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Wednesday, 3 June 2009
Page: 5383


Mr ROBB (9:25 AM) —Significantly reducing the global level of CO2 in the atmosphere is an issue of great consequence. What we do, the consequences, who is with us, how well thought through any scheme may be and what we need to do to get it right are all important. Sadly, the development of an emissions trading scheme has been very badly mishandled by the Rudd government, just as Mr Rudd has mishandled the nation’s finances and saddled Australians with massive debt.

As with the government’s response to the global financial crisis, the government has had too much of an eye on the politics of its emissions trading scheme and not enough of an eye on what is best for Australia, what is workable and what will protect jobs while reducing emissions. Selfish political considerations are overshadowing sensible policy imperatives. In its panic to get to an early election before the community sees the depth and extent of its financial ineptitude, the government is stampeding this flawed Bill through this parliament. Before the last election, Mr Rudd promised deep cuts in emissions without disadvantaging our export and import competing industries. Yet the government scheme fails on all counts. It will cost tens of thousands of jobs, it will kill major investments and it will do little or nothing to reduce CO2 emissions. The scheme is deeply flawed. Mr Rudd’s scheme is testament to the fact that his promise cannot be delivered if other major competitors are not also taxing their emissions. Mr Rudd’s response is to stick with a proposal so ill considered and so awful that it cannot be supported by anyone—not by the Greens, the crossbenches or the coalition.

Mr Rudd wants to go to an early election claiming he tried on climate change but blaming his inaction and his incompetence on everybody else. This is all about politics for the government, not the environment. At least the Rudd government was mugged by reality and forced to delay the start date by 12 months. The government should use this delay to see what President Obama does during this year in finalising his all-important legislation, to see what the world decides at Copenhagen and to do the work necessary to correct the many flaws in Australia’s scheme. Common sense dictates that the vote on this legislation should wait until the new year. It is why the coalition is moving to amend this bill to ensure that it is deferred until then.

Now that the coalition has provided the government with a truly Australian position on targets to be taken to and negotiated at Copenhagen in December, there is absolutely no reason to seek to ram this flawed scheme through this parliament. This was confirmed last week when the executive secretary of the UN organising committee for Copenhagen, Mr Yvo de Boer, revealed that the UN does not expect countries to have legislation in place before Copenhagen. There is no urgency or reason to rush this legislation.

The government’s emissions trading scheme has been designed for a world where every country has such a scheme and where every country has a price on carbon—a level playing field. If the world were moving on this contentious issue, all the contentions issues surrounding the government scheme would largely disappear. If our competitors were also imposing a price on carbon, our own industries would remain strong, competitive and innovative while reducing their carbon footprint. In this regard, everyone acknowledges that, with Australia producing just over one per cent of the world’s emissions, there is no unilateral Australian solution, only a global solution. It is why the government’s claim that for a dollar a day their scheme will save the Great Barrier Reef is so wrong and disingenuous. This is the totally false impression given to the community by the government’s very misleading presentation of the Treasury modelling. If this were the real cost, why wouldn’t you put up your hand in support?

The public have not the foggiest idea what an emissions trading scheme is. The government has not explained it in 18 months and the public have not really engaged because they have been told that there is no personal cost to them. They have been duped. For most Australian families the annual tax that the government will impose on electricity and other energy-intensive industries will result in a 30 per cent to 40 per cent increase in power bills and indirect increases in the price of most services and items purchased. It will be equivalent to increasing the GST from 10 per cent to 12½ per cent.

Without the rest of the world engaging in some form of carbon reduction scheme, Australia’s actions will have absolutely no impact on the Great Barrier Reef or on the environment generally. In fact, global emissions could actually increase as investment and jobs, especially in major regional centres like Geelong, leave Australia and go to developing countries, where less-efficient factories pump out much more CO2 than in Australia. Without our major competitors engaging in some form of scheme, the cost to Australians will be much greater. This cost will be measured in the premature closure of many coalmines, cement works, coal powered generators and fuel refineries and the loss of major investment in new smelters, metal refineries, LNG projects, cement works, exploration and much more. There will be significant direct and indirect costs added in tax on agriculture and manufacturing businesses that compete against foreign products which have no such tax applied. For example, the average dairy farmer will face a $9,000 tax and have no capacity to offset this cost.

