Home topics small-business-resources legal Legal News Legal The legality of passing on carbon tax costs Lorna Brett November 25, 2011 The carbon tax is coming, and lawyers are warning that businesses must actively review their contractual rights and obligations around the passing on of carbon costs so they’re not left with an unacceptable share of the cost burden when the legislation kicks in. According to CPB Lawyers senior associate Julian Mellick, businesses that assume their ability to pass on the costs of the carbon tax is protected by standard ‘change in law’ clauses in existing contracts, could be in for a surprise. “’Change in law’ clauses allow prices to be adjusted where there’s been a major regulatory change. But they are unlikely to be very helpful on the carbon tax because they typically require the change to be ‘not reasonably anticipated’, which is hardly the case since these reforms have been expected for some time.” Mellick warns the clauses often only cover situations where reforms require payment of a particular fee or charge. While the large carbon emitters liable for the tax fall into this category, other businesses saddled with higher input costs “would be left out in the cold.” Going forward, all businesses should consider whether to incorporate specific carbon pass-through clauses into their new contracts, Mellick urges. “When tailoring a carbon pass-through clause, companies should consider the scope of the costs that may be passed on, such as whether both direct and indirect costs are covered as well