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Thursday, 29 October 2009
Page: 11504

Ms MARINO (12:00 PM) —I rise today to speak on the Carbon Pollution Reduction Scheme Bill 2009 [No. 2] and cognate bills. There is no doubt that the Labor government’s emissions trading scheme legislation is seriously flawed and will cost Australian jobs. It will cost investment and compromise our historic, natural, internationally competitive advantage of cheap energy as well as increase the potential for carbon leakage. As a result of these very real flaws, the coalition is proposing amendments designed to lessen the impact on industry, business, consumers, regional communities and economies, so saving Australian jobs yet achieving the same environmental targets. Our commonsense amendments will prevent the shutdown of industries that are essential to the Australian economy—industries that provide jobs in regional communities as well as contribute both directly and indirectly to regional, state and national economies. They include key export industries, including those in coalmining, aluminium, natural gas, food processing and agriculture.

The coalition has very serious concerns about the flawed Labor government ETS for all trade-exposed industries, small and medium businesses and energy generators—those that provide regional jobs and support local and regional communities and local, state and federal economies. Australia’s treatment of emissions-intensive trade-exposed industries must be comparable with the treatment of trade-exposed industries in the United States and the European Union, given the assistance in the proposed US and phase 3 EU trading schemes. One amendment is the exclusion of coalmine fugitive emissions. The government’s ETS proposal will cost the industry billions of dollars. It will cost jobs whilst having little or no environmental benefit. The Minerals Council of Australia stated in the Australian on the 22 September that the Labor government’s ETS plans ‘were far too tough compared with new European Commission ETS proposals’ and ‘would cripple the ability of Australian companies to compete’ against European companies.

The Labor government’s ETS compromises WA’s current energy security through the treatment of our black-coal energy generators. It totally ignores the fact that WA has no brown-coal energy generators and is not connected to the much larger National Energy Market and that WA, as an energy island, has to remain self-sufficient in managing its security of supply. Black-coal energy generators in the WA Energy Market have, by necessity, struck long-term contracts. There is no consideration of this in the ETS. In the WA electricity market the pass-through mechanisms for carbon costs are completely different to those in the NEM—again not reflected in the Electricity Sector Adjustment Scheme as less than one per cent of the ESAS assistance will be allocated to WA under the Labor scheme. The WA electricity market needs a separate ESAS formula and cut-off emission intensity applying a consistent design to both the WEM and NEM, based on the relative proportions and intensities of each market.

The coalition will also continue to advocate an intensity based cap and trade model for electricity generators, delivering the same emission cuts as the ETS but with a much less increase in electricity prices. Coal fired generators must also be better compensated for the loss of value they will experience from the ETS, to ensure security of electricity supply and to enable them to transition to lower emissions energy sources. Increasing the price of electricity to small businesses by 20 per cent in the first two years of this scheme will compromise the viability and profitability of thousands of small businesses which receive no compensation at all for their higher power bills under Labor’s ETS. Many of the approximately 13,400 small businesses in my electorate of Forrest will find it difficult to remain viable and compete with a 20 per cent increase in costs. The coal industry is a major employer of over 600 people in my electorate. Overall, the coal industry employs over 36,000 people in Australia. Yet the Labor government is clearly willing to jeopardise these and many other Australians’ jobs through this legislation that will see the Chinese, Japanese and others buying coal from other countries that do not impose ETS taxes.

The Australian Aluminium Council have stated that they support a well-designed emissions trading scheme. However, there are a number of fundamental changes that need to be made to the legislation. They have said that the CPRS will add $2 billion in costs in the first decade. Worsley Alumina is a major employer of over 1,200 people directly in my electorate, plus contractors. The alumina and aluminium industries are major, mostly regional employers of around 17,000 people across Australia, 6,000 of whom are employed in Western Australia. These industries’ companies add significantly to local and regional communities and economies. The coalition’s amendments will assist the alumina and aluminium industries in Australia to remain globally competitive and, as well, to have access to competitive energy availability and pricing.

In my electorate Perdaman Chemicals and Fertilisers are a prospective new industry hoping to produce urea at a project site in the town of Collie. Perdaman will use local coal as their feedstock for their urea-manufacturing process and will then gasify the coal and utilise the hydrocarbons in the gas to produce urea for export to India. The project will be a major employer, injecting millions into the local and national economies. The most significant problem that this project and their industry face is that, under the particular system of the proposed ETS, their coal ‘feedback’ will be treated as equivalent to natural gas rather than coal. Coal has an allocative baseline for permits at 90 per cent emission level whereas natural gas has only 65 per cent. This single decision alone under the ETS will make the project potentially unviable. I understand that Perdaman’s coal gasification process will be 40 per cent cleaner than standard coal fired power generation.

