SYDNEY 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 tax on the top 500 carbon polluters would have little impact on economic growth, which is riding on the back of China's appetite for its mineral resources.
Prime Minister Julia Gillard on Sunday unveiled her long awaited climate policy which will see big polluters, including steel and aluminum manufacturers, pay a A$23 a metric ton tax from mid-2012. That will rise by 2.5 percent a year before moving to a market-based trading scheme in 2015.
"The nation's future needs to be a clean energy future. 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.
Australia's parliament twice rejected attempts to price carbon in 2009. But Gillard, with the support of Green and independent MPs, hopes the latest carbon tax will see her Labor party regain political momentum ahead of elections due by 2013.
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.
Australian stocks were heading for their biggest fall in nearly a month on Monday, dropping 1.5 percent, with coal miners, steel and transport firms such as Macarthur Coal, Bluescope Steel sharply down as investors digested the impact of the tax.
Australian airline shares also tumbled. Qantas said the carbon tax will cost it an estimated A$110 million to A$115 million, while Virgin Australia said it was likely to face a cost impact of A$45 million in fiscal year 2013.
Both airlines said they would pass on the cost to passengers.
Clean energy firms are expected to be the winners from the carbon tax and an associated A$10 billion ($10.7 billion)clean energy package initiative. Geodynamics soared 25 percent and Infigen Energy rose 5 percent on Monday.
AUSTRALIA RELIES ON COAL 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 due to its heavy reliance on cheap coal for power.
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, to help the industry refinance loans of between A$9 billion and A$10 billion over the next five years.
Power suppliers and manufacturers have warned of rising prices due to the carbon tax. To compensate, the government said more than A$24 billion to be raised from pollution permit sales over three years will go to households through tax cuts.
"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 metric ton to the cost of mining coal at a time when coal prices are at near record highs above US$300 a metric ton.
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," said Rio Tinto managing director Australia David Peever.
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.
($1 = 0.930 Australian Dollars)
(Additional reporting by Rob Taylor in Canberra and Sonali Paul in Melbourne; Editing by Ed Davies and Miral Fahmy)