By Michael Perry
SYDNEY (Reuters) - Coal miners, steel firms and airlines were sold off on Monday a day after Australia's unpopular government introduced a carbon tax scheme, while power suppliers warned the tax could risk A$4-6 billion in assets if banks tightened financing.
But economists said the A$23 a tonne carbon tax, aimed at encouraging the biggest polluting industries to clean up operations, would have little impact on economic growth, riding on the back of China's appetite for its mineral resources. Nor would it significantly affect inflation or interest rates.
Prime Minister Julia Gillard on Sunday unveiled her long awaited climate policy which will see 500 big polluting firms, including steel and aluminum manufacturers, pay a A$23 a tonne carbon tax from mid-2012. That will rise by 2.5 percent a year before moving to a market-based trading scheme in 2015.
Gillard's government, which maintains a one-seat majority with support from the Greens and independents, sees the tax as a way to recoup popular support ahead of an election due by 2013.
Australian stocks fell about 1 percent early on Monday, with coal miners, steel and transport firms such as Macarthur Coal, Bluescope Steel and Virgin Australia sharply down as investors digested the impact of the tax.
Clean energy firms Geodynamics climbed 25 percent and clean energy firm Infigen Energy rose 4 percent on a $10 billion fund to finance clean-energy projects or technologies, rose 4 percent.
"We've opted for the cheapest way of cutting carbon pollution," said Gillard, as she kicked off a nationwide campaign to sell the tax, opposed by most Australians.
The scheme, likely to be passed by parliament this year, aims to cut emissions by 5 percent off 2000 levels by 2020. Australia is the developed world's worst per-capita greenhouse gas emitter, because of heavy reliance on cheap coal for power generation.
Green groups hope the tax package will aid global efforts to fight carbon pollution, largely stalled since U.S. President Barack Obama last year ruled out a federal climate bill during his present term. Outside the European Union, only New Zealand has a national carbon scheme.
AUSTRALIA RELIES ON COAL
Australia relies on coal-fired power plants for 80 percent of its electricity, which in turn accounts for 37 percent of national emissions.
Power suppliers said the tax would help retire the worst polluting brown coal power plants, but warned it also put at risk A$4-6 billion in black coal plant assets.
"Our sector has assets that...last 40 to 50 years and have payback periods of 20 to 30 years and are constantly having to be maintained and reinvested in," said Brad Page, chief executive officer of the Energy Supply Association of Australia.
"When it comes to refinancing these facilities, which occurs every few years, the banks will take a very hard view on this. These black coal facilities may struggle if that refinancing is not available to them."
The government plans to set up loan guarantees for electricity generators through a new Energy Security Fund, to help the industry refinance loans of between A$9 billion and A$10 billion over the next five years.
"CARBON TAX EXPERIMENT"
Under the scheme, coal miners like global giants Xstrata Ltd, Rio Tinto, BHP Billiton would be eligible for a A$1.3 billion compensation package.
The tax is estimated to add, on average, a mere A$1.80 per tonne to the cost of mining coal at a time when coal prices are at near record highs above US$300 a tonne.
But Rio Tinto said Australia should not impose a price on carbon before its competitors.
"We have to be careful about imposing policy experiments on the Australian economy. Australia's minerals sector now faces significant additional costs not faced by competitors," said Rio Tinto managing director Australia David Peever.
The coal mining industry is Australia's second-largest exporter and is expected to launch a damaging campaign against the carbon tax, warning of job losses and mine closures.
UBS said, however, it remained a good time to buy Australian mining stocks as issues such as European debt worries, Chinese economic tightening and U.S. quantitative easing were abating.
Australia's scheme will cover 60 percent of carbon pollution apart from exempted agricultural and light vehicle emissions, with Treasury models showing it would boost the consumer price index by 0.7 percent in its first year, in 2012-13 (July-June).
"At a time of elevated inflation pressures, the carbon tax will add to RBA (Reserve Bank of Australia) vigilance but is unlikely to result in higher interest rates," said Katie Dean, head of Australian Economics at ANZ.
Parliament twice rejected attempts to price carbon in 2009, but this package is backed by the Greens and key independents.
Gillard needs to sell the package hard to voters in face of a loud campaign by the conservative opposition.
To neutralize opposition, more than A$24 billion to be raised from pollution permit sales over three years will go to households through generous tax cuts to offset price rises.
(Additional reporting by Rob Taylor in Canberra, Sonali Paul in Melbourne; Editing by Ed Davies and Ron Popeski)
