers."

Woodside said liquefied natural gas had an important role in lowering greenhouse gases and Gillard's government should acknowledge that with a carbon tax exemption.