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Tonight - the hard sell.

We've got a lot of explaining to and I'm gonna keep explaining.

And the stakes have been have been set high.

Such political future as I have got rests entirely on beating this tax.

Good evening. Welcome to 'Lateline'. I'm Ali Moore. The hard sell has begun. The Prime Minister
working to Minister working to convince voters a price on carbon is the only way to reduce
emissions. The opposition arguing the opposite. The messages from business about the package are
also mixed. Some have welcomed the tax and very vocal industries like steel largely got the
compensation they wanted. The coal industry, though, says it will cost jobs and investment, and do
nothing to cut Tonight, we analyse the detail of a tax and some of the claims with the Grattan
Institute's Tony Wood and look at the impact on one of the country's biggest energy players Origin
Energy with Managing Director Grant king who was on Grant king who was on the government's business
round table. First our other headlines - Rupert Murdoch races to London to save his bid for BSkyB.
The US withholds military aid to Pakistan retaliation for a failure to deal with extremists. And -
Qantas pilots threaten to go on

Carbon tax campaigning steps up a gear

ALI MOORE, PRESENTER: Tony Abbott's targeted a coal-mining electorate in Labor's heartland on the
first day after the official unveiling of the carbon tax.

The move's aimed at convincing uneasy Labor MPs to help him defeat the tax, but tonight a group of
Government backbenchers from mining seats are standing firm behind the Prime Minister.

They've issued a statement expressing full support for the controversial carbon plan, part of a
political struggle that's assuming all the proportions of an election campaign.

Here's our political correspondent Tom Iggulden in Canberra.

JULIA GILLARD, PRIME MINISTER: Effectively, the starter's gun has gone off.

TOM IGGULDEN, REPORTER: The Prime Minister's got a year to make her unpopular carbon tax a reality.

Today her campaign machine swung into action in suburban Sydney.

Once inside, the biscuits were waiting; so was the media. And a made-for-TV family chat.

There wasn't much chance of an upset.

VOTER: I mean, I suppose I grew up in a Labor family, but that hasn't - that doesn't mean I need to
vote that way.

TOM IGGULDEN: At the local shopping centre, an unscripted vote of support.

MAN: Julia! Julia! Good on you for the carbon tax. Well done with the carbon tax.

JULIA GILLARD: Thank you!

TOM IGGULDEN: Her main selling point's income tax cuts to offset increased prices caused by the
carbon tax. Four million low income earners will be overcompensated.

Middle income earners get a smaller tax cut.

JULIA GILLARD: Around six million households will come out effectively square.

TOM IGGULDEN: For the rest, family budgets will take a hit, but the Prime Minister says they can
afford it.

JULIA GILLARD: That's what it's all about. It's all about taking pollution out of our atmosphere
because that is driving global warming, dangerous global warming.

TONY ABBOTT, OPPOSITION LEADER: This is an attack on aspiration. This is an attack on the
aspirational classes of our country.

TOM IGGULDEN: Tony Abbott's media strategy's been the same for months. Today he was back in a coal
mine in a Labor electorate.

TONY ABBOTT: I know many of you guys probably in the past have not thought all that much of the
Coalition.

TOM IGGULDEN: He's hoping to change that through his pledge to destroy the carbon tax.

TONY ABBOTT: I mean, I have dedicated my political life, whatever's left of it, to stoping this
carbon tax.

BARNABY JOYCE, NATIONALS SENATOR: You know the Greens want to close down all coal mines? OK. That's
fair dinkum, you've seen it, they've said it. That means nobody in this room's got a job.

TOM IGGULDEN: The emissions-intensive steel industry's also in Labor heartland and the Government
wants a support package for it.

BOB BROWN, GREENS LEADER: Difficult situation for the Greens, because the steel industry's not
been, um, one of our biggest supporters.

TOM IGGULDEN: But the Greens Leader's indicating he might support the package anyway.

BOB BROWN: And I'm saying this to Tony Abbott: if you're going to let down that part of your own
constituency, I'll go to the steel industry, I'll go Whyalla, I'll go to Wollongong, I'll go to
meet the workers in the steel industry.

TONY ABBOTT: Let's put the boot on the other foot: will Julia Gillard be going to Whyalla? Will
Julia Gillard be going to Port Kembla? I'll tell you where she'll be going. She'll be going to
university campuses, that's where she'll be going.

TOM IGGULDEN: But Wayne Swan chose a different location.

