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Thursday, 29 October 2009
Page: 11488


Mr RAMSEY (10:51 AM) —I rise to address the Carbon Pollution Reduction Scheme Bill 2009 [No. 2] and related bills. What is in a date? What is in a day? What is in a month or even three? The Intergovernmental Panel on Climate Change has identified man’s emissions of CO2—caused almost entirely by the burning of fossil fuels since the Industrial Revolution, over two hundred years ago—as the cause of global warming. Over the last twenty years, world opinion has slowly but surely been swinging to support for action. Accordingly, the Australian government has now committed to an emissions trading scheme—as, indeed, had its predecessor. The Prime Minister has deferred the start-up date for his scheme by 12 months to mid-2011, more than a year and a half away. Almost all of the rest of the developed world, including the world’s largest economy, the US, has not yet decided what their schemes, if any, will look like, and when they will start. In the developing world, the large emitters, China and India, are most likely years away from making any commitment. So what then is in a few months?

We are debating these bills now for no other reason than political advantage for the government. The Prime Minister would dearly like the opposition to vote against these bills so that he can claim that we on this side of the House are climate change sceptics, when in fact our major difficulty with the legislation is locking Australia into a permanent competitive disadvantage with an ETS that is out of step with the rest of the world. It is worth noting that the Canadians, who were quite advanced in the design of their ETS, have shelved its introduction and will now use whatever scheme the US decides on as a template. There is absolutely no doubt in my mind or in that of the majority of Australians that we should not be making these decisions until after the Copenhagen meeting and the passage of any US scheme through their Senate. But the government is determined to force the bills to a vote.

I said on a previous occasion when this bill was last being debated in this place that my commitment to the reduction of CO2 emissions was genuine but that I would not blindly support a scheme that had the effect of sending our industries overseas where they would contribute as much, if not more, carbon into the atmosphere of the planet, providing no benefit at all to the environment. Unfortunately, without serious amendment, that is just what this deeply flawed emissions trading scheme legislation is promising to do. Many would argue that, if the government’s legislation is flawed, we should just let it happen—that they will eventually wear the electoral consequences, lose government and the Liberal Party will be given the job of fixing everything up. Unfortunately, this legislation is just too dangerous to the future of Australia for us to let that happen. That is why the member for Groom is negotiating a number of amendments with the Minister for Climate Change, Senator Wong.

My electorate of Grey is more than a passive observer of the passage of this legislation. The Onesteel plant is essentially the lifeblood of Whyalla, the Nystar smelter is similarly essential to Port Pirie, as is the Northern Power Station to Port Augusta. And then there is the farming industry, which accounts for almost 50 per cent of our economy. They all stand to face significant obstacles to their survival if this legislation is passed in its current form. There is almost no chance that any scheme brought in by another nation will ever include agriculture. The Australian government must rule out agriculture permanently from the scheme, because to leave the spectre of its inclusion after 2015 hanging over its head will affect investment and confidence in the sector. It is also essential that the government offers incentives to farmers to participate in carbon capture and storage.

Landholders control 60 per cent of Australia’s land mass, which has been identified as one of the great potential carbon sinks. For the government not to engage landholders, to exclude them from incentives to change their farming practices—changes that could actually make a real difference—is just plain stupid. If we are to make a serious attempt to capture carbon—and its worth remembering that the only way carbon has ever been sequestered from the atmosphere is through photosynthesis—it is absolutely essential that the people responsible for the land management of 60 per cent of Australia be brought into the business of capturing carbon. Participation will give farmers a chance to offset some of the extra costs they will have to meet as a result of this legislation. If the legislation is unamended, input costs for farmers are likely to rise by as much as 13 per cent—a cost that farmers certainly cannot afford. The inclusion of off-sets will at least give farmers some chance to claw back some of that cost.

For the steel and lead industries in Whyalla and Port Pirie, we are looking at the cutting edge of what could become carbon leakage central. These industries are already being tested to the maximum by the financial difficulties of the world and by a number of policies implemented by the current government, including the new industrial relations environment and the spending-borrowing programs, which are exacerbating interest rate pressure and leading to a higher Australian dollar. The impact of the 92c Aussie dollar on our export and import replacement industries cannot be underestimated. If the government insists on continuing its policy of putting the Australian taxpayer more than $200 billion in debt, despite widespread advice that it should be winding back the stimulus program, then the chance of an even stronger dollar is high.

