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Monday, 18 November 2013
Page: 495


Mr CONROY (Charlton) (17:57): Mr Deputy Speaker, I congratulate you on your election last week to that august role. Before I get into the substance of my speech, I want to correct a couple of myths—'myths' being a generous term—that the member for Bowman just espoused. Firstly, never have I seen such a great lack of knowledge of what is happening internationally, which I will address in my speech later. The member for Bowman—

Mr Frydenberg: He's a doctor.

Mr CONROY: So does that make him an expert on international action, does it? Secondly, the member for Bowman commented on the deep scepticism in the community that was growing over the last few years. That grew because of the demonisation of scientists that occurred by the current Prime Minister, his frontbench and his friends in conservative talkback radioland. They stand willingly under sign' that say 'ditch the witch' and talk about UN conspiracies around climate change science. They deride climate change. They give people an excuse not to take action and that is why this debate is where it is now.

This piece of legislation represents the final nail in the coffin of the economic illiteracy of the coalition. The party of Deakin, the party of economic liberalism, is now suspicious of markets. As the member for Kingsford Smith talked about before, they are now seeking to replace what is the most effective and efficient way of combatting climate change with a slush fund akin to government commander control. Mr Lenin would be proud of it, as the member for Kingsford Smith said, but I can imagine many Soviet era economists being very happy with this. The case is that it is now the member for New England that is writing the economic policy for the coalition government. We well and truly have a case of the National tail wagging the Liberal dog.

The fact is that in 2007 both major parties took to the election policies for an emissions trading scheme. It was only when the current Prime Minister knocked off the member for Wentworth and betrayed the trust of the Australian people that we saw this consensus on fighting climate change through a market mechanism break. I was elected as were all of my Labor colleagues on a platform of moving from a fixed-price emissions trading scheme to a flexible-price emissions trading scheme in 2014 and I will proudly vote that way.

We have been hearing a lot in the last two weeks about 'mandate this', 'mandate that'. I thought it would be illustrative to quote what the current Prime Minister said in 2007, when giving advice to then opposition leader Brendan Nelson. He said:

Nelson is right to resist the intellectual bullying inherent in talk of ‘mandates’.

…   …   …

The elected opposition is no less entitled than the elected government to exercise judgement and to try to keep its election commitments.

It is ridiculous for the Prime Minister, a man who is a self-confessed weathervane on the topic, who once called for a carbon tax to claim a mandate on this issue.

This bill demonstrates yet again that the coalition does not accept the science of climate change is settled. The latest report from the UN Intergovernmental Panel on Climate Change reinforced the fact that the science is settled. No other country in the world questions the science. No other government in the world questions the science and no other Prime Minister calls the science 'crap'.

The fact is that internationally action is occurring. Over one billion people now live in countries or provinces where some form of carbon pricing, whether it is a carbon tax or an emissions trading scheme, exists. They are in countries in Europe and states in the United States—for example, California, the ninth largest economy in the world in its own right, has introduced an emissions trading scheme around the $20 mark. There are 200 million people living in Chinese provinces where they are developing emissions trading schemes right now and they have a goal of a nationwide emissions trading scheme later this decade.

By 2016, over three billion people will be living in countries where there are emissions trading schemes or carbon taxes. To say that we are leading the world or that we are going by ourselves is a complete furphy, which demonstrates a complete misunderstanding of this debate.

Those who think that we can sit by and do nothing while our trading partners take action are kidding themselves and are exposing us to massive trade retaliation. Besides our trading relationships, it is vital that we take action so that we can harness the advantages that accrue to people in the low-carbon industrial revolution. Every previous industrial revolution has demonstrated that the countries that move first are the ones that will benefit the most. That was demonstrated by Britain in the first industrial revolution that concentrated on steam and textiles. It was proved by Germany and the United States dominating the second half of the 19th century with the rise of steel and railways. It was demonstrated by Japan and the United States in the electronic revolution post-World War II. It is the countries that solve the problem and develop the technologies that fight climate change that will be the ones in the best position to compete in the 21st century.

There has been a lot of discussion about international competitiveness, helping our industries. I can tell you: turning us into a rust belt economy while the rest of the world decarbonises will be a great disadvantage to our economy.

The fact is that we have a responsibility to play our part and the clean energy bills a fixed-price emissions trading scheme moving to a flexible-price emissions trading scheme is the most efficient way of doing it. It is a market mechanism recommended by people such as Professor Shergold, Ross Garnaut and Lord Nicholas Stern in the United Kingdom. Every serious economic commentator has said an emissions trading scheme is the way to go.

Despite the disgraceful exaggeration of those opposite, the implementation of the carbon price was smooth. The inflationary impact was modest—in fact the modelling probably overestimated the inflationary impact of the scheme. Nine out of 10 households were compensated. We had landmark economic reforms associated with a package, including the tripling of the tax-free threshold.

A leg of lamb does not cost $100 as the member for New England prophesised it would; in fact the price of lamb has fallen by 10 per cent in the last year. Whyalla has not been wiped out—it is still there—and 140,000 jobs have been created in the economy since the carbon price began. The stock market has grown by 32 per cent, and our emissions are flat, if not falling.

We have seen a 6.1 per cent fall in emissions from electricity generation over the last year. This represents 12 million tonnes less carbon pollution being emitted into the atmosphere than the equivalent time last year. This is the equivalent of taking 3½ million cars off the road, so a price on carbon works. Getting to a flexible-price emissions trading scheme is the way to go.

