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Monday, 26 November 2012
Page: 9696


Senator THISTLETHWAITE (New South Wales) (13:50): When I last spoke on this issue, I pointed out that Treasury modelling clearly demonstrates that without the ability to access international carbon markets and the ability for Australian businesses to purchase international permits, the cost of meeting our emissions reduction target will double. This was a point that was well made by representatives of Loy Yang Power when they appeared before the Senate Select Committee on Scrutiny of New Taxes hearing on 16 September 2011. In response to a question by a senator, Ken Thompson of Loy Yang Power responded. The questioner asked if he was aware:

… that Treasury had done a study which demonstrates that if businesses like [his] are not able to access international permits on the international market once the carbon trading scheme begins … it will substantially push up costs.

Mr Thompson's response to that question was:

Correct.

The questioner goes on:

That is a view that you share as well, is it?

Mr Thompson: Yes, absolutely.

So there we have it. Business in Australia recognises that without the ability to link the Australian carbon pricing mechanism to the EU scheme and to other international markets, the cost of abatement in Australia will increase, and that is something that those opposite do not understand. That is why, from 1 July 2015, we will be linking the Australian carbon price mechanism to the European Union's emissions-trading scheme and moving to a fully flexible emissions-trading scheme where the Australian carbon price reflects the price in the largest carbon market in the world.

The EU scheme has been operating since 2005 and has delivered cost-effective emissions reductions across the European Union. Australia has a responsibility to act—and act globally. We are one of the top 20 greenhouse gas-emitting countries in the world and the highest per capita emitter amongst advanced economies, so it is incumbent on us to roll up our sleeves and get on with fixing this problem. However, Tony Abbott, the Leader of the Opposition, has been attempting to convince Australians to ignore this global movement towards emissions reduction through market mechanisms and to whip up fear and relentless negativity about the operation of this scheme. On 8 July he said:

…the world is running away from an emissions trading scheme at a million miles an hour.

On 4 July he said of international action:

…it is an act of economic self-harm. Everyone who's thought about this knows it which is why other countries are running away from things like carbon taxes at a million miles an hour.

But the facts speak for themselves. We are not alone in our efforts to reduce carbon emissions despite the coalition's attempt to convince Australians otherwise. I note that on 30 September this year the Minister for Climate Change and Energy Efficiency, Greg Combet, and Cabinet Secretary, Mark Dreyfus, announced that Australia and California have agreed to work together toward the development of regional and global carbon markets. That is Australia working on international carbon trading with the eighth-largest economy in the world. To follow that up, on 24 October 2012:

China, Chile, Costa Rica and Mexico have outlined their plans to consider domestic carbon pricing at World Bank meetings hosted and co-chaired by Australia in Sydney this week.

That was followed by the Republic of Korea passing legislation to introduce a national emissions-trading scheme from 2015. Norway has announced the doubling of its carbon price on oil and gas in 2013. Thailand has announced its plans to enter into a voluntary domestic carbon market in 2014. Add to that New Zealand and all the nations of the European Union and there is a distinct trend: the world is moving towards carbon pricing.

The opposition is stuck in the past and cannot understand that the lowest-cost form of abatement is available through the reforms we make today with the passage of this bill. Our carbon price will be consistent with that of countries inhabited by no less than 530 million people throughout the world. From 2013, 850 million people will live in places where polluters pay to pollute with carbon. International linkage is the most economically and environmentally responsible way forward—joining with a host of other nations to ensure our efforts to reduce greenhouse gas emissions are as effective as possible; but nonetheless those opposite continue to oppose it. They not only oppose it on environmental grounds but also oppose it, wrongly, on financial grounds. It has become a bit of a habit for the opposition to get the big calls wrong when it comes to economic policy.

As a supporter of the development of a global system, Australia has a direct interest in promoting links between comparable schemes. Any Australian domestic trading scheme should be designed to enhance the scope of links, both formal and informal, with as many different systems as possible. Because of their opposition to the international linking of our emissions-trading scheme, the coalition would pay twice as much as this government to achieve their goal of a five per cent reduction in emissions by 2020. This is the hidden cost of the opposition's scheme that the Australian public is not aware of. If the opposition are elected, Australians will pay more when it comes to the abatement of carbon emissions by five per cent by 2020, and that is something the Australian public needs to be aware of.

Linking with the EU has been broadly supported. Andrew Grant, the chief executive of listed carbon offset company CO2 Australia described it as 'a very intelligent policy development.' He went on to say:

The original dream was that we would have one uniform carbon market and what we have is a patchwork quilt around the world, so the more linkage the better. Linkage for us is really important and it means you can go to the market that will give you the best result.

Nathan Fabian of the Investor Group on Climate Change said:

Linking to the larger and more established EU ETS will give more clarity to investors on the longer term direction of carbon pricing without the policy design uncertainties that can be created by questions over the duration of a price floor.

Looking to the future, key economies in the Asia-Pacific such as India, Thailand and Vietnam are entering carbon markets which will lead to the development of an Asia-Pacific carbon market in the future. As I have already mentioned, many of our trading partners, including China, Korea and California, are moving in this direction.

This is a sensible proposal. It will ensure that Australians and Australian businesses are able to access the least-cost abatement in our economy and that is fundamental to the way that this scheme works. All of the Treasury modelling—in fact, 37 parliamentary inquiry reports of this place and the House of Representatives since 1992—has indicated that the cheapest form of abatement is through a market based mechanism, an emissions-trading scheme; and, by linking our scheme to Europe, it ensures that Australian businesses can access that abatement at the cheapest and most efficient cost available. That is why this bill must pass the Senate. It is also why the coalition is once again stuck in the past when it comes to the big economic calls in this country. This bill will alter the current arrangements for applying an equivalent market price to other synthetic greenhouse gases.

The bill provides additional flexibility in the regulations for how liability is to be imposed on potential greenhouse gas emissions embodied in an amount of natural gas. It amends the Clean Energy Act so that relinquishment units are cancelled and new units are issued in this place. All in all, this is a positive reform. I commend the bill to the Senate.

Debate interrupted.