The scheme will see tens of thousands of jobs at risk, the permanent and serious shrinkage of major regional centres and the loss of major investments, yet have little or no impact on CO2 emissions. A $4 billion investment to extend an aluminium smelter in the Hunter Valley will be shelved. This project alone will see the loss of 15,000 construction jobs and 3,000 permanent jobs. It is why Australia must not find itself effectively going it alone. We can and should influence and assist the world to respond, but we cannot get too far ahead of our major competitors. Australia is only one of five countries in the world that will meet its 2012 Kyoto target for emission reductions. This result and leadership was delivered by the former government, along with setting up AP6 and the global forest initiative.

Putting a multibillion-dollar new tax on our businesses many years before our competitors do likewise will get us too far ahead of the world. That is why the critical debate that we are having is all about how, not whether, we transition to lower carbon emissions. It is about how we calibrate that transition to be broadly in step with the willingness of our major competitors to do something similar in terms of putting a tax on carbon. How we deal with the next 10, 15, 20 or more years of transition is critical. If the transition is mishandled, if we go it alone, if we get too far ahead of the world, we will see the great strength of our economy wantonly undermined and damaged for no good environmental outcome.

The design of the Rudd scheme assumes that our major competitors will put in place a major new tax on carbon in the early years. But what if China, India, Indonesia, the Middle East countries, South American countries and many other competing developing countries do not apply a tax on carbon for 15, 20 or more years? Why wasn’t Treasury required to test such scenarios? It has been seven months since the Treasury modelling was released and there is still no such analysis—not a whiff of it. All they had to do was change some assumptions and run the model again. They have refused.

A major independent analysis conducted by the Centre for International Economics concluded that we know nothing of the 20- to 30-year transition period because there is no analysis of different scenarios concerning delayed start dates by major competing countries during that 20- to 30-year transition period. There is no analysis of the impact of the global financial crisis. There is no empirical analysis of alternative approaches to achieving a reduction in CO2 emissions. If passed in its current form, the biggest deliberate structural change in our history would be more a product of blind faith and pig-headedness than rigorous analysis. Is the design of this scheme robust enough to deal with the scenarios that have not been modelled, where our competitors take 10, 15, 20 or more years to adopt a price for carbon?

We have moved an amendment requiring the Productivity Commission to do, over the next six months, the missing analysis identified by the Centre for International Economics, to do the necessary work, so that we know whether this scheme can protect our jobs while moving us towards a lower carbon economy. This call has been supported by ACCI, the Cement Industry Federation, the Minerals Council of Australia, the Master Builders Association, the Chamber of Commerce and Industry in Western Australia, Woodside and others.

The deliberate failure of the government to require such analysis has meant that individual companies and organisations have been forced to commission such research. In so many cases this research has shown that many years of going it alone will severely weaken key industry sectors in our economy. In the end it all translates into jobs. Over recent months company after company has indicated the cost of this proposed scheme in terms of lost jobs: the Minerals Council, Rio Tinto, Xstrata, Alcoa, Exxon, BlueScope, OneSteel, Hydro Aluminium Kurri Kurri, ZeroGen, Envirogen, Ford, Woodside, Chevron and many others. Research commissioned by the New South Wales government, and suppressed by the federal government, into the regional impacts of the government’s scheme found that regional centres across Australia, such as Gippsland, Geelong, central-west Queensland, the Hunter Valley, central Western Australia, the Kimberley region, Whyalla and Port Pirie, would shrink by over 20 per cent under the government’s scheme.

How stupid we would look if in 10, 15 or 20 years time our major competitors still have no scheme in place or have protected their trade-exposed industries and we have been imposing these costs and more because of the built-in annual reduction in free permits. Such stupidity is already being exposed as the details of a future Obama emissions trading scheme take shape in the United States. Specifically, the draft United States bill now provides for 100 per cent protection for all US export and import energy-intensive industries until 2025 and continuing levels of such assistance if competitors have no such scheme in place. As well, the Obama draft bill provides for assistance for US electricity generators through until 2030. By comparison, the assistance provided to the Australian electricity sector will be far less and will be phased out by 2016. This emphatically confirms that the Rudd scheme will see Australia effectively going it alone. It is all about design—design features which give you the robustness and the capacity to manoeuvre to play a part in all of this but not get too far ahead of the rest of the world, not go it alone.

