Victoria contributes 24% to Australia's total carbon emissions, in line with the share of population nationally.
Its sector emissions profile though, is different to the national average. Relatively high emissions sectors include
electricity generation; services, construction and transport; and residential. Conversely, primary industries in Victoria
contribute a low proportion of the state's total emissions compared to the national figure. The Victorian manufacturing
sector's contribution is consistent with the national average.
The carbon tax will target businesses within the high emission sectors (excluding agriculture), and these
businesses will face cost increases unless they reduce their emissions or buy lower cost carbon offsets as the carbon
tax evolves into an emissions trading scheme. Either way, these businesses may become more vulnerable to rising
costs unless suitable actions are taken.
Employment (and consequently output) of these sectors is unevenly distributed spatially within Victoria, suggesting
that some Victorian regions will be more vulnerable than others to rising costs, with the introduction of the carbon
tax. Finding ways to measure how strongly, and where, vulnerability to the carbon tax will be experienced is vital to
inform policy responses. One approach, developed by SGS Economics and Planning, is to derive a ‘vulnerability score'
for each Victorian LGA, using spatial employment data by industrial sector and the emissions profile by sector for
Victoria. The method is described in Figure 4.
The results of this exercise are presented in Figure 2 at the state level and in Figure 3 for the metropolitan Melbourne
region. Latrobe City appears most vulnerable due to it being host to the Hazelwood power plant. The inner metropolitan
and some of the manufacturing LGAs within the metropolitan area including Greater Dandenong, Kingston, Maroondah,
Brimbank, as well as regional LGAs such as Wodonga also appear highly vulnerable.
Agricultural based regions, including West Wimmera, Loddon and Pyrenees appear least vulnerable to the carbon
tax. However they may be affected by impacts from the changing climate in itself, with some regions expected to
improve productivity due to better expected rainfall patterns and others expected to become drier and less productive
Vulnerability, as adjudged using the criteria applied here, is a rough guide. Of course, the capacity of the local economy
to respond and adjust to the challenges may mean that a region with a particularly emissions intensive industrial profile
may be less vulnerable than a region with a comparable emissions profile that is less adaptable. Over time, the
options available to drive change will influence vulnerability to a significant extent. Some regions, for instance, Latrobe
City, may not have easy options available, except to switch to gas powered plants, whereas other regions, for instance,
manufacturing oriented regions with greater flexibility and increased diversity within the manufacturing sector, could
look at alternative ways of production or alternate sources of power.
More importantly, the government's policy for a ‘Clean Energy future' is likely to create opportunities for industry
inasmuch as providing the necessary expertise and funding new technologies for mitigation of carbon emissions.
These opportunities will likely help alleviate the vulnerability identified through SGS's analysis.
Figure 1 Total Emissions by sector; Australia and Victoria
Source: National Inventory by Economic Sector 2009, Australian National Greenhouse Accounts, Department of
Climate Change & Energy Efficiency. Notes: Total emissions include both direct and indirect emissions, where
the latter include embodied emissions attributable to the sector's electricity consumption.
Figure 2 Vulnerability by LGA: Victoria
Figure 3 Vulnerability by LGA: Metropolitan Region
Source: several data sources including National Inventory by Economic Sector 2009, Australian National
Greenhouse Accounts, Department of Climate Change & Energy Efficiency (DCCEE) and SGS employment
projections prepared for Department of Planning and Community Development (DPCD) in 2008 and Department
of Transport (DoT) in 2010.
Notes: Employment projections for 2011 by LGA were taken from past SGS reports done for DPCD and DoT.
Total emissions include both direct and indirect emissions, where the latter include embodied emissions
attributable to the sector's electricity consumption. The vulnerability score is derived using the weighted
average of the employment intensity of the industry by LGA and the emissions of the industry.
Figure 4. Methodology for deriving Vulnerability Score
To derive vulnerability scores for each LGA:
• The sum of (employment share by industry for each LGA multiplied by
that industry's share of total Victorian emissions), gives a carbon
emissions score for that LGA;
• The derived score of the maximum scoring LGA was normalised to 100;
• The score for all other LGAs was indexed against the normalised
maximum scoring LGA.
It was assumed that the emissions profile of industries is distributed
evenly spatially across Victoria (for lack of more detailed availability of data).