WAYNE SWAN, TREASURER: Fired the starter's gun on getting the investment into renewable energy so
we can develop the solar, the wind, geothermal energy ...

TOM IGGULDEN: The Treasurer's gone back on previous statements that the carbon tax would be revenue
neutral.

WAYNE SWAN: There are upfront costs, but through the surplus years there's a minor pull on the
surplus.

JOE HOCKEY, SHADOW TREASURER: This man is not fit to be the Treasurer! He can't count!

TOM IGGULDEN: That one got the crowd baying for more.

AUDIENCE MEMBER: What is the Coalition going to do to try and stop the people of Australia taking
up arms against this government?

JOE HOCKEY: I can perfectly understand your anger, but we are a peace-loving nation.

TOM IGGULDEN: And no day of campaigning would be complete without a gaffe, this one from one of the
government's better performers.

PENNY WONG, FINANCE MINISTER: So that's the answer.

ABC RADIO COMPERE: OK, how much will you raise?

PENNY WONG: I think it's about $18 billion from memory, over the forwards.

CHRISTOPHER PYNE, LIBERALS: Are you sure it's not $21 billion?

PENNY WONG: 21. He might be right.

CHRISTOPHER PYNE: It's $21 billion, John. I'm not the Finance Minister, but ...

ABC RADIO COMPERE: OK.

PENNY WONG: The net hit ...

CHRISTOPHER PYNE: ... I read the document.

TOM IGGULDEN: It's actually closer to $25 billion, but who's counting? This battle-to-the-death
debate will come down to whether or not voters will be convinced that the Government's plan will
clean up the atmosphere without costing them their job or a significant slice of their income.

Tom Iggulden, Lateline.

The tax will cut emissions: Wood

ALI MOORE, PRESENTER: Joining us now in the studio is Tony Wood, the energy program director at the
Grattan Institute.

In recent years Tony Wood has worked with the Clinton Foundation and Ross Garnaut. Prior to that he
was with Origin Energy.

Tony Wood, welcome.

TONY WOOD, ENERGY PROGRAM DIRECTOR, GRATTAN INSTITUTE: Thank you.

ALI MOORE: Well I guess the real question is the one that Tom just put at the end of his package.
You've done the analysis; will the carbon tax cut emissions as promised without hurting the
economy?

TONY WOOD: It will cut emissions as promised. I think the way the scheme's been designed actually
underwrites that particular promise quite successfully. And as many people have said, the economy
will continue to grow, jobs'll be created and generally speaking people will survive this. It'll be
actually a strong economy growing for - into the future.

ALI MOORE: We should clarify though, shouldn't we, that although it will cut emissions, emissions
will still go up, won't they? They're gonna be higher by 2020, just not as high as they would've
been without the tax?

TONY WOOD: That's in Australia. Australia's emissions will be higher under the projections of the
Treasury. But we will also be effectively counting emissions against our target from the permits
that we buy overseas. And if it's cheaper to do it overseas, then it makes a good idea - good for
the environment and good economically as well.

ALI MOORE: I want to look at those overseas permits in a minute. But what about compensation,
especially to business? We know that the $1.3 billion for the coal industry is unlikely to win the
support of the Greens. Is the compensation too generous?

TONY WOOD: Well in our view, much of the compensation was too generous.

I think it's very important that it's demonstrated that there's a good case for compensation. So
for example, the core case for compensation is that if it affects an industry in Australia such
that all that happens is the carbon goes overseas, then that obviously doesn't improve the
environment at all and affects the economy.

Now that test is very important, and clearly, certain industries such as steel, cement, almost
certainly pass that test and that would be clearly recognised.

At the same time there are other industries where it's far more questionable and it's going to be
very important that the role of the Productivity Commission, which is defined in the program, in
the package, is very clearly defined and such that the Productivity Commission actually will review
these compensation arrangements and ensure that they are justified and continue if they are, but if
they're not, that they're phased out.

ALI MOORE: Where do you see that they're not justified at this point?

TONY WOOD: Well I think it's very easy to say, for example, that if we shut down one of our coal
mines or one of our gassy - our high CO2 gas fields, that it'd be replaced by something dirtier
overseas.

Well it's not obvious.

It could be that way, but it also could be that a coal mine in Australia with high CO2 emissions is
replaced by a coal mine somewhere else with low CO2 emissions. Therefore, I think it's the case
that most - some of those industries haven't demonstrated that the carbon leakage argument applies.

Now if they can, of course they should get the same treatment as the other industries I mentioned.

