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Monday, 17 March 2008
Page: 940

Senator MILNE (2:41 PM) —My question is to the Minister for Climate Change and Water, Senator Wong. With regard to emissions trading, given that a number of major greenhouse polluters are pressuring the government to allocate free emission permits rather than having them auctioned, will the minister outline to the Senate the disadvantages of allocating free permits to pollute under an emissions trading system?

Senator WONG (Minister for Climate Change and Water) —Yes, I am aware that a range of sectors of industry have put views to the government both publicly and privately about the way in which an emissions trading scheme should be designed so as to minimise the impact on those sectors of industry. These are matters that the government will consider over the time line I have announced today. As I made clear in my speech of 6 February, we are conscious particularly of three sectors. We have said that we need to consider the perverse incentives which the introduction of emissions trading may place on our trade exposed emissions intensive sector. We have also said that we will look at measures to address the impact on strongly affected industries. Finally, and importantly, we have also said measures will be developed to assist households, particularly low-income households. That is because the government is aware that this is a significant reform—the introduction of emissions trading is akin to the liberalisation of trade that this country went through in the last three decades. We recognise that this is essentially about economic transformation, and the government will take a careful and methodical approach to ensuring that we consider the impact on the Australian economy, on particular sectors and on households in how we design our scheme. I have outlined today a time line for consultation, including the release of a green paper. The range of issues that Senator Milne seeks advice on, and that I canvassed today, will be amongst those issues that the government will consider, and which will be covered by the green paper.

Senator MILNE —Mr President, I ask a supplementary question. I note that the minister once again failed to address the question I asked, and that was to tell the Senate what are the disadvantages of allocating free permits to pollute. I got a time line but I did not get an answer to the question about what is wrong with free permits. I had hoped to hear about the anticompetitive effect, the creation of perverse incentives, the transaction costs, and the failure in Europe of free permits. So I ask the minister whether she is aware that Professor Garnaut said in November last year:

Managers and analysts of the first phase of the European ETS recognise that the large and inequitable distribution effects of allocating free permits to established emitters, even when the carbon price was passed on to households, was a fatal flaw. Questions of distribution are therefore fundamentally important to the environmental integrity of mitigation policy, and not only to distributional equity.

Will the minister rule out the free allocation of permits?

The PRESIDENT —Order! Senator Milne, that is a very long supplementary question; you went over time.

Senator WONG (Minister for Climate Change and Water) —I say to Senator Milne: I am not going to rule anything in or out. Until the government has gone through the process I have outlined, I am not ruling in or out any of those issues because it would be inappropriate to do so given that the government has committed to consulting with the community and with particular sections of industry to look at these complex issues.

I note the comments of Senator Milne in relation to Europe. Certainly we will consider the evidence from overseas experience in our consideration of the most appropriate design for our emissions trading scheme, but we will take a careful and methodical approach to this issue. I am aware that the previous government did make such a commitment. We have made it clear that that is amongst the issues we will consider through the process of looking at the various design elements for the emissions trading scheme. That will be done carefully and methodically, with consultation with industry and the community. (Time expired)