New climate change legislation will add significant costs at a time when business can least afford it, according to the Australian Industry Group (AiGroup).

Australian Industry Group Chief Executive, Heather Ridout says the passage of the legislation through Parliament with a high starting price and no flexibility to adjust the price in the initial years is “deeply disappointing.” 

“This is especially so given the extremely uncertain and weak global economic conditions and the volatility of global carbon prices,” said Ms Ridout. 

"Ai Group has long argued that the high starting price during the three-year fixed price period is a very serious issue, she said.

"The downward pressure on the European price in response to economic circumstances is testament to the need for a more flexible approach. For Australia not to show willingness to adjust to this changed context is very concerning.

"The legislated prices in Australia for the fixed period are close to double those in the major international markets, the European Union Emissions Trading Scheme and the Clean Development Mechanism. Australian businesses will experience a marked disadvantage even when they are competing with businesses in countries that also impose an explicit carbon price.  It begs the question, what happens if the world price goes even further below the Australian price?”

Ms Ridout said the legislation effectively doubles the burden faced by Australian businesses by imposing an explicit price without removing the pre-existing implicit prices imposed by the plethora of carbon reduction measures in operation at both State and Federal levels.

"Outside the resources sector, business is doing it tough in the face of a persistently high dollar, cautious consumers and global jitters, Ms Ridout said. “While strong compensation is provided to most households and offsetting arrangements are proposed for some businesses, many businesses in the industrial sector will be acutely exposed to a shock to their competiveness. The Government has decided to hope that these impacts will be modest. Time will tell.”