22 January 2013

Investment opportunities presented by the carbon tax

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Months have passed since the introduction of the carbon tax, but debate on its merits continues.

The tax, beginning with a $23 impost for each tonne of carbon dioxide emitted by a group of the largest industrialists, is meant to reduce

Australia’s greenhouse gas emissions and encourage cleaner energy technologies.

But while criticism of the carbon tax has been widespread, many astute Australian businesses and investors have pounced on the myriad of investment opportunities it has presented by this change in policy.

 

The green paradigm

This new green paradigm under the carbon tax is complex, and a cautious approach is recommended. For those people seeking to exploit opportunities, your adviser can discuss the guidance and specialist knowledge required. Put simply, to minimise the impact of the carbon price, industry needs to investigate ways to retrofit existing infrastructure to make it more energy efficient, while developing more effective, renewable energy solutions.

 

In Australia, eco-investing can encompass buying stakes in companies that produce biofuels, harness biogas, manufacture

sustainable building and lighting products, recycling and nature conservation businesses.

 

Investment in innovation

In Australia, the establishment of the Clean Energy Finance Corporation (CEFC) has spearheaded incentives of $10 billion for new  businesses and investment opportunities in the green sector. There is also the Renewable Energy Target which dictates that 20 per cent of the Australian economy’s power in 2020 must come from renewable sources.

 

Retailers of energy will be forced to buy 20 per cent of the electricity they sell customers from renewable energy generators. Some electricity retailers have diversified their power generation portfolio to include wind farms and others are making investments in solar and geothermal energy research.  Businesses are taking a fresh look at the energy requirements of their products and services and

whether their current approach is aligned with the future needs of customers and government regulation.  This has created an opening for innovation, with the early adopters the first to benefit.

 

Sectors to watch

Sectors at the forefront of developing clean energy alternatives for transportation of smart power, green grids, energy storage, green building, energy efficiency, and air water and waste management are poised to cash in on the low carbon economy. But the starter’s gun in the race to significantly embrace green technologies won’t go off until Australia introduces its emissions trading scheme in 2015.  It will be a complex, new landscape but it will also be a time of opportunity for well-advised, canny investors.

 

1 ‘Renewable energy’, 2012, Australian Government Clean Energy Future, <http://www.cleanenergyfuture.

gov.au/clean-energy-future/renewable-energy/>

The author is an employee of Verante Financial Planning in Castle Hill, Corporate Authorised Representative of Magnitude Group Limited, Licence No 221557, Magnitude Group Limited ABN 54 086 266 202.

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