ALI MOORE: So what do we make of the cries of agony from the coal industry, because at the same
time as we hear them, we have others like Bob Brown saying coal will actually grow?

TONY WOOD: Well, in 1853, Charles Dickens wrote about the millers of Coketown who complained that
if they were threatened with having to reduce their smoke, that they would throw their equipment
into the ocean. And patriotically, they never did.

So I think at times there are people who cry wolf when in fact the impact is going to be far less
than they would claim.

ALI MOORE: At the same time though of course, some will close. I mean, the Government is going to
pay some stations, most people assume Hazelwood in Victoria will be the first one. Do you support
that as a way to get some of these really big polluters off the scene quickly?

TONY WOOD: Well I think if the carbon price does its job, then those big polluters would
progressively be withdrawn anyway. So it's difficult to see why you would justify paying them to do
such a thing.

ALI MOORE: But at $23 a tonne, how quickly? I mean, I would've thought something like Hazelwood
would possibly still stay around for quite a long time.

TONY WOOD: Quite possibly. But the issue (inaudible) to be our emissions reduction. And if we are,
without Hazelwood shutting down, what's the problem?

And if it's necessary for Hazelwood to shut down to meet that target, then, the carbon price, which
is rising, would cause Hazelwood to shut down.

So, it's difficult to see why the extra payment to Hazelwood to shut down, or anybody else to shut
down - it may not be Hazelwood - is necessary or justified. And all that means is some of these
compensation mechanisms have added to the cost of the whole package and probably why the overall
package is therefore over budget.

ALI MOORE: Will this drive investment in renewables? Because of course the big difference between
this and the CPRS is the $10 billion that's going to the Clean Energy Finance Corporation.

The aim there is to encourage commercial investments through loans and loan guarantees. Is it
anything more than picking winners?

TONY WOOD: If it's designed well, it should not be. There has been some evidence in the past, and
the Grattan Institute has done some analysis on that and demonstrated that many of these programs
are ...

ALI MOORE: Well in fact most of these programs, really.

TONY WOOD: Yeah, almost all of them. And this is by the way not unique to Australia. This is around
the world that these programs are not very good at picking winners, governments are not very good
at picking winners.

And in many cases, the projects that have been selected don't even actually go ahead and the money
doesn't even get spent. So, there's some problems with these.

Now, it's true to say I think that the flexibility that's provided under this new corporation by
way of loan guarantees or other financial engineering could actually be more successful.

It's not yet clear whether that is being taken up in the design of this program, and the devil will
definitely be in the detail as to whether that will work or not. Now, clearly new technologies are
absolutely essential.

ALI MOORE: But is it right that if you didn't have a fund like this, $23 a tonne is not gonna drive
that investment?

TONY WOOD: No, it wouldn't. It would be very slow and it would take a lot higher carbon price to
cause some of those investments to occur over time.

ALI MOORE: Going back to international permits, once the tax becomes a trading scheme, companies
can access the international market, I think up till 2020 for 50 per cent of their permits.

What happens if when that transition happens, the global market for permits or the global market
for carbon has collapsed? Does that mean that all the investment that was designed to drive change
here will simply go offshore where people will buy cheaper abatement?

TONY WOOD: I guess the question might be as to what would cause the global market to collapse. I
mean, markets collapse for good reasons.

ALI MOORE: Like a GFC, for example?

TONY WOOD: Well, for example, yes. So if it turns out the Europeans because their - or some other
part of the world doesn't need to do any further abatement because their economies collapsed and
they're not producing any emissions, it might make sense in certain circumstances for that to be
done.

Now, that would be difficult to imagine. I think the real issue's going to be: how do we make sure
that when we link with these international schemes that they have very high levels of integrity?
And we would clearly be insisting through our process that they do.

So you could imagine linking with the New Zealand scheme or linking with EU scheme. And price
volatility is not a market failing. Often price volatility is the market actually working.

ALI MOORE: A final question, and I guess, again, one of the biggest questions about this is: will
it last long enough to make a difference? Tony Abbott of course is committed to repealing it.

TONY WOOD: Well, that will be the in the hands of the politicians. Clearly, the world is starting
to move on this issue; Australia is part of that process. We have been for some while, and now
we've adopted a much more formal structure to the process. We've set out on a journey. The ship has
been created and we can set sail.

ALI MOORE: And indeed, would it be like unscrambling an egg once it's put in place?

