The new 'carbon tax' is set to be introduced in July next year in what is shaping up to be one of the biggest economic reforms seen in Australia for a long time.

Businesses need to be ready whether they are liable to pay the carbon tax or not. All businesses must come to grips with the risks and opportunities arising from a price on Carbon and to ensure the types of support that are available are being optimised.

A lot of businesses simply don't know what they need to do and when they need to do it. Public confusion about the 'carbon tax' is obvious when I speak to people about the new laws.

However with a little careful planning, businesses will treat the new 'carbon tax' like they do any other uncertainty and volatility they deal with on a daily basis, and when the 'carbon tax' commences in July 2012, businesses wont be so daunted by the challenge of such a reform.

Here are 5 steps your company should be taking to help deal with the 'carbon tax':

1. Figure out if your company is liable under the new 'carbon tax'?

It is estimated that only the top 500 emitting companies will be liable to pay the 'carbon tax'. Technically, if your company emits 25,000t of CO₂ or more, it is likely you will have some kind of liability.

2. Calculate Your Emissions

The way to find out if you are liable is by accurately measuring and reporting emissions data.This includes a detailed understanding of your operational boundaries and emissions sources.Your company's emissions need to be accounted for accurately in order to determine your financial liability.Your emissions data is critical in driving commercial decisions and businesses need to be confident their systems are robust.

Therefore businesses need to develop and test systems to manage all of their emissions data. This can be done by either investing in sophisticated carbon software such as Carbon Systems or Carbon View. Alternatively, you can have your emissions calculated by companies that are able to come to your office to conduct regular auditing, such as large accounting firms KPMG or PWC.

3. Assess Your Exposure to the Carbon Price

Businesses need to identify and quantify their direct and indirect costs as a result of the 'carbon tax'. For example, many power generators are liable under the scheme and it is expected that at least some of their liability will be passed onto businesses and other consumers. Businesses need to account for this by developing a company profile or financial model that includes all of potential carbon abatement options and costs. The sooner a company is aware of their exposure, the sooner they can respond and potentially save a lot of money down the track.

4. Manage Your Carbon Liability

This is where your company may choose to invest into an abatement project such as a forestry carbon sink or a wind farm or purchasing carbon credits from a number of exchanges. By doing so, your company is able to lock in a cheaper price for carbon instead of paying the set price of $23 per tonne of CO₂.

Select Carbon work with a number of clients looking to invest money into a forest carbon sink that they would have otherwise paid the carbon tax rate for. A company can choose to buy carbon credits in advance and can treat any carbon credits they purchase as a financial asset which can be sold or retired at a later date. Most companies will invest into a portfolio of projects to spread their risk against increases in carbon prices and carbon markets across the globe. Each company should consider coming up with a carbon trading strategy and review it regularly.

5. Corporate Governance

Finally, businesses must deal with the added responsibility of reporting their emissions accurately and assessing their liabilities with great care. Emissions data will determine your financial liability and should be treated with the same degree of oversight as other management procedures. Regulatory compliance will be a major part of the new 'carbon tax', so it is worthwhile investing early on to make sure your systems are in place for this new set of data reporting.

Whether your business is directly liable under the 'carbon tax' or not, everybody should approach the new laws prudently, examining potential exposures to price increases as well as looking for new opportunities in what promises to be a transformational few years ahead.

Purchasing carbon credits to offset your liability should be examined with the same degree of due diligence you would show for a potential long-term investment product. Select Carbon is able to help you with any aspect of carbon trading and project development of a forestry carbon sink offset project. Please don't hesitate in contacting us for any further information.