If the member for Flinders bothered to read his own department's reports rather than Wikipedia, he would know that this fall in emissions was driven by fuel switching to cleaner energy sources and falling demand. Despite his claims to the contrary, electricity is an elastic good and demand has been responding to the price signals as economists have prophesised.

As the ETS has a harder cap on emissions, it guarantees that Australia's net emissions fall, and this was the important point the member for Port Adelaide was making in his response. No amount of misrepresentation or Treasury modelling by those opposite negates the fact that a cap-and-trade emissions trading scheme means that Australia's net emissions in 2020 will be at least 130 million tonnes less than they would otherwise be.

That is why credible internationally linked emissions trading schemes are so important, particularly for emissions-intensive economies such as ours. They allow pollution to be cut at the lowest cost wherever it can be achieved. There is after all only one atmosphere, and a reduction in pollution anywhere in the world has the same environmental benefit.

The coalition's policy of prohibiting the trade of carbon permits with other countries is economic xenophobia. It is sending a signal that it is somehow dubious to trade with foreigners. It is typical dog-whistle politics and is in fact a white carbon policy.

I would now like to turn to the regulation impact statement that accompanied these bills. The RIS importantly admitted that not all prices will fall to their former level if these bills are passed. The RIS is very explicit on this point, and this has been confirmed by industry only as recently as last week.

The RIS also contained a very interesting table worth reading, which is table 8.1. This table outlines the expected changes to industry output in a scenario of a carbon price against one with repeal. This table in this official government document that accompanied these bills made it very clear that repealing the carbon price would cause agricultural and manufacturing output to be lower than output would be if there was a carbon price, which is a shocking revelation.

I wish to turn to the solution that the government is offering when they try and repeal these bills: Direct Action. This scheme is a joke; it is friendless. A recent survey of economists found near unanimity that a market based solution is the best policy option to reduce carbon price. Thirty-three out of 35 economists surveyed rejected the government's Direct Action policy. Of the two economists who favoured this farce of a policy, one did so because he favoured no action by Australia and the second did so because he rejected the established scientific fact that climate change is overwhelmingly human induced.

No policy to tackle climate change is cost free. That is the truth. You can either charge polluters or charge the taxpayer. Despite the protestations of those opposite, direct action is not market based. Direct purchase of abatement from the private sector does not change incentives to abate or emit throughout the economy. If you are not a successful bidder in their scheme, you have zero incentives to change your behaviour. I ask the coalition: how can you have a market without an explicit price? How is a government subsidy a market? If they were honest—and to his credit the member for Wentworth has been in the past—they would answer 'you can't' and 'it isn't'.

It is worth quoting the member for Wentworth's exact words: 'Tony Abbott is putting a price on carbon, it's just that the taxpayer is paying for it. Now the view that I've argued for, which is you know, and you have to be, you know, fair and say it's the view that most economists support, is that you're better off having the market determining the price of carbon and therefore you put a price on carbon either through an emissions trading scheme or through a tax ... Tony Abbott is ... saying there will be a price, but the price will be paid for out of taxpayers' resources via direct subsidies, as opposed to being paid by the emitting industries and then passed on through the market, and that is, you know, that's really a debate about the benefits of market forces versus direct action, as Tony describes it, by government. Now my preference, because I am a liberal and a free enterprise person, is always for the market.'

For once, the member for Wentworth is right, and I am proud that the Labor Party are agreeing with him on this point. Direct Action will not produce investment certainty and it will not produce sufficient abatement to meet Australia's abatement targets without creating enormous budgetary costs. Using the most optimistic assumption that it would be as efficient as a domestic only emissions trading scheme, Treasury found that to reach the minus five per cent target Direct Action would cost the government at least $48 billion to 2020. This is not the Labor Party saying it; this is the independent Treasury saying that it will cost at least $48 billion. This equates to a tax increase of $1,200 per household. You have two choices in this debate: either polluters pay or taxpayers pay. Direct Action is a recipe for a $1,200 increase in a household's tax.

Other independent experts such as the Grattan Institute have estimated that it will cost up to $100 billion to reach the 2020 target using schemes such as Direct Action. This type of direct action scheme has been tried in the past and failed. The Howard government tried the Greenhouse Gas Abatement Program, which was wildly unsuccessful and Direct Action will be too. Direct action is a ridiculous scheme. It will require tree planting on the combined land mass of Victoria and Tasmania to reach the five per cent target. They have pinned all their hopes on soil carbon. In fact, their joke of a policy document says that soil carbon will provide 85 megatonnes of the abatement. This, unfortunately, cannot happen because the process of soil carbon is unproven both scientifically and economically. Farmers who have looked into this matter reckon they are kidding if they think they can get away with paying only $8 to $10 for soil carbon.

This bill is really a debate about the future of Australia. I want a future where we are playing our part in international action to tackle climate change, where my daughter and her generation can grow up in an economy that has decarbonised and where our industries have taken advantage of the new technologies that will support changing our economy and combating climate change.

My electorate has the largest power station in the country and it has six coal mines. These companies are already taking action to reduce their emissions, in response to the price signals sent by the carbon price at the moment and because they recognise that they need to take action if they are going to compete internationally. Interestingly, when I talk to all these people not a single one favours Direct Action. They all support an internationally linked emissions trading scheme, which is exactly Labor's policy.

Labor have had a policy to combat climate change using an emissions trading scheme in our platform since the late eighties—long before the growth of fringe environmental parties—and I am very proud of that fact. I am very proud that Labor will keep fighting. We will not support this bill unless there is a guarantee that the scheme will be replaced by an internationally linked emissions trading scheme, which is the cheapest and most efficient way of combating climate change.