TONY WOOD: Largely. I mean, when you think about the complexity of what's being put in place
progressively, it will be quite difficult to - and you would wonder whether or not a future
government would actually do so, recognising that many of the things that the Opposition currently
proposes - if they are, for example, less than $23 a tonne, then they'll be done. And so some of
those direct actions will actually occur under this scheme as well.

ALI MOORE: Tony Wood, many thanks for joining us.

Business leaders divided over tax

ALI MOORE, PRESENTER: A number of the nation's most prominent resources figures told an Asian
energy conference in Perth today that the carbon tax could jeopardise Australia's relations in the
region.

But in Victoria, the head of one of the bigger polluters was more accepting.

Hamish Fitzsimmons reports.

HAMISH FITZSIMMONS, REPORTER: In Perth the new tax was on the mind of one of Australia's most
powerful figures at this Boao regional energy conference. Mining and now media player Gina Rinehart
says staying competitive and maintaining good relations in the region isn't going to be helped by a
carbon tax.

GINA RINEHART, HANCOCK PROSPECTING: To do that we have to keep ourselves earning that position, we
have to keep ourselves cost-competitive. Things like MRRT and carbon tax hurt.

HAMISH FITZSIMMONS: The mining state's premier agrees and says supplies to resources-hungry
neighbours mustn't be compromised.

COLIN BARNETT, WEST AUSTRALIAN PREMIER: That has been to some extent jeopardised over the last year
or so. I hope now we can have stability in the relationship. That is what the Chinese, the
Japanese, the Koreans and the Indians are looking for.

HAMISH FITZSIMMONS: Airlines were also quick to react to the news that the tax would apply to
aviation fuel on domestic routes. Qantas, Virgin and Rex all said any costs from the carbon tax
will be passed onto the consumer and fares will rise.

And in Victoria, one of the companies that will certainly be affected by the tax was more
circumspect.

IAN NETHERCOTE, LOY YANG POWER CEO: There's certainly some good aspects to it that provide us with
some early levels of certainty in the earlier years or in the fixed price period. And then
obviously there's some concerns about what happens post that.

HAMISH FITZSIMMONS: Loy Yang Power generates a third of the state's electricity with its 2,200
megawatt station in the La Trobe Valley, which is fed by its adjacent brown coal mine.

It's one of the companies that will receive federal money to offset effects of the tax. And its
chief executive believes the station will make the leap from coal to gas and renewable
technologies, but that it won't be easy or cheap.

IAN NETHERCOTE: I think it will be very difficult if not impossible to implement those technologies
at a commercial scale, without having significant assistance from state, federal governments and
industry alike.

HAMISH FITZSIMMONS: And for those literally at the coal-face in this era of transition like Loy
Yang mine worker Neville Darragh, the future is an uncertain one. He's seen the privatisation of
Victoria's power industry in the 1990s which led to an increase in unemployment and depression in
the region.

NEVILLE DARRAGH, LATROBE VALLEY POWER WORKER: After that, we sat back and watched the valley
crumble. We had massive problems here because once people's livelihoods went away, stable families
then become unstable. We went right down the track where suicides went through the roof.

HAMISH FITZSIMMONS: And while there is pessimism, there is still hope.

NEVILLE DARRAGH: The valley has got a future in different areas that hopefully maybe my grandkids
might get a chance of getting a job and all the other people around the area, because even though
it's a bit of a wet, cold place, it's not a bad place to live.

HAMISH FITZSIMMONS: Hamish Fitzsimmons, Lateline.

Global warming will threaten food security: CSIRO

ALI MOORE, PRESENTER: If the federal and other international governments meet their targets to
reduce greenhouse gas emissions, there's still likely to be a global temperature increase of around
four degrees by the end of the century, according to leading client scientists meeting in Melbourne
tomorrow.

That's double the increase most scientists believe is safe for humanity.

And a new paper by the CSIRO says Australia's ability to feed itself could be under threat by as
early of 2050 as the face of agriculture is dramatically transformed.

Margot O'Neill reports.

MARGOT O'NEILL, REPORTER: Australia's golden wheat belt, stretching from west Australia to central
Queensland, is set to shrink as it chases retreating rainfall to the nation's coastline, slashing
productivity by up to 40 per cent.

If climate scientists are right, it's just one of the dramatic transformations that'll hit food
production as temperatures heat up inland Australia.

