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Wednesday, 3 June 2009
Page: 5399

Mr RAMSEY (10:27 AM) —Regardless of what the government would have people believe, the commitment of the coalition parties to bipartisan targets for the reduction of CO2 emissions is genuine. The benchmark should be that we design an emissions trading scheme that delivers real reductions and does not have the effect of sending emitting industries overseas, where they will contribute as much or more carbon, providing no benefit to the environment. Clearly the proposed scheme under the Carbon Pollution Reduction Scheme Bill 2009 and cognate bills offers a high chance of delivering just that outcome.

There is no doubt that, if we as an opposition had not raised the genuine concerns of major industries and the employees of Australia, the government would have implemented an emissions trading scheme based on the white paper. Since then the government has made further alterations before tabling the legislation. There is no doubt that, if the opposition had not highlighted the flaws, we would have been saddled with that version. Still the government fiddles at the edges of this flawed scheme, with the latest tinkering on 4 May. The scheme does not need tinkering with; it needs major surgery. Unfortunately, the government is far more focused on political victories in this area than on a scheme which will give genuine reductions in emissions and keep Australian businesses in business.

The opposition is doing exactly what it should. It is unearthing flaws in what will be one of the most intrusive and complex pieces of bureaucracy ever visited on Australian business. Make no mistake: the new industry that will spring from the trading scheme proposed will offer the biggest market opportunity for the financial services sector in a generation. This is for the sector which is the preserve of the neoliberals whom the Prime Minister decries in his 7,000-word diatribe in the Monthly magazine’s February issue. These terrible predators are to be given a whole new playing field, courtesy of the man who thinks they are responsible for most of the ills of the world.

Now the government has announced the later start-up date. That means there is no need to rush the legislation. Without the urgency, the government should defer the legislation and request a full investigation of the impact on industry and jobs by the Productivity Commission, focusing on making sure that neither Australian jobs nor emissions are exported, which would lead to worse environmental outcomes for the world and certainly a worse outcome for Australian workers and their families.

In just the last few weeks the US has announced legislation in congress to establish an emissions trading scheme. Whilst the US economy has lost some of its lustre, it is by far the biggest and most influential in the world. Whatever we all think of the US legislation—whether it is the best way to address carbon emissions, whether it will protect American jobs or export them, whether it will offer full protection to their agricultural industries or whether it will allow unencumbered imports from non-participating nations, thus enticing American consumers away from products which have paid the price to reduce their carbon emissions—it will inevitably become the single most important piece of legislation in this field in the world because of the size of the American economy. The US economy is three times the size of the Japanese economy and four times that of China’s, and it is the most influential economy in the world by a large margin.

The Waxman-Markey bill currently before the US congress does one thing that the coalition has been calling for since the start of this national debate: it legislates for something which was an integral part of the proposed emissions trading scheme that the previous government took to the last election. If passed in its current form it will deliver something that the Rudd government has steadfastly refused to do—that is, it will give full exemption for exporting industries and import-competing industries. We can safely assume that, if the US adopts a scheme that gives full protection to its trade exposed industries, if it gives full compensation to its farmers, all the economies around the world which are yet to commit to a scheme but have signalled an intention to do so will take a great deal of notice of what the Americans have done.

Canada, a country that is often compared with Australia, has deferred all decisions on the design of its ETS until it sees what the economic giant on its border does. Thinking that we as the 14th largest economy in the world, with just 1.4 per cent of total world carbon emissions, can forge a path through the sheer complexity of an emissions trading scheme and expect the rest of the world to follow us indicates a disconnect from the rest of the world.

Recent modelling by the New South Wales government has found that the impacts of the proposed scheme on regional communities will be far worse than on the rest of the economy. It should come as no surprise that the impact on regional Australia will be greater—after all, that is where most of the heavily emitting industries are. But a prediction that regional economies will shrink by 20 per cent would devastate any regional economy. Population decline, empty schools and cheap housing—we have seen it all before and, after the excitement and growth of the Howard-Costello years, we hoped that we had put it behind us. It should come as no surprise that I hold grave concerns about the impact it may have on the people in my electorate of Grey.

