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Wednesday, 28 October 2009
Page: 11358


Mr HARTSUYKER (10:24 PM) —I am pleased to have the opportunity to speak on the Carbon Pollution Reduction Scheme Bill 2009 [No. 2] and the related legislation because the transition to a low-carbon economy is one of the biggest challenges in the history of our economy. This process will change the way Australia relates to its trading partners, it will change the way that the government interacts with the free market and it will ultimately lead to changes in the way consumers behave. No industry will be left untouched by Labor’s emissions trading scheme. No family will be able to avoid the consequences of this new tax. Whether they realise it or not, every person in my electorate has an interest in the outcome of this debate.

I am mindful that there are a range of views on the issue of climate change and carbon emissions. Indeed, among my own constituents there are a very wide range of views. I know of some people in my electorate who are so convinced of the dangers of climate change that they have completely changed their lifestyle, and I also represent people who are convinced that the theory of human activity related climate change should be filed alongside Aesop’s Fables. Because of the wide range of views on this subject and the complexity of the issue, I have made a concerted effort to research carefully, taking in literature from both sides of the argument. I have also met with constituents and other stakeholders to hear their views about carbon emissions and climate change. Recently, I met with a group of scientists from Climate Scientists Australia. We had a very informative and constructive dialogue.

The Prime Minister advances his flawed Carbon Pollution Reduction Scheme as the only solution to climate change. However, there are a range of programs and options that may be implemented by the government as it seeks to reduce our national emissions. One option is to use a market based approach, which is the basis for an emissions trading scheme. In a nutshell, an emissions trading scheme works by setting a cap on the amount of carbon that may be emitted by Australian industries each year. At the end of each financial year, liable entities are required to surrender an eligible emissions permit for each tonne of greenhouse gas emitted during that year. In theory, the government can gradually reduce our national carbon emissions by reducing the number of emissions permits that are available each year. This reduction in the supply of permits is supposed to force the price of permits up, which eventually makes it more viable for businesses to invest in low-emissions technology than to buy expensive permits. The ETS solution also supposes that emissions intensive goods and services will become more expensive, which will encourage consumers to favour goods and services that are less carbon intensive.

Another scheme designed to reduce carbon emissions is a simple carbon tax. A carbon tax is similar to an ETS, but, instead of the government controlling the quantity of carbon that may be emitted and allowing the market to control the price, a carbon tax allows the government to control the price of carbon while letting the market determine how much carbon will be emitted. The theory with a carbon tax is that the government can gradually increase the tax on carbon emissions, which encourages industries to invest in low-carbon technology.

Another option available to the government is to mandate the use of low-emission or zero-emission technology. We already see this taking place with regard to the renewable energy target, which was recently passed by the parliament. There is scope to use this type of scheme to reduce our emissions by mandating, for example, the use of gas fired electricity generators to meet a proportion of our electricity needs—no need for a tax; no need for a complicated market based system; just a simple mandate to get a desired outcome. The government also has the option—heaven forbid!—of itself investing directly in low-emissions technology. In certain circumstances, this may well be a more desirable course of action.

Clearly, contrary to the claims of the Prime Minister, there are a range of solutions to the environmental challenges we face. We should not be fooled by government spin and rhetoric that this Carbon Pollution Reduction Scheme is the only solution to the challenges that we face.

Although there are obvious benefits to allowing the market to play a central role in reducing our emissions, I can see that there are significant deficiencies in the government’s current plan. I find it particularly hypocritical for the Prime Minister to be introducing a scheme which is based on free market ideology when he declared himself that the global financial crisis was the ‘culmination of a 30-year domination of economic policy by a free market ideology’. The Prime Minister’s infamous diatribe in February’s edition of the Monthly made it clear that the free market was the sole source of the world’s financial woes. Yet less than 12 months later he is trying to convince us that the free market will be the saviour of the earth.


Mr Bruce Scott —A double backflip.


Mr HARTSUYKER —A double backflip, as the member for Maranoa says. During the first year of the CPRS, the government is proposing that an unlimited number of emissions permits would be sold for $10 each. In the following years, a set number of emissions permits will be auctioned based on a cap set by the government. In theory, the price that emitters are willing to pay for the permits will increase as the supply of permits is reduced. As permits become more expensive, it will be economically viable for emitters to invest in low-emissions technology, and there lies the theory of the matter.