MARK HOWDEN, CSIRO CLIMATE ADAPTATION FLAGSHIP: It's because there's a realisation now with the
trajectories of greenhouse gas emissions that we're going on that it's unlikely we're going to be
able to stop temperature increasing by only two degrees and it could well go up to four degrees or
more.

Already with only 0.8 degrees Celsius increase in temperature, we've already seen significant
impacts.

MARGOT O'NEILL: The CSIRO's Dr Mark Howden specialises in climate adaptation. In a paper to be
released this week, he says projected drying of the continent in many regions plus population
growth could see Australia become a net importer not only of fruit and vegetables but of wheat by
2050.

The nation's ability to feed itself will be no longer guaranteed.

MARK HOWDEN: I don't think we can take for granted that we're going to have an excess of food in
terms of supply exceeding demand, domestic demand. And that means not only will we become less food
secure, but we also will have less to export and earn external dollars from.

It doesn't mean we'll starve, because obviously if we earn enough money from other industries we
can buy that food from other places.

MARGOT O'NEILL: Grain growers will be in a tight race with fruit and veggie growers for
high-rainfall land with cooler temperatures near the coast and are also likely to clash with urban
sprawl if the nation's population reaches upper projections of 62 million by the end of the
century.

MARK HOWDEN: And also, if we're to start to do biofuels or carbon sequestration in a large scale,
then that also competes with agricultural land. And so the prospects for significant increase in
agriculture in those high rainfall areas are quite limited.

MARGOT O'NEILL: Australian farms will be among the hardest hit in the world, with forecast
productivity across all categories down 17 per cent by 2050. Dr Howden says when four degrees is
reached, some agriculture could be unrecognisable, like the dairy and rice industries, which could
face twice as many droughts, and the banana industry, which could be ravaged by more intense
cyclones.

Some vulnerable players are already looking to the future. Victoria's Brown Bros Wines has acquired
vineyards in Tasmania, where temperatures will stay cooler.

ROSS BROWN, BROWN BROS WINES: To make fine sparkling wine, it has to be very cold and very slow
ripening. Pinot noir's very similar to that. And those grape varieties on the mainland will really
be threatened by climate change.

And they're the two grape varieties that are actually seeing some of the largest growth in the
commercial market at the moment, so it was a pretty easy decision to come and look at Tasmania,
given those scenarios.

MARGOT O'NEILL: Ross Brown says the wine industry must act now.

ROSS BROWN: If this direction's not taken, the industry could well find itself on the back foot,
sort of 10 or 15 years down the track

MARGOT O'NEILL: New South Wales Liberals senator and farmer Bill Heffernan says farmers are doing
the best they can given recent extreme climate variability and that governments need to come up
with a long-term plan for food security.

BILL HEFFERNAN, LIBERAL SENATOR: At the two degrees increase in temperature that's predicted,
Australia will certainly have a dramatic new look. Now I'm not interested in what's causing all
this, nor getting into the debate on that. I am interested in how the human race is going to feed
itself in the future and making sure that we have the technology to allow that to occur. I mean, we
are talking huge problems in the future.

MARGOT O'NEILL: The Four Degrees conference at Melbourne University will also discuss how cities
can adapt to hotter and more extreme weather.

Margot O'Neill, Lateline.

Carbon price 'about right': King

ALI MOORE, PRESENTER: Joining us now in the studio is the managing director of Origin Energy, Grant
King, who helped advise the Government as part of the business roundtable and runs an energy
producer and retailer focused on gas and renewables.

Grant King, welcome to the program.

GRANT KING, MD, ORIGIN ENERGY AUSTRALIA: Thank you.

ALI MOORE: You were on the business roundtable, as I just said. You're also part of the Business
Council of Australia, which wanted a $10 carbon price. Did the Government get it right with $23?

GRANT KING: Look, I think the Government has struck a reasonable balance.

As we heard on the prior program, the community has got two quite strongly-held views, some that
want to see us make progress on reducing carbon emissions and some that are very concerned about
every dollar that they spend, and our customers tell us that as well.

So I think the carbon package, the carbon part of the package is in about the right place. It will
cause some change, not as quick as some would like, but that price together with the offsetting
measures I think is a reasonable package.

ALI MOORE: You talk about the package, because I know a couple of years ago you said - in fact more
recently than that - that if they wanted to achieve their five per cent cut in reductions on 2000
emissions by 2020 on price alone, you'd need a price in the $40-to-$60 category.

So you believe that there are enough other mitigating factors around that price to make it work?

GRANT KING: Yes. There's three phases. If you think about how to reduce carbon, there's sort of
three phases in the process.

