Victoria's coal tax increase has costs and consequences

The tripling of the Victorian Government’s royalty payment on brown coal is a significant tax increase that will either be passed on to consumers or impair businesses expected to reinvest in the decarbonisation of electricity, the energy industry said today.

The Victorian Government announced the threefold increase in the royalty payment on brown coal as part of yesterday’s State Budget.

Australian Energy Council Chief Executive Matthew Warren said the increase would operate like a State-based carbon tax, with affected generators seeking to pass on their higher operating costs when bidding into the National Electricity Market.

“All tax increases transfer money from someone to the government.  No tax increase is ever free,” Mr Warren said. “This increase from 2017 will increase the cost of the royalty payment from around $1 per megawatt hour to around $3 per megawatt hour, making it the most expensive royalty payment in Australia.

“If the businesses can’t pass the cost on it will simply come off their bottom line and impair their ability to continue to invest in new cleaner generation.  Yet the businesses at which this tax is aimed each have a demonstrated commitment to investment in renewable power generation.

“Australian energy businesses will need to be able to borrow and invest around $230 billion in new energy generation by 2050 to deliver the transformation of our energy sector.  Pinching revenue from already marginal businesses does nothing to assist in this considerable investment challenge.

“The energy industry supports an efficient, national approach to reducing emissions.  Big increases in state-based taxes such as this are a step backwards.”

About the Australian Energy Council

The Council represents 22 major electricity and downstream natural gas businesses operating in competitive wholesale and retail energy markets. These businesses collectively generate the overwhelming majority of electricity in Australia and sell gas and electricity to over 10 million homes and businesses.