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Wednesday, 3 June 2009
Page: 5541

Ms GEORGE (8:29 PM) —I begin my contribution on the Carbon Pollution Reduction Scheme Bill 2009 and related bills by asserting that climate change is real. You only need to pick up a newspaper and read regular stories about the impacts of climate change. Just yesterday in preparing my notes for this speech, I noted in the Herald that scientists were warning that rising CO2 emissions are turning oceans acidic in an irreversible process that threatens coral reefs and food security.

I believe that the community understands that climate change is a serious global issue requiring a global response. In the words of Sir Nicholas Stern:

It is the greatest market failure the world has ever seen. …

He points out that the costs of stabilising the climate are significant but manageable if we take early action, whereas delay would be dangerous and much more costly.

Our government has the challenge to find the means of reducing emissions at the lowest possible economic cost. That is why we have an integrated approach to reducing carbon pollution by putting a price on carbon through the CPRS, by promoting investment in renewable energy, by promoting energy efficiency measures and by investing heavily in low-carbon-pollution technologies.

In designing the CPRS, as encompassed in these bills before us, the government has endeavoured to get the balance right—that is, to reduce emissions while continuing to manage economic growth into the future. The legislation proposes a package of assistance for emissions-intensive trade-exposed firms both to guard against carbon leakage and to support existing jobs in the process of transition. I want to address my remarks in the short period tonight to this part of the bill in particular.

BlueScope Steel is the largest employer in the Illawarra region. About 4,700 people work directly for the company and up to several thousand contractors regularly rely on its operations. With the multiplier effect the company sustains about 12,000 Illawarra people in employment. This company also contributes $2.1 billion to the gross regional product and generates $909 million in wages and income from direct and indirect employees. In fact, Bluescope Steel is the largest manufacturer and exporter of manufactured products in my state of New South Wales. More importantly, it is the lifeblood for about 12,000 people and their families and it underpins our regional economy in the Illawarra. So the wellbeing of our community is intimately tied up with the fortunes of that company.

Furthermore I want to state on the record that I am an unapologetic advocate for a viable domestic Australian steel industry both now and into the future. It is in Australia’s national interests. A competitive Australian steel industry is an important foundation for a competitive Australian manufacturing sector. Australian made steel is a key input for a large range of domestic manufactures, including the automotive sector, white goods, machinery, building products and, into the future, I believe, for our renewable energy sector in areas like wind, solar and water conservation infrastructure. It is not surprising therefore that I have brought the concerns of Bluescope Steel, the workers who work there, the union and other stakeholders in my region to the highest levels of government. I would have failed in my responsibilities if I had not done so.

I want to also acknowledge the fact that the Minister for Climate Change and Water and other members of government have gone to great lengths to understand and deal with these concerns. Presently, Bluescope Steel is facing bleak times as a consequence of the global financial crisis. The Secretary of the Australian Workers’ Union described it as the:

… worst crisis ever in the entire history of making steel in this country.

Production has halved, steel orders have fallen and naturally enough workers and their families are worried about future employment prospects. The company committed $372 million to the reline of the number 5 blast furnace, which is now completed, but the furnace will not be restarted until market conditions improve. Some of the hundreds of contractors may be employed on the upgrade of the sinter plant, but hundreds of others who worked on the reline will have no work. The company has managed these difficulties in a collaborative fashion with the unions, avoiding retrenchments while workers exhaust their existing leave entitlements.

In this climate the company was anxious about the introduction of the CPRS. The company and I differed about a doomsday scenario that they advanced, which I believe was the result of conflating the impact of the global crisis and the introduction of a CPRS. In my view, that analysis unnecessarily spread panic and anxiety among the workforce and throughout the region generally, particularly so at a time when concerns such as these were weighing heavily on people at all levels, including senior people in our government.

The predicament facing emissions-intensive trade-exposed industries like steel is well understood by the government, and we saw that reflected in May this year when the Prime Minister announced a delay in the start of the CPRS for one year to manage the impacts of the global recession. The phasing in of our scheme from 1 July 2011 will see a one-year fixed price for permits at a cost of $10 per tonne, with the transition to a full market trading system from 1 July 2012. As people would be aware, a new global recession buffer will be provided as part of the assistance package for emissions-intensive trade-exposed industries. Industries eligible for 60 per cent assistance will receive a 10 per cent buffer and those eligible for 90 per cent will receive a five per cent buffer. So it is clear that the government listened and the government acted.

Our minister has consistently argued that there was no purpose in imposing a carbon price domestically if it resulted in emissions and production transferring internationally for no environmental gain, and I wholeheartedly agree with that. Maintaining the competitiveness of Australian industries like steel and preventing carbon leakage was always a priority for the Rudd Labor government. Trading internationally in steel we are up against countries such as Brazil, Russia, India and China, who produce half the world’s steel but do not impose carbon costs on their industries and have no plans to do so in the foreseeable future. So, as I said earlier, avoiding the risk of carbon leakage has been a constant in our considerations and a key consideration in determining at what level permits will apply.

As people would be aware, in the white paper the rate of assistance for integrated iron and steel making is 90 per cent free permits. However, as we know, the number of free permits provided will depend on the precise definition of the activity being conducted. BlueScope has raised with me that a narrow definition could result in reduced levels of assistance. To assist in this process of activity definition, an expert panel headed by Dick Warburton will advise the government on activity definitions, which will then be reflected in draft scheme regulations. BlueScope has the opportunity to have its arguments properly considered and evaluated in this process, but I will continue to argue for an activity definition that I believe best takes account of the industry’s needs. The company has also raised with me concerns about scope 3 emissions being passed on—in particular, the carbon cost from its coal suppliers being passed on to the company. The government is aware of these matters as well and will continue to engage with BlueScope on these and related matters.

I congratulate the Obama administration for their commitment to deal with climate change in the midst of their profound economic circumstances, which are much worse than the situation applying in our own country. But they too are proposing a cap-and-trade emissions scheme, together with a raft of energy efficiency measures and other environmentally friendly measures which will form part of that package. So moving to a carbon constrained economy confronts the United States as much as it does Australia and they, too, will have to deal with a range of what they describe as ‘trade vulnerable industries’. In that regard, I note the varying analyses of the content of the Waxman-Markey bill and the level of protection to be afforded to comparable industries like steel for industries located in America.

As a matter of principle, I believe that Australian workers deserve no less protection than that which will ultimately apply in the United States, which after all is the world’s largest economy. That will be the position that I will continue to advocate on behalf of the workers and their families whose livelihoods depend on a competitive and viable steelmaking capacity in the Illawarra region. The Minister for Climate Change and Water has argued that our scheme, a cap-and-trade scheme, as encompassed in this bill, ‘has been designed to link in with existing Kyoto mechanisms and to eventually link with other international schemes as these schemes are implemented and mature’. The Rudd Labor government is committed to playing its full and fair part in the global efforts to address climate change.