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Hunt defends fines for big polluters, critics say they're too soft -

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ELEANOR HALL: Federal Environment Minister, Greg Hunt, is today defending the regime of penalties he wants to impose on the country's biggest carbon polluters.

The Minister insists that the rules will enable Australia to meet its emissions target. But environment groups and industry analysts don't agree.

They say the new rules would in fact allow most of the largest polluters to increase their emissions.

In Canberra, Peta Donald reports.

PETA DONALD: Direct Action is the Government's policy to reduce Australia's carbon pollution.

It's a carrot and stick approach.

The carrot is a system of incentives for farmers and businesses to cut emissions.

Now for the stick.

The Government has revealed the system it wants in place from July next year, to fine those who pollute above business-as-usual levels.

It hasn't gone down well with John Connor from the Climate Institute.

JOHN CONNOR: They look at a historical average over the past five years and a company can pick the best of those years i.e. the most polluting years, and there's a series of exemptions they can call for if they want to challenge and get that relaxed even further.

So deeply concerned by this which is the third key leg of the Government's pollution platform.

PETA DONALD: He's not the only one.

Independent carbon market analysts Repu Tex and the Grattan Institute also say the draft penalties are too soft.

The Grattan Institute says 80 per cent of the largest polluters will be able to increase pollution without penalty.

John Connor says it means Australia won't be able to meet its recently announced target, of reducing emissions by more than quarter in 15 years time.

JOHN CONNOR: A much bigger proportion is to come from the safeguards in reductions, whereas we have this measure which independent analysts at Repu Tex say will increase the sectors pollution by 20 per cent, an increase in pollution because of the way these base lines can operate.

I'm not here to penalise, but it’s actually about the companies taking responsibility and reducing their emissions because the net sum of all of this, when we've got three legs of policy here from this Government, it's a renewable energy target, which they've driven the reduction of, and then it's the taxpayer fund, the Emissions Reduction Fund, which takes the burden of responsibility of reducing emissions and that's where we fall back on.

In times when our budget deficit is in trouble, it's the budget which is paying for the emissions reduction and it’s not the polluters.

PETA DONALD: The Environment Minister Greg Hunt has brushed off the critics. He says they were wrong before, about the Direct Action, and they will be proven wrong again.

GREG HUNT: Some of the same critics are now, for partisan reasons, trying to disparage what is a very effective but carefully balanced limit on the emissions from Australia's largest firms and emitters. So it's a strong system, but it's a balanced system.

We'll reach our targets. We're on track to do that and now we've set an ambitious international target and we've got an effective domestic system.

PETA DONALD: Why did you decide to allow businesses to take their highest level of emissions in the last five years as their base line?

GREG HUNT: Well, in many cases, companies are recovering from the GFC (global financial crisis) and what they have said, and what we have concluded, is that after the global financial crisis there was a rightful recovery in production and this gives us an outcome which has both an impact, but also the ability to, but also the ability to make further changes, to progressively make changes over the coming decade.

So this is the first step in actually putting in place a limit on Australian firms which doesn't involve a tax, which doesn't involve higher prices, which is complemented by a spectacularly successful emissions reduction fund.

We're beating our targets; we're doing it without electricity prices rising and that's a perfect outcome for Australia.

ELEANOR HALL: That's Environment Minister Greg Hunt, speaking to Peta Donald.