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Tuesday, 22 May 2012
Page: 5115

Mr ZAPPIA (Makin) (22:25): Over coming weeks, councils across Australia will set their rates for the year ahead. With a price on carbon taking effect on 1 July, the community will quite rightly be asking what impact carbon pricing will have on their council rates. It is a question also being asked by local governments across Australia as they prepare their 2012-13 budgets. Already, exaggerated claims of significant increases to council rates, attributed to a price on carbon, are being reported in the media.

It is therefore important to look at the facts relating to the impact of a price on carbon on council rates. This issue can be complicated because councils each have their own priorities and local obligations. The issue is further complicated because in some cases, not in all, the impacts of a carbon price on landfill costs must also be factored in. I will address that matter separately.

The Independent Pricing and Regulatory Tribunal of New South Wales has examined this question for New South Wales councils and presented a detailed report on its findings. I have read that report in full. From my council experience, the findings of that report would apply equally to South Australian councils as to, in all probability, most councils around Australia. In summary, the report concludes that a carbon price of $23 a tonne will contribute a 0.6 per cent increase to council rates. That is about $3.30 yearly, or 6c per week—I repeat: 6c per week—and is less than the 0.7 per cent carbon price effect on each household estimated by Commonwealth Treasury.

The reason for the lower figure is simple. Councils rely on a local government cost index which better reflects council costs than does the National Consumer Price Index. Around 40 per cent of council expenditure is on salaries and wages. Because of the government household assistance measures, salaries and wages increases would not be impacted by a carbon price. That leaves around 60 per cent of council expenditure possibly subject to a carbon tax. A detailed breakdown of that expenditure by the Independent Pricing and Regulatory Tribunal has not only identified the likely costs to each individual expenditure area but aggregated those cost increases. It concluded that 0.6 per cent is the likely increase to councils arising from a price on carbon.

Waste management costs vary greatly between councils and therefore each council will be impacted very differently by a carbon price. Waste facilities which generate less than 25,000 tonnes of emissions annually will not pay a carbon price on emissions and therefore waste management costs for councils using those facilities will not be affected. Waste facilities which exceed 25,000 tonnes of emissions annually will be required to account for those emissions and may incur a cost.

However, there are two important considerations with respect to that liability. Firstly, even if a landfill incurs a greenhouse gas emissions liability, that liability does not commence until 1 July 2013. The carbon price only applies to waste deposited after 1 July. Emissions from existing waste, referred to as legacy emissions, are not included for liability assessment. Furthermore, waste takes time to start decaying, and the government has set out rules which deem emissions in the first year as being zero. Therefore, there will be no carbon price liability for any landfill in the year 2012-13.

Secondly, landfill operators have the opportunity to capture greenhouse gas emissions and earn money. For example, landfills may be eligible for Carbon Farming Initiative carbon credits for the destruction of methane, which can be used to offset the carbon price or sold for a profit. Landfills that create electricity from captured methane are also eligible for tradeable renewable energy certificates, which can also generate income under the Renewable Energy Target scheme.

Because legacy waste emissions are excluded from any liability, it is expected that carbon farming credits from landfill waste will exceed liability on landfills in the period through to 2020. The Department of Climate Change and Energy Efficiency have estimated that best practice capture of methane emissions can reduce the future carbon price liability to less than $8 per tonne, or around 13c per week, to each household affected by the carbon price. Ratepayers should be asking their municipal authority what it is doing to reduce landfill tonnage and what measures are in place to capture and reuse landfill emissions.

In summary, no carbon price liability will be incurred by landfill operators in 2012-13. After that, only landfills which exceed 25,000 tonnes of emissions per annum will incur liability, and all landfill operators have the opportunity to offset those liabilities by emissions capture and reuse strategies. Finally, a price on carbon will add an estimated 0.6 per cent to council rates, and the government has factored that increase into the household assistance measures. (Time expired)

House adjourned at 22:31