The coalition will also empower business and community groups to participate in voluntary measures to directly contribute to the reduction of greenhouse gas emissions through measures such as energy efficiency. However, even with our amendments, the coalition has consistently argued that it is reckless for the Labor government to push ahead with this legislation prior to the Copenhagen summit in December, particularly before we know what the rest of the world is doing.

And we are not alone. Caltex chief executive, Julian Segal, described the government’s proposed scheme as ‘flawed’ and said:

… if it was introduced, Caltex would not invest more funds in its two Australian refineries, as it would be cheaper to operate refineries in Singapore, where there were no plans to introduce an emissions trading scheme.

He also stated:

If we are going to say this scheme is about reducing gases we need to be genuine about it and make sure we don’t push emissions from Australia somewhere else.

A recent survey by the Australian Industry Group stated:

Many Australian businesses—

including small businesses—

are actively managing their carbon footprints.

…            …            …

Almost three quarters of businesses (74%) are currently measuring their firm’s overall carbon footprint or plan to do

so over the next three years.

…            …            …

More than 60% of businesses have taken steps or plan over the next three years to invest in “cleaner” capital equipment …

With the additional costs of fuel in regional and remote areas, which are at least 10 per cent higher than in Perth in my state of Western Australia, and the significant distances, energy, general transport of goods, agricultural inputs and other service increases, businesses and households in regional and remote areas will be disproportionately affected by the Labor government’s ETS legislation. I would hate to think that any pensioner does not turn their lights or heater on as a result.

Western Australia derives 46.7 per cent of its income from exports compared to 20.5 per cent of the national income for 2006-07, which shows this is a direct market and trade exposure and WA’s economy is the most exposed and at risk of any state to carbon leakage. I note that the Western Australian government, in its submission to the green paper, made the following recommendations:

The Commonwealth Government should ensure that remote operations and communities with no short-term access to lower emissions energy substitutes do not face disproportionate disadvantage.

…            …            …

The cost of providing essential services such as power and water will rise in response to the CPRS. This is likely to increase the value of existing concessions and assistance provided by the State Government to households by at least $6 million a year if the State was to fully mitigate the impact of the CPRS.

The WA government noted that the lack of economic models available in the legislation to perform comprehensive activity analysis was an issue. The limited detail and regulations in the government’s legislation are clearly deliberate, to disguise the full costs and prevent individual industries, sectors and businesses and even consumers from being able to fully evaluate the economic impacts and costs of the government’s ETS.

This is an abject failing of the government for a policy that will have such a profound impact right across the economy. Why has the government not released the Treasury modelling on the impact of the ETS on Australian industry, business, employment or costs of living and provided comprehensive regional cost-benefit analysis? Much of the assistance provided by the government to consumers is short-term only.

The coalition proposes to permanently exclude agricultural emissions from the ETS, aligning the Australian scheme more closely with the proposed United States and phase 3 European Union schemes. Australian farmers, like all EITE industries, are simply asking for a reasonably level playing field. It is one industry that already has to compete with countries that have tariffs and protections. The Labor government ETS will further disadvantage Australian farmers, food processors and exporters

The coalition will allow agricultural offsets for farmers, including carbon sequestration in soils, vegetation and trees, providing an opportunity for our farmers as well as driving financial and land management benefits in the rural and regional areas. This is a win-win situation for farmers, the environment and the economy. No other country is including agriculture in their scheme. The Canadians are not. The Americans are not. The Europeans are not. But the Labor government is. ABARE in their publication Issues Insights stated:

Like all sectors of the economy, agriculture will face higher input costs because of the CPRS from 2011. This is a direct result of placing a price on non agricultural greenhouse gas emissions.

Even more importantly, ABARE stated:

There may also be a CPRS related cost-price pass-through from downstream processors to farmers that lowers the prices farmers receive for their produce.

Effectively, under the government’s ETS legislation, Australia’s approximately 150,000 farming businesses and family farms will be hit with a carbon tax across their input costs—for fertiliser, fuels, freight, electricity and chemicals to name just a few. As we on this side are aware, farmers are price takers; they cannot pass on additional costs. But they will also have to accept lower prices for their products from processors that can pass their costs back to their source of supply, the farmers. Farmers will become less competitive in international markets as well as having to compete with imported and sometimes dumped products that do not bear the additional compounding costs of an ETS. But under the Labor government, farmers will have no capacity to generate carbon credits.

There is no doubt that Labor’s ETS will reduce farm profitability. Broad acre cropping enterprises, dairy, with its dependence on electricity, the beef and sheep industry, horticulture and vegetable producers will all reduce their farm cash margins. The agriculture and food processing sectors will face cost increases. Those with over 25 kilotonnes of carbon dioxide equivalent will have to buy permits. ABARE stated:

The processing sector is highly trade exposed and so it is expected that the full extent of increased costs will not be passed on to consumers … some of these increased costs to the processor will be passed on to agricultural producers in the form of lower prices paid for the inputs to the processing sector such as wool, livestock and milk, etc.