In addition to our concern about undermining our competitor’s position, the bill contains other major deficiencies. It is my observation that existing large emitters are the companies best placed to lead Australia, and its industries, to a low-CO2 environment as long as their balance sheets remain strong enough to fund the billions of dollars to finance the necessary technology and innovation to lead that transition. Yet the balance sheets of some companies will see half or more of their average profitability over the last eight years taken up with the effective tax that they are going to be forced to face or see a loss of uncompensated asset value of billions of dollars. The other balance sheet issue is the existence of large numbers of free permits on a balance sheet. When investors are approached to fund a 40-year energy or resource project and they see a balance sheet with a large number of free permits that are reviewable in five years and are there solely at the whim of the government of the day, they will become concerned about sovereign risk. Projects are already facing this financial dilemma, including a new gas-fired power generation plant.

This relates to the third issue, the problem of churn or recycling of billions of dollars of taxpayers’ money through the system at the government’s discretion. Each year the sale of permits will see the federal government reap a huge new tax revenue—$13 billion in the second year, growing rapidly to $20 billion a year by 2020 or thereabouts. The government intends to recycle some billions of these dollars to compensate low-income earners for the 30 to 40 per cent increase in electricity costs. This will see millions of cheques continue to be mailed to Australian households each year. This government is addicted to mailing out cheques, and it is not hard to see why. A huge administration will be set up to churn billions of dollars back through the economy, with the government picking winners as to who gets compensation and who does not. No new energy or resource project will get off the ground without companies coming on bended knee to get a quota of free permits from the government to make their investment competitive.

Finally, in our view the government has not looked at the significant low-cost opportunities or complementary measures that are available. Too much is being expected of an emissions trading scheme in the absence of global action. Complementary measures should be directed at capturing carbon in soil, at reducing energy usage especially in commercial buildings, at other biosequestration and at recognising the efforts of individuals and families in reducing emissions. All of these have the potential to quickly deliver very significant cuts in emissions without putting at risk tens of thousands of jobs and the fabric of many major regional centres. All of these possibilities have been largely ignored in the government’s scheme, ignored in the government’s rush to be seen to be punishing the big emitters and ignored in the design. It is a design issue. The design of the scheme is deeply flawed. We as a country are exposed with this scheme.

All of these complementary possibilities, in concert with a major focus on promoting renewables, provide an opportunity to minimise the risk of putting too much onus on an emissions trading scheme when the intended actions or inactions of the rest of the world are still not clear. It is why the coalition has proposed the establishment of a government authorised voluntary carbon market from 1 January 2010 based on the Chicago Climate Exchange. This would enable the immediate involvement of individuals and communities, agriculture and biosequestration, the commercial building sector, energy efficiencies by business and other complementary measures in creating bankable offsets. It would be a legitimate and genuine attempt to make an immediate start on significant reductions in CO2 emissions while we get the design of the scheme right, while we find out what the rest of the world is going to do and while we find out what Barack Obama, the President of the leading country in this issue, will do over the next six or nine months. These voluntary measures would enable immediate action on achieving Australia’s 2020 targets and would create an opportunity for individuals, communities and firms to help deliver greater abatement than the government targets will do once a full scheme is in place. As to the government’s argument that this scheme must be passed now to provide certainty, the comments of the CEO of Anglo Coal reflect the view put to me by so many other companies. He said, ‘We don’t want the certainty of a bullet.’

The government’s rushed scheme, as designed, puts major industries, and the jobs that go with them, at great risk for little or no environmental gain. Commercial realities have been ignored and President Obama’s plans have been ignored. The scheme is deeply flawed. We have to better understand the prospects and the implications of Australia effectively going it alone with this scheme before we make any decisions about finalising a scheme—all at a time when we will need the energy and resources sector and other businesses to play a very big part in getting on top of the mountain of debt accumulated so rapidly by the Rudd government. It is a time for prudence, careful policymaking and common sense. It is not a time to gamble with people’s livelihoods and their futures in the cause of political expediency. The government’s scheme is in no shape to be passed and the vote must be deferred until after Copenhagen and when the Obama scheme is clearer. There is no plan B if the rest of the world does not follow suit on this government scheme. This is the biggest deliberate structural change to our economy ever. We must get it right.