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Monday, 26 November 2012
Page: 9787

Senator CORMANN (Western Australia) (21:06): The Labor Party are in complete chaos over the carbon tax that was imposed on them by the Greens as the price for government. The reason we are debating these bills tonight is because the Labor Party are in panic mode. The Labor Party are in panic mode about the impact of the carbon tax. It only came into effect about five months ago but here we are: in the last five months we have had eight significant changes to a tax which was supposed to provide certainty.

Once the carbon tax was legislated it was going to provide certainty to business.

The Labor Party have finally cottoned on that the carbon tax is deeply unpopular across Australia. People across Australia understand that this is a tax which will push up their cost of living because it will push up their cost of electricity and it will push up their cost of gas. This tax will push up the cost of doing business in Australia, which will make us less competitive internationally at a time when, quite frankly, we should be focused on making ourselves more competitive internationally. It is a tax which is doing nothing for the environment. Far be it from being a tax which would lead to reduced global greenhouse gas emissions, it arguably will actually lead to increases in global emissions.

This carbon tax is an absolutely incredible broken promise by the Prime Minister. The Prime Minister made the most emphatic promise five days before the last election. Staring down the barrel of a camera she told the Australian people in the shadow of a difficult election for her: 'There will be no carbon tax under a government I lead'—a promise which was supported and endorsed by every single one of the Labor senators sitting on the other side of the chamber. It is a broken promise. It is bad policy for Australia. We will scrap it. As Senator Williams has just said, the next election will be a referendum on the carbon tax. If we do get the confidence of the Australian people, we will scrap this bad carbon tax when we are in government.

This Labor-Greens carbon tax is, as I have mentioned, the world's biggest, most expensive carbon tax. It is bad for families, bad for business, bad for jobs, bad for international competitiveness and bad for our economy. In fact, it is even bad for the federal budget, because the government has spent so much on trying to deal with the political implications of introducing this carbon tax. Even the federal budget is worse off as a result of spending more than the revenue it will raise. Of course, it is even bad for the environment.

According to the government's own modelling, the cost of electricity is expected to go up, the cost of living is expected to go up, the cost of doing business is expected to go up and investment in key sectors of our economy is expected to be lower than it would be without the carbon tax. Our economy is expected to grow less strongly than it otherwise would and not just by a little bit but by $1 trillion in today's dollars between now and 2050. People might say that 2050 is a long time away. Yes, it is 38 years away. But when you judge the merits or otherwise of economic policy proposals you have to look at their long-term implications. What direction is a particular policy taking Australia into? Over the next 38 years, according to the government's own modelling, the carbon tax and the emissions-trading scheme which is to follow will take Australia in the wrong direction because it is making us less competitive internationally because it will actually result in slower and lower economic growth to the tune of $1 trillion in today's dollars between now and 2050. To put that in perspective, that $1 trillion represents the whole GDP for the whole of Australia for a whole year. I have said it before and I will say again that effectively what the Labor Party and the Greens expect people across Australia to do between now and 2050 is to work a whole year for nothing to pay for the impact of the carbon price on our economy. They expect people to work a whole year for nothing in order to pay for this mad tax.

Critically, this carbon tax is imposing a cost on business in Australia which is not faced by businesses in other parts of the world which businesses in Australia are competing with. Every time a higher-emitting business in another part of the world is taking market share away from a more environmentally efficient, lower-emitting business in Australia not only does the economic activity and the jobs go overseas but the emissions go overseas too. On many occasions and across many industries when you have higher-emitting businesses in other parts of the world—where for the same amount of economic output the emissions intensity is going to be higher—then what you are actually doing is increasing global emissions as a result of the way this Labor-Greens government has structured this carbon tax here in Australia.

Labor and the Greens do not like it when we refer to their carbon tax as the world's biggest, highest and most expensive carbon tax, but it is. Let me just run through some facts and figures. The Australian carbon price is manifestly the world's highest on a per tonne of CO2 basis. It is more than 2½ times higher than the current EU ETS price. The Australian price starts at $23 and the European Union, which has the world's largest emissions-trading scheme at present, has a price of about A$8.60 right now. The Australian price is going to go up to $24.15 and then $25.40 a tonne in the next two years and then up to $29 a tonne, whereas the European Union price is forecast to go up to $11.20 and $13.60 per tonne respectively. That is according to forecasts published by analysts at Reuters reported back in October 2012.

