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Ross Bird is Morningstar's head of equities strategy.

Details of the long awaited Labor/Greens carbon tax have arrived. As Australia embarks on this course, not necessarily shared at the present time by major trading partners and competing economies in south-east Asia, the cause and effect implications are extremely complex for business, employment and households alike. Hence, flow through impacts to company profitability will be difficult to assess and some time will elapse before clear impacts and trends emerge.

For example, brick making as forecast by Brickworks (BKW) needs a 6% rise in prices to recoup costs. Will this lead to a loss of market share to other building products, reduced volumes of new home construction in response to higher overall building costs (and a possible rise in value of existing homes) or maybe absorption of these higher costs by homebuyers with the offsetting reduction in spending activity in other areas.

The main details of the carbon pricing scheme are:

• Starting 1 July 2012, an initial fixed carbon price of $23/t to be paid by non-exempt companies that produce at least 25,000 tonnes of CO2 equivalent a year at a given facility. The government estimates this affects around 500 companies. The price will rise by 2.5% real p.a. to 1 July 2015 at which time the price will be set by the market. From this point, there will be a floor price of $15/t rising by 4.0% plus inflation a year and a ceiling price of $20/t above the expected international price, increasing by 5.0% plus inflation a year. The lower and upper limits will help companies to forecast the impact but the range is quite large.
• The price of non-aviation transport fuel is not affected for households and business though businesses operating in rail, and diesel generators at mines, will see a reduction in their fuel tax credit from 38c/litre to 32c/litre. Large road transport is to be captured from 1 July 2014. Domestic aviation will see an increase in fuel excise costs equivalent to the carbon price.
• Compensation is available for industries classified as emissions intensive trade exposed (EITE). These industries would trade at a severe disadvantage to overseas competitors without compensation. Highly intensive emitting industries, those that emit more than 2,000t CO2e per $m in revenue will receive 94.5% of average industry cost compensation while medium intensity industries, producing above 1,000t CO2e per $m will get 66% of average industry cost compensation. These industries include metal, glass, cement, lime and paper products production.
• Liquefied natural gas producers will receive 50% compensation, reducing by 1.3% a year.
• Additional compensation packages for the closure of 2,000MW of emissions-intensive electricity generation capacity and issue of free carbon permits over six years to other coal-fired power generators totalling up to $5.5Bbn.
• Funding availability for businesses to invest in energy efficient capital equipment.
• The steel-making sector to receive $300m over four years.
• A $10bn Clean Energy Finance Corporation (CEFC) to provide finance to approved "green" energy projects.
• In addition, as a means of assisting low income earners to pay for the pass on cost rises in electricity bills etc, the tax free threshold will rise from $6,000 to $18,200 (and to $19,400 from 2015/16). However, the marginal tax rate at $18,201 rises from 15% to 19% and from $37,001, it rises from 30% to 32.5%. It provides an incentive for low income earners to work but will see higher taxes at the top end.