The Nyrstar smelter at Port Pirie is often described as a lead smelter. In fact, that description wildly undersells the capacity and role of this plant, which is the primary provider of jobs in the Port Pirie region. It is a complex smelter that produces lead, copper, zinc, gold, silver, cadmium and sulphuric acid. It provides, directly and indirectly, almost 2,000 jobs in a city of 14,000 people. Nyrstar have shown themselves to be good corporate citizens and have invested heavily in reducing the impact of the smelter on the environment and the citizens of the city. They are only interested in running a clean, profitable and engaged industry. A commitment to stay will require long-term investment plans. As with all our refining and export industries, the collapse in world markets has had a severe effect on Nyrstar’s bottom line. Piling on what is effectively a new tax can only threaten their viability. It should be made clear that industry will pay a net $3 billion a year in taxes under this scheme—that is, after the government has paid compensation at varying rates across different sectors. Let us call this the winners and losers market.

The proposed scheme is enormously complex, and industries that were expecting to get 90 to 95 per cent of their permits for free are finding that their production is being broken down into segments, all attracting different rates of compensation. Each and every segment of their operations will have different carbon accounts operating on different rules. This complexity alone will lead to a ramping-up of costs.

Now let us take the case of the steelmakers, in this case represented in my electorate by OneSteel. As with Nyrstar in Port Pirie, OneSteel is the prime generator of jobs in Whyalla—nearly 2,000 directly and another 2,000 indirectly. If Whyalla were to lose its steel-making industry, it would make the withdrawal of shipbuilding from the city more than 30 years ago, which led to 30 years of depression, look like a picnic by comparison.

There are a few things that I am not sure the government understood when they designed this scheme. If we look at the steel industry, we can see that more than 70 per cent of carbon emitted in the steelmaking process is incurred by the use of coke in the blast furnace. You cannot turn iron into steel without using coke in the furnace. Steel needs carbon. Why, then, did we design a scheme which in effect raises the cost of using coke in the steelmaking process as an incentive to seek an alternative? There is no alternative. All this can do is raise the cost of production, favouring overseas competitors.

Plainly put, any new tax which our competitors will not have to pay could well be remembered as the straw that broke the camel’s back for these industries.

There are flaws in this scheme. We have time to rid ourselves of these anomalies, but not if the government persists in ramming the legislation through in this ill-considered way. The government now does not intend to introduce the scheme until 2011. So let us pause and have a look at what the US does and at the outcomes of Copenhagen and, as the world’s 14th ranked economy, not get our ambitions mixed up with our capabilities.

My electorate of Grey has a large agricultural base. Outside the industrial cities, it is the economic backbone of the greater community. The emissions trading scheme allows for agriculture to be exempt from trading but offers no relief from the increase in costs associated with the scheme, estimated by the Australian Farm Institute to be six to eight per cent and by ABARE, a government agency, to be 20 per cent. It also does not offer any incentives for farmers to participate in carbon capture and storage.

So here we have landholders in control of more than half of Australia’s landmass, which has been identified as one of the great potential carbon sinks, and we are closing the door on incentives to participate. We should be establishing a voluntary carbon market in which farmers can make managerial decisions to store carbon if they wish to and industry can buy the credits from them. It was alarming to me to find out as a result of Senate estimates hearings that the Treasury modelling had not even considered the impact on agriculture. In an effort to play catch-up, this week the climate change and agriculture ministers have invited farming groups to come to Canberra once a fortnight to contribute to the formation of climate change policy as it affects agriculture. It is about time. But guess what? Those fortnightly visits to Canberra for at least six months would all be at the participants’ expense. That’s very handy if you happen to live in Adelaide or Perth! The government is saying, ‘We value your opinion but it’s going to cost you thousands of dollars and many days away from work.’

If the government is willing, we can now address these underlying flaws in the proposal. It is time to bring the parties together and get this right. A focus on remedies that provide positive signals, such as investment in low-emission electricity generation, biosequestration of carbon in agricultural soils, including biochar, and redesign of buildings to reduce energy demands all offer positive answers that will not cost us thousands of jobs, particularly in regional communities.

We will almost certainly have an ETS, and we in the coalition, as I have said from the outset, will support the government’s targets. We can design a scheme that will not disadvantage us in comparison to our competitors by making sure we are largely in step with them. It makes sense to now pause and see what the biggest economy in the world is going to do, to ask the Productivity Commission to assess the impacts of the scheme on our economy and to take into account the question, ‘What if the rest of the world does not come on board?’ which is something the Treasury modelling has not considered.