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Monday, 30 November 2009
Page: 9378

Senator XENOPHON (5:54 PM) —I indicate that I will not be supporting these amendments. I agree broadly with the Greens as to the destination of much deeper carbon cuts but it is about the manner in which it ought to be achieved. My issue is not whether you give out free permits but how you give them out. My concern is on the issue of churn. We can have a debate about Frontier Economics and their model, which I think is vastly more efficient and produces a better outcome both in economic and in environmental terms. I cannot support these amendments for those reasons. I am grateful for Senator Milne’s amendments, because they do beg a number of very important questions as to the whole issue of how the permits are allocated. That is a very valid point.

I want to refer briefly to a column written by Julian Glover in the Guardian newspaper in the United Kingdom on 23 February 2009. It is an article that I referred to during the February estimates when I asked Senator Wong a number of questions relating to that. But the point that Julian Glover made was at a time when the price of the EU’s carbon permits had collapsed. Julian Glover’s contention was that a collapsing carbon market makes mega-pollution cheap. He said:

The theory sounded fine in the boom years, back when Nicholas Stern described climate change as ‘the biggest market failure in history’—a market failure to which carbon trading was meant to be a market solution.

Instead the contention of Mr Glover was that it actually bolstered the business case for fossil fuels because the price had collapsed. Mr Glover’s contention is that the lesson of the carbon slump:

… like the credit crunch, is that markets can be a conduit, but not a substitute, for political will.

He talks about the fundamental flaws in the European system. I understand that that has been dealt with substantially in recent months. Mr Glover’s column was written at a time when the exchanges were in meltdown and a tonne of carbon dropped to about €8 down from the previous summer’s peak in 2008 of €31 and far below the €30 to €45 range at which renewables can compete with fossil fuels. My question to the minister is: notwithstanding the differences I have with the minister in terms of the issue of churn, and the difference between the Frontier model and what the government is proposing, given Senator Milne’s amendments, to what extent has this approach learnt from Europe where the market price was so volatile that it did not give a clear price signal for renewables and for cleaner, greener alternatives? In other words, how can we be sure that what happened in Europe will not happen here in terms of the safeguards that have been put in place with this particular scheme?