Powerless to pass on carbon tax price hikes

The carbon tax has arrived. Many in the industry are worried. Electricity prices are set to rise and suppliers’ bills look likely to follow. Printers are faced with a difficult choice: to pass on price rises caused by the carbon tax or absorb them. 

The carbon tax may also end up dividing companies in another way – into those who see it as a threat and those who see it as an opportunity.

There is no clear picture of how the industry intends to handle cost increases. Of the 139 responses to a ProPrint poll on this issue, 77% planned to pass on the costs. Yet that was the case for only one of the seven businesses ProPrint contacted directly.

“Alarming” anecdotal evidence from the Printing Industries Association of Australia (PIAA) also suggested “a significant number” of companies would refrain from passing on costs, said national manager of policy and government affairs Hagop Tchamkertenian. This would be a bad idea, he added.

“If printing businesses have an ability to pass on the cost increases that are related to the carbon tax then they should do so because industry margins have fallen to a level that’s not commercially sustainable,” he said.

It sounds nice in theory, but that isn’t the precedent usually seen among printers. One regular user of the ProPrint forums, Inky McFee, summed up the thinking of a lot of printers: “I’m alarmed that Hagop is alarmed. Surely he knows what we’re like by now. When was the last time we passed anything on?”

Will costs go up?

There are different opinions on how printers expect to handle the rises is in question, but there’s consensus about one thing – all the companies ProPrint spoke to said they expected the cost of their electricity to rise.

Focus Press managing director David Fuller said his power bill would be $30,000 higher. Print Bound managing director Mauro Mattarucco predicted a 30% increase. Active Display Group’s price hike would “definitely be a sizeable amount of money”, said marketing manager Zita Watkin.

However, those three companies, along with other environmentally skewed printers Mystique and Finsbury Green, said they probably wouldn’t pass on costs.

Mattarucco said trading condition remained so tight that Print Bound’s prices were likelier to go down than up due to “lack of volume and oversupply”.

Mystique environmental manager Mat Eldred said declining margins and an “extremely competitive” market made it impossible to pass on costs. “We have had experience with this from the early stages with our involvement with the voluntary carbon market.

“[Our National Carbon Offset Standard] certification does cost money and the current business environment doesn’t allow Mystique to pass these costs on.

“Customers will not pay a premium even if they are getting a carbon neutral product and knowing that their money is going towards reducing carbon emissions,” added Eldred.

Watkin said Active Display didn’t expect to pass on costs; it has already been forced to reduce margins to win jobs. “We know there will be some price increases from suppliers and that will be very hard to pass on to customers – we probably won’t.”

Franklin Web managing director Phil Taylor wouldn’t be drawn on whether or not the Melbourne catalogue giant would pass on costs, although he conceded passing them on “might prove difficult”.

On the other hand, PMP’s general manager of procurement and sustainability, Adam Crowe, said the group would be passing on costs because that was how the carbon tax was designed. “If we do not pass this down, then the printers’ customers simply reap the benefit and printers’ margins further decrease.”

Media frenzy

The mainstream media frenzy whipped up around the carbon tax means it is no easy task to get a grasp on the actual real-world implications without a fair amount of emotional involvement. From financial Armageddon to a spur for clean energy economy, the different sides of the debate are at loggerheads over whether the tax will be a plus or minus for business.  

Tchamkertenian said although it was difficult to accurately gauge the mood of the industry, the general feeling appeared to be that the carbon tax represented a threat.

Fuller said Focus Press would be treating the carbon tax as an opportunity to improve rather than an impediment to success. “Carbon tax – no problems. The tax I have an issue with is payroll tax.

“As far as I can tell the [carbon] tax will serve to raise the awareness of energy wasting and force stakeholders to look for innovative ways to reduce consumption.”

Focus Press has introduced energy efficiency measures that will produce savings of “more than double” the $30,000 extra it will pay in electricity, according to Fuller.

Eldred said Mystique might save “as much as 20% on our current energy spend” by participating in the PIAA’s buying group. He also praised the carbon tax, even if he questioned the decision to introduce it during a time of such economic uncertainty.

“I think the concept behind the carbon tax is a good one; it will drive innovation and make the country more competitive. Australian business won’t embrace the alternatives and improve efficiencies unless they get a push and the carbon tax is a good way to force business community to do that.”

That “push” factor is one reason why PMP’s Crowe thinks the carbon tax will produce net benefits for his company. He said PMP had been improving its energy efficiency for more than five years. This will accelerate as rising electricity costs make it easier to justify expensive modifications.

“Our energy-efficiency programs will overcome this carbon tax increase.”

PMP did not expect to suffer much from rising suppliers’ costs as most of its partners are international, said Crowe.

But some printers are concerned of being hit with higher prices.

Mattarucco said he expected consumables to become more expensive, although it had yet to happen. In the meantime, he said Print Bound was “reducing costs through energy-saving initiatives, revisiting other overheads and reducing other expenses in the company”.

Watkin said Active Display had been put on alert by some suppliers that said they had already been forced to pay 10% more for raw materials.

Treasury statistics suggest the carbon tax will lead to a 0.7% rise in the cost of living, but Finsbury Green national environmental and technical manager Rod Wade said it was “a case of wait and see” whether that would turn out to be true.

“We’ve had a good look at it and analysed it. If it ends up being in that range, it’s a pretty insignificant amount,” he said.

Tchamkertenian cautioned that the Treasury prediction was a national average and so would vary from sector to sector. Only time would tell what impact the printing industry would experience, he added.

That view was echoed by most of the printers ProPrint spoke to, including Taylor from Franklin Web. “It’s too early to come out and say if this is going to be a big problem or a little problem.”

Hidden costs

There’s another worry, though – that suppliers might whack on extra charges under the veil of carbon tax increases. Wade said Finsbury Green had called a company to account for doing just that. 

But beyond that example, ProPrint  found little concern among printers that suppliers would falsely attribute price rises to the carbon tax.

Crowe said it would be impossible to fool PMP as environmental audits gave the company a detailed understanding of suppliers’ costs.

Focus Press’ Fuller was also unconcerned, predicting “market forces should keep it all in trim”.

“If all you needed to put up prices was an excuse, you’d be a bank. Nobody else would keep the customers,” he said.

Whatever the impact of the carbon tax on the industry, the feeling seems to be that it is here to stay, at least until Australia makes the scheduled transition to an emissions trading scheme in July 2015. The Coalition has promised to repeal the carbon tax in event it wins next year’s Federal election, but the people ProPrint spoke to said it would be too difficult to repeal.

Mattarucco from Print Bound spoke for most when he said: “We’ll have to live with the carbon tax. It’s just another form of tax.”

Fuller, though, said the industry shouldn’t waste its time pondering the carbon tax’s future.

“Don’t know; don’t care. Let’s get busy adding value to our business and customers rather than being negative about everything. Otherwise it becomes self-fulfilling.” 




Carbon tax winner

At least one printer has benefited from the carbon tax.

The Federal government turned to Opus Group’s CanPrint Communications when it decided to produce 9.2 million coloured pamphlets to help it sell the carbon tax.

The contract to print and distribute the electricity bill inserts was worth $130,000, according to the Department of Climate Change and Energy Efficiency.

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