However, the problem is that you will also be able to purchase unlimited permits in the international market. In the absence of an international agreement on carbon emissions, international demand for offsets may remain low and it is likely that emissions permits will continue to be available overseas at relatively low prices. The availability of inexpensive international carbon offsets will seriously undermine the basis of the government’s proposed scheme. In some international markets, carbon offsets are selling for as little as 10 per cent of the government’s asking price of $10 per tonne. Privately negotiated transfers of carbon offsets on the voluntary Chicago Climate Exchange were selling at between US85c and US$1.


Mr Bruce Scott —You would buy them there. Why would you pay the $10 the government is charging?


Mr HARTSUYKER —Why would you pay $10 when you can go down to Nock and Kirby’s and get it for 85c? However, prices on the Montreal Climate Exchange are vastly more expensive. In Montreal you had to pay Can$3 for each metric tonne of CO2 equivalent at close of business on 26 October. As little as a couple of days ago, you could buy for US85c on the US market or, if you went north of the border to Canada, you could get it for Can$3. I am mindful that these offsets are not available for purchase by Australian companies at the moment, but these figures indicate clearly that carbon offsets are available in some markets at a fraction of the price proposed for the cheap introductory offer this government is putting forward of $10 a tonne. The government very clearly expects this price to rise quickly and substantially.

Offsets are currently available through the UN sponsored Clean Development Mechanism—probably a euphemism I suggest. According to industry insiders, the Clean Development Mechanism will be the lowest cost option to emitters. This creates a problem for the government because the revenue from selling emissions permits is earmarked to be used for providing assistance to low-income earners and trade exposed industries. If the government are not receiving the projected income from permit sales, they may be forced to go further into debt—and we know this government are experts in the field of running up debt—in order to finance their household and industry assistance packages.

With all of these factors in mind, we must remember that the emissions trading scheme will not in the end necessarily reduce our emissions. There seems to be a perception in the community that the CPRS will automatically reduce our carbon emissions simply because of its existence. But in reality the CPRS will simply allow for the creation of another tradeable instrument. This link between the finance industry and environmental outcomes may prove to be a very weak link indeed and may prove to be the greatest flaw in the government’s scheme.

Recent comments by BHP chairman, Don Argus, to the Melbourne Mining Club make it clear that traders and the government do not often share the same objectives. Mr Argus said:

… a trading mentality will not get CO2 out of the atmosphere. Already they will be salivating about where they can run derivative products …

He goes on to say:

Now the theory is that the market will fix the emissions trading by setting the price to reward those that are good and challenge those that are not. That’s great theory. I know from a trading desk there are different objectives. And if you do get differential pricing and you leave an arbitrage opportunity anywhere in the world there are some very, very smart guys out there who can make a buck. And I’m not sure that they will be worried about CO2 emissions.

I think that Don Argus has nailed it there. From my experience, I can assure you that traders are hard-wired to make money. The government’s aim is to reduce carbon emissions, but the people it is relying on to make the system work are more interested in making money than they are in reducing carbon emissions.

Another issue of concern to me is the integrity of carbon offsets being sourced from overseas. There have been numerous media reports of problems with carbon offsets and credit projects around the world, particularly in developing nations. It would be particularly galling for my constituents to be paying higher prices under Kevin Rudd’s tax only to find that Australia’s emissions are not being reduced because businesses are buying dodgy carbon permits from overseas. This is an issue that will require particular attention from the government and particular attention right around the world.

Some of the problems I have mentioned would be mitigated, however, by the establishment of a comprehensive global agreement on carbon emissions. An Australian ETS would be much more effective if it were introduced in conjunction with similar schemes around the world. Unfortunately, a global agreement on climate change is looking increasingly unlikely. At a recent conference in China, Senator Alan Eggleston met with representatives from the Japanese, Chinese and South Korean governments, and they all indicated that their respective countries were unlikely to introduce an ETS. The Copenhagen summit is just around the corner, and the major economies of the world still seem to be poles apart on this issue. Without a global agreement on climate change, Australia’s exporting industries will be disadvantaged, and ultimately it is my constituents who will suffer through higher prices and higher unemployment for little environmental benefit.

Most of the talk and debate surrounding the ETS has been on how we are going to help the industries and businesses that will be affected by the scheme. Unfortunately, the people who are forgotten in this debate are the people who will be affected the most by the CPRS. I am talking about the pensioners, the families on low and middle incomes, and small business. These are the people who will struggle to cope with increased prices. These are the people who will struggle with unemployment due to an ETS. Even with the government’s compensation package, life under a Rudd government ETS, under a Rudd government tax, will not be easy for my constituents.

The biggest losers under the Rudd government’s ETS will be small businesses. Small businesses will get no compensation. Even though they will be forced to shoulder the burden of higher electricity prices and higher prices for the goods they buy, they will receive no assistance from the government. Small business faces higher costs and reduced profitability under Labor’s flawed scheme. Small business is the backbone of the Australian economy, and the government should be ashamed that it has not considered the impact of the CPRS on this vital group.

The whole basis of an ETS is that the higher cost of emissions-intensive goods and services will lead people to change their habits towards using less carbon-intensive goods and services. The problem with this assumption is that many pensioners, many low-income families and many small businesses are operating with very limited ability to change their purchasing decisions. In New South Wales the state government has just increased electricity prices by 20 per cent. How are struggling pensioners, after the 20 per cent increase that was just recently introduced, going to be able to afford to pay even more for electricity? What we have seen in the recent price rises in New South Wales is just a curtain raiser to what we are going to see under Kevin Rudd’s ETS.

As I previously mentioned there are a range of ways to reduce Australia’s carbon emissions. An ETS is only one of many possible solutions, and there are many different ways to implement an ETS. It is quite clear that the government’s ETS proposal is flawed and that it will jeopardise thousands of jobs and put at risk the viability of our trade-exposed industries, so the opposition has proposed amendments. They have tried to breathe some life into this dog. The opposition’s amendments will show that it is possible to achieve similar results at less cost and without the catastrophic loss of jobs that this flawed scheme would deliver, at less cost to families, at less cost to pensioners and at less cost to small businesses.

The coalition proposes to increase assistance for trade-exposed industries and include food processing as a trade-exposed industry to ensure that these industries continue to remain internationally competitive. The amendments will permanently exclude agriculture from the ETS—which is a vital change—and will introduce an agricultural offset scheme similar to schemes operating in the US and Europe. This will allow farmers to play a key role in reducing our carbon emissions and mitigating climate change.

The amendments will alter the way the CPRS applies to electricity generation and deliver cuts to carbon emissions with a much smaller increase in electricity prices. This will be a great relief to families and a great reduction in the burden on small businesses. The coalition will amend the CPRS to provide better compensation for coal-fired generators. Also, the amendments will ensure that voluntary action by Australian families and businesses is taken into consideration under the scheme.

Labor’s scheme is a dog. Even with these amendments, introducing the CPRS without a global agreement on carbon emissions is reckless. Australia’s lone action on carbon emissions will make no difference on a global scale. The Prime Minister’s insistence that this scheme must be passed before the end of the year is sheer nonsense and any intelligent primary school child could work that out. It is incredible that the members opposite are not able to come to grips with that very simple fact.

As long as there is no global agreement on carbon emissions and carbon permits are widely available on the international markets, the CPRS will not reduce Australia’s carbon emissions but it will force up the price of everything. Make no mistake: the CPRS is nothing but a tax. Winston Churchill put it perfectly when he said:

We contend that for a nation to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.

Although spoken more than sixty years ago, Churchill’s argument could reasonably be applied to the situation in which our nation finds itself as the Rudd Labor government attempts to tax us into a better future. It will not work. It did not work 60 years ago and it will not work now. All Labor’s CPRS will do is hurt our small businesses and make it more difficult for Australian industries to compete on the world stage.

The government’s determination to press ahead with this new tax, regardless of the outcome of the Copenhagen summit, is a purely political decision. It is not in the best interests of the nation, it is not in the best interests of the Australians that I represent in regional areas, because regional Australia will bear the brunt of this new tax, regional Australia will lose the jobs and regional Australia will be facing lower growth. Regional Australia will suffer and particularly low-income regional Australians. This tax is an outrage. It is a poorly designed scheme and the government should be condemned for the very poor approach it has to this very difficult problem.