We are yet to see the administrative complexity of trying to identify diverse emissions from different enterprises on a single farm, for instance a mixed farming operation of dairy, beef, vegetables, cropping. There will be significant administrative costs for all businesses; and for family owned and run businesses there will be an additional time cost as well.

Over the last financial year, Western Australia exported approximately $6 billion worth of food and agricultural commodities, and much of this was from my electorate of Forrest. This represents a growth in value of agrifood exports of 28 per cent in 2008-09. Having less than 10 per cent of Australia’s farms, WA produces nearly 20 per cent of Australia’s total agricultural and food exports, which has assisted in keeping Australia out of technical recession over the past 18 months. Given this, it is understandable that farmers in my electorate are seriously and very rightly concerned about the impact the Labor government’s ETS will have not only on their farms but also on their regional and rural communities.

The Senate standing committee inquiry into climate change in the Australian agricultural sector noted in their final report:

… there is little evidence of work being done on the impacts of climate change on rural communities.

The Labor government’s ETS will see Australian farmers disadvantaged compared to US farmers and the proposed US legislation. Not only are US farmers exempt from coverage but sequestration options and periods further disadvantage Australian agriculture. The Labor government ETS does not provide for the considerable existing sequestration capacity of annual and perennial crop and pasture cycles, as well as other on-farm practices. We have some of the best in the world. The US offers sequestration options for agricultural, grassland, rangeland and management practices, changes in carbon stocks attributed to land use change and forestry activities, as well as manure management and disposal. Even with forestry plantings, Australian farmers are at a disadvantage compared to what is projected for US farmers, with the forestry sequestration period for Australia being 70 years after trees reach maturity and in the US it is 20 years.

A further issue for agriculture in Australia is the food security issue—the loss of quality food-producing land to extensive carbon sink forests, which impacts not only on farmers themselves but also on their communities and the broader economy. In their submission to the Senate inquiry into climate change, citing the Australian agricultural sector final report, the ACCC stated:

If adapting to climate change proves too difficult in some areas, populations will decline and the abandonment of rural towns and farming areas could follow, with the consequent loss of local history, culture and dire natural resource implications. The advent of weeds, pests, disease and erosion could be considerable resulting from the exodus from certain rural and remote areas.

Is the Labor government prepared to facilitate this through a flawed ETS? From day one of the government’s ETS, farmers will pay more for virtually every input. Their costs of production will increase and their profits will decrease. It is that simple.

A Climate Institute paper recently acknowledged that there is a raft of challenges to be overcome before agriculture can be cost-effectively linked to the CPRS, acknowledging the issue of leakage and that higher farm costs makes overseas products not subject to emissions charges more competitive.

I note that the WA Farmers Federation spokesman for climate change summarised the opinion. What he would like to see is farmers being able to participate in the carbon market on both sides, as we in the coalition have proposed, recognising that, yes, they do put some methane into the air but also that they sequester carbon. Farmers are good carbon managers. In the last 15 years we have reduced emissions, or potential emissions, by 40 per cent, and it is basically those reductions that have allowed Australia to meet its Kyoto target. That was discussed on the ABC Rural Report this week. An article in the Weekly Times by the Australian Dairy Industry Council, referring to the dairy processing sector, stated:

Our industry is highly trade-exposed and our Government’s … Carbon Pollution Reduction Scheme plan leaves us vulnerable to losing export markets to other countries whose policies differ significantly.

In my electorate of Forrest there has been a lot of investigation into sources of renewable energy. A lot can be achieved in Australia through energy efficiencies. We have heard this consistently from the member for O’Connor about the transmission sector: how and when energy is used and the integration of systems. Earlier this month, West Perth based Green Rock Energy announced that it had been granted three geothermal exploration permits within the town of Collie in my electorate, where a substantial proportion of Perth’s electricity supply is generated from power stations. I recently hosted an energy diversity forum in my electorate to provide information about current and future energy sources, including tidal, wind power and geothermal energy. The potential of converting CO2 to oil and stockfeed through algae is also being investigated, potentially for my electorate.

In conclusion, the coalition supports the view that it is reckless for the Labor government to insist that Australia locks in its emissions trading scheme ahead of the rest of the world. I support the coalition’s amendments to this seriously flawed Labor government ETS.

The DEPUTY SPEAKER (Hon. DGH Adams)—The question is that the words proposed stand as part of the question. The honourable member for Slipper—the honourable member for Fisher.