The ETS as it stands is incredibly complex. On the surface it offers support for industries like Nyrstar and Onesteel, with the issue of credits to the tune of 94.5 per cent of emissions. But, in reality, the businesses are cut up into sections, with some qualifying for different levels of assistance and some not at all. The effective levels of assistance are far lower, closer in fact to 70 per cent. The bill commits to a decay rate of 1.3 per cent a year, which increases the impact on industry year by year, without any reference to what may be occurring in competing countries. In 10 years that actual assistance of 70 per cent will have dropped to 57 per cent. It is a straightjacket which has the potential to strangle these vital industries that are the backbone of our regional economies. There is a grave danger that this approach will see Australia committing to cuts in emissions and to higher and higher costs on industry and the accompanying loss of jobs, when the rest of the world has not moved.

We must have the flexibility to deal with a changing environment. That is why the opposition is proposing that there should be a single level of assistance across all emissions-intensive trade-exposed industries of 94.5 per cent at start-up year until 2015, when it drops to 90 per cent. There will be no further reduction in assistance until 80 per cent of our trade competitors have implemented carbon reduction programs. We also propose that the threshold for assistance should be lower, at 850 tonnes of CO2 per $1 million worth of production. This proviso will allow us to ramp up our commitment to carbon reduction if our trading partners and competitors in the world show a genuine commitment to reducing carbon emissions, rather than just talking about them. In short, if the rest of the world gets serious about this issue, this will ensure that we remain in the forefront of the effort to reduce emissions, but it will not allow us to get so far in front of the pack that we drive jobs out of Australia. Without modifications of this nature, I have great fears for the future of the industries that underwrite the prosperity of both Whyalla and Port Pirie.

The government’s ETS will heavily tax coal-fired power stations, which, like other energy intensive industries, will be forced to have permits for all emissions. This approach will lead to the government collecting enormous amounts of carbon tax, which they will then be able to redistribute to whomever they wish as electoral largess—the honey pot of all honey pots. And do not think governments will not use this for political advantage. This is a heavy-taxing regime and it is little wonder that the industries that stand to benefit most from the trading of permits support their introduction. This will result in a completely new commodity for markets in which to trade and make margins. It is difficult not to have concerns about this outcome.

The opposition is asking the government to recognise how integral electricity is to all production and that large increases in electricity will lead to higher household and business costs. These will flow through the whole economy and eventually rest with those who provide the export income for Australia, because, in the end, they are the only group who cannot pass on their cost increases. So we propose that electricity generation should be rated on an intensity basis. This will allow for generators to be rated against world’s best practice, to buy credits for poorer outcomes and to receive credits for better. This will deliver the same cuts, with the same incentive per tonne of emissions, but with a much smaller total bill. It will reduce the enormous pool of money the government will harvest from the scheme, which they have proposed to give back to certain groups.

The significant reduction of tax will lead to a far smaller rise in the price of electricity. If the price rises by far less, then less compensation will be needed. In effect it reduces the wash of money going around and around in ever diminishing circles, being top sliced, bottom sliced and middle sliced at every transaction level. Our proposal on electricity is about efficiency—we can achieve the same cuts for far less.

This bill, which will introduce a cap and trade scheme, provides no incentive at all for individuals to reduce their carbon footprint. The nation sets a target and, theoretically at least, we will meet that target, even though we may emit more if we buy credits from other parts of the world. There are a plenty of reasons to be concerned by the bill and by the government’s politically motivated time frame.

However, if we assume we meet our target, if a householder changes their hot-water system, refrigerator and light bulbs, double glazes their house or installs solar panels, reducing their energy consumption, all that will do is to allow another industry to emit more without penalty. This is clearly silly.

Part of the amendments the member for Groom is negotiating allows for the introduction of ‘white certificate’ energy credits, which will reward those who make the effort and lead to a real reduction—real rewards for the environment for individual effort. We must not forget that an ETS for Australia is in fact a tax on everything. It will lead to rises in the cost of living and the cost of doing business. If we do not have a global solution, we will not provide any reduction in global emissions. If we are to have an ETS, we should take great care to ensure it is of the cheapest possible nature and still deliver the goods. It cannot do that if we act in a unilateral way.

I urge the government to take away the gun pointing at the head of the parliament, drop its politically based timetable and allow us to get this scheme in step with our major competitors. But I fear they are past common sense on the issue and are driven only by political advantage. If they are to insist on this manufactured timetable then I urge them to negotiate in good faith with the opposition, to recognise some of the flaws in their legislation and act in the best interests of Australia by accepting amendments which will lead to a vastly improved bill.