The tax take per capita here in Australia will be the world's highest whether compared with EU experience to date or looking at forward projections. The transition period for Australian industry to adjust will be the world's shortest. The EU emissions-trading scheme transition is more than 20 years. Hundreds of Australian firms are now due to pay the full carbon liability from year 1. Not a single European firm will have to buy all of its permits until 2027. The level of assistance to trade exposed industry in Australia is far weaker than that in the EU scheme. The safeguards for jobs in manufacturing are far inferior in the Australian scheme compared to those applicable in the European ETS.

The cost burden on Australian exporting and import-competing industries will be the world's harshest. That is here in Australia and it will be much higher than that applying in the EU ETS. And tax take does, of course, matter because a firm in Australia with an emissions profile of one million tonnes of CO2 per annum will pay $72.5 million from 2014-15, while its identical European equivalent will pay just $9.4 million. The Australian carbon tax will be much higher than the EU price for the next three years—we know that—and I have just gone through the figures there. But the tax take from the Australian scheme is and will be the world's highest.

Over the next three years, 22 million Australians are in fact paying five times as much carbon tax as 500 million Europeans over the same period. How can that be a level playing field? How can that be seen to be fair? Based on revenue estimates contained in the government's own fiscal tables contained in the Clean Energy Future package of July 2011—which I am referencing—and even after deducting the value of industry assistance, the Australian scheme is expected to raise nearly $49 billion in tax revenue over its first 6½ years. This compares with $4.9 billion in tax revenues generated by the European ETS since its commencement in 2005. In other words, the Australian scheme will raise 10 times as much revenue as the European ETS in its first 6½ years and this is despite the fact that the European population is 23 times larger than Australia's population and European GDP is 14 times larger than Australia's.

A couple of weeks ago, the Minister for Climate Change and Energy Efficiency, Mr Combet, thought he should go out and boast about the fact that 'America’s east coast emissions trading drives 10 per cent pollution cut by 2018 and clean energy investment'. He runs through a report which supposedly has indicated that annual CO2 emissions for the three-year period 2009-2012 across 10 states on the north-east coast of the US were 23 per cent lower than for the preceding three-year period. Incidentally, there is actually no information in that report as to a causal link. There has been somewhat lower economic activity across large parts of the US than would otherwise have been expected. Arguably, when you have less economic activity than you thought you would have then your emissions are going to be less than you thought they would be.

But leaving that point to one side, there is a fact about the carbon price for that particular scheme, the Regional Greenhouse Gas Initiative, as it is called, being an emissions trading scheme operating in 10 states in the north-east of the United States which the minister pointed to as a great success. Guess what the carbon price is in that scheme? It is less than $2 a tonne; $1.90 a tonne is the carbon price in that particular scheme. It does not even apply to manufacturers and other industrial plants. A whole bunch of people are actually excluded from that scheme. If Minister Combet thinks it is such a fantastic scheme and that that scheme is evidence that in other parts of the world they are doing things that we are doing here in Australia, why not adopt that scheme with the $1.90 per tonne carbon price if he thinks it is so fantastic while excluding all of manufacturing and all of the industries that are currently captured in the Australian scheme? Because Minister Combet does not mind making Australian manufacturers less competitive than the competitors we have got across the US, Europe, China, Russia, Mexico or Brazil. He does not mind and he does not worry about putting more lead into Australian manufacturers' saddlebags, but then he comes out with dishonest spin like this.

Here we are now in this situation where clearly things are not looking good and so the government comes up with this plan: 'Oh well, given that the carbon price is not likely to be $29 a tonne by 1 July 2015, when we plan to go to the emissions trading phase of the scheme, we'd better get rid of the floor price because the floor price is going to be very embarrassing for us. When we have a floor price of $15 a tonne at a time when we expect that the carbon price would be $29 a tonne and the actual price across Europe is probably going to be below $10 a tonne, it's going to be very embarrassing for us. But not only that as we're going to link our scheme to the European scheme holus-bolus and that's going to get rid of any sorts of competitiveness considerations.' That is the government's argument—but it doesn't because the European scheme was fundamentally different from the scheme that has been put forward here in Australia. For starters, in the European scheme the transition period for industry adjustment was very different. Permits will be sold in the Australian scheme from the first year while the auctioning of permits will not commence in the European ETS until probably 2015, the 11th year of the scheme. There are approximately 11,000 European firms with a direct carbon liability under the EU ETS and approximately 400 to 500 Australian firms that will have a direct liability. Tens of thousands more will face higher electricity and fuel costs. How many of those 11,000 European firms, whether trade exposed or not, will be required to purchase permits covering all of their liability in 2013? The answer is none, not a single one.

Of course, there are a lot of other inconsistencies. The European scheme provides assistance in the form of free permits to at least 151 trade exposed sectors. The Australian scheme provides such assistance to around 45 activities; 90 per cent of Australian minerals exports by value will receive no shielding; 60 per cent of Australian manufacturing exports will receive no shielding. In Europe the wine industry is considered trade exposed while the Australian sector is not. Why? In Europe sugar producers are considered trade exposed while in Australia they are not. Why? Why is the European gold industry trade exposed but the Australian sector is not? In Europe why are the jobs in these and 120 other European industry sectors worthy of protection from the carbon price but the jobs in the Australian sectors are not? Why do European manufacturers of watches, ships, pleasure crafts, sporting goods, brooms, brushes, chemicals and fertilisers who are trade exposed get free permits but manufacturers of these goods in Australia do not? Why are European manufacturers of work wear, outer wear and underwear deserving of free permits under the European scheme while their competitors in Australia are not under the Labor-Greens carbon tax? Job safeguards in the Australian scheme are manifestly far inferior to those in the European ETS. The EU scheme will provide assistance to manufacturing firms employing 14.6 million Europeans. That is around 42 per cent of EU manufacturing jobs. The Australian scheme will provide shielding for firms that employ, wait for this: 93,500 Australians. That is less than nine per cent of Australia's manufacturing workforce of just over one million.

The cost burden for average firms in Australia will be the harshest in the world. The small number of EU industrial firms that do not receive trade exposed treatment will face a far lower cost burden than their Australian counterparts. Non-trade-exposed industrial firms in the EU will receive 80 per cent of permits free in 2013 and 30 per cent of permits free in 2020 and will only buy all their permits in 2027. In contrast, non-trade-exposed industrial firms in Australia will buy permits covering 100 per cent of their liability from the first day of the scheme.

There are many, many other problems, not least of which is that the European scheme actually expressly excludes, for example, methane gases from coal production. So we have the Australian government linking the Australian carbon price to the European scheme and saying, 'Oh, well, that makes sure that we're all working on the same level playing field.' But it is not true because, under the linking arrangement that this bill is trying to legislate, we will have the perverse situation where Australian coal producers will be paying the European carbon price equivalent at the time that the linking happens while European coal producers will not because the European emissions trading scheme does not even cover methane, the greenhouse gas known as a 'fugitive emission' that is emitted during the mining of coal. So, if the government's Treasury modelling is correct and the carbon price is indeed $29 per tonne in 2015-16, Australian coal producers will be paying more than $1 billion annually in carbon costs whereas European coal producers will not pay a single euro for their emissions. On the contrary, most of the high-cost European coal producers will be receiving public subsidies. This is a complete joke, yet this is what the government has signed us up to.

Here are a few other bits and pieces. Last week, Barclays described the European CO2 scheme as a 'regulatory omnishambles'. That is what the Gillard government is signing Australia up to: a regulatory omnishambles. The Senate should also know that the recent assessment by the carbon market advisory firm RepuTex is that recent policy decisions taken in Brussels to prop up the European carbon price will increase the cost of the carbon price to Australian companies by $3.7 billion. Of course, the European bureaucrats in Brussels can change their scheme and impose additional costs on Australian businesses overnight without consulting us, and we think it is a good idea. We do not think it is a good idea. This carbon tax is a shambles. It is bad for Australia, bad for Australian families, bad for Australian small businesses and bad for the Australian economy. It makes us less competitive internationally while pushing up the cost of living and, at the same time, does absolutely nothing to help reduce global emissions. It should be scrapped.