The first is we have to change the capital that we're going to spend in the future, particularly to
generate energy. And in fact the very simple carbon scheme at a starting price of $1 would do that.
That would cause us to change the way we spend capital in the future.

If we want to change the way we use our current power stations and change the energy we use, change
the fuel we use and the way we use them, that's what this scheme will cause us to do and it will
start that process and it will accelerate the rate at which we reduce carbon emissions.

And of course, it we want to make even quicker changes, it would take a much, much higher price,
maybe $40 or $50, because we would need to retire assets that are already in production.

And I think that third phase is frankly beyond what we can tolerate and accept as a community in
terms of a carbon price necessary to do it.

And I think that's why we see one of the features of the scheme as a discussion with some
carbon-intensive generators as to whether we can withdraw them early from the system.

So I think that's a more sensible discussion to have. It would take a much higher price to move us
into the third phase of carbon reduction, to accelerate carbon reduction.

ALI MOORE: It's hard for people to I suppose get a handle on what it means when there are such
differing opinions.

And you're saying it's a reasonable place to start, but other companies, for example Rio Tinto,
they say it's going to hinder jobs growth, it's going to hinder investment and it's not really
going to have any impact on global emissions.

In fact they call it a "policy experiment". What we're hearing from the big coal miners; I mean,
how do we reconcile that what with you're saying? Are they scare-mongering?

GRANT KING: Well I think the reconciliation is a bit different than the question you've just asked.

In respect of households, I think households have been reasonably and sensibly dealt with. And as
the Government has said, more than 50 per cent of the revenue raised from the scheme will go to
household compensation.

Business is in quite a different position.

And two other features of the package - so we've got at the core of the package what will
ultimately be a carbon trading scheme - but around that package is some important elements that are
using the revenue that's raised, and two of those elements is how much money goes, for example, to
help research and development in renewable energy, and how much goes to assist business.

Now, in that respect I think there's a much bigger call being made about whether that
distributional aspect is right.

ALI MOORE: Do you think it's right?

GRANT KING: Well, right now a lot of money's going to renewables at the expense of helping business
make the transition, and that is an experiment.

There's no way of knowing whether the answer is right today in prospect.

But I think a very, very important part of the package that's announced is the review processes
which the Government's announced, particularly the Productivity Commission review.

And I think it's imperative that that first round of review, which I think is in 2014-'15, with
much more evidence on the table, looks very carefully at that question of: how have we made that
distributional choice, and have we got it right?

It would be a bad outcome for Australia if we got it wrong because we would disadvantage our
industries and it would perhaps commit us to a much higher cost in reducing carbon emissions.

So I think that that explains the difference in view. I think the Government has concentrated on
the household sector and I think got a reasonable outcome there. But business has been asked to
accept a cost of transition, which in the fullness of time may or may not prove to be right.

ALI MOORE: Do you believe some sectors in business though, as Tony Wood suggested, are crying wolf?

GRANT KING: Well, look, it's for each company to make its claim, and I would in respect of our own
business, I would say each company has the right to do so, it knows its own business - the steel
industry for example, the coal industry, the LNG industry in which we participate. I know our
numbers. And we believe for example the LNG has been short-changed in respect of that
distributional question: how much assistance do we get? That's a case for each company or each
sector to make.

ALI MOORE: Well, let's look at LNG, because you are part of this joint venture, building this
massive LNG project in Queensland. You'll be 50 per cent compensated, but of course your
international competitors don't pay a tax at all. Doesn't that bother you? All factored into the
business plan?

GRANT KING: Well, I think, as I said earlier, I think many elements of this package are reasonable;
I would say logical in the context of all the needs that have been satisfied.

But some elements of the package are a little bit ideological. And that's because there's a view
that some of our coal and gas, which are seen to be fossil fuels, should be discouraged at the
expense of renewable energy.

Now that's what I say - that's a big call to make that call, but part of that ideological view I
think is seeing the transitional assistance for LNG short of where it should be.

ALI MOORE: But does this hurt you? Does it make it uncompetitive?

GRANT KING: Again, that'll be tested in the fullness of time. The specific circumstance we're in is
we won't be in production till 2015-2016. That will be after the first review period.

We'll know what's happening - or we'll know more of what's happening in the rest of the world. So
that's a question that will need to be answered at that time.

But that's why I make the point very strongly that a part of the overall package is review
processes by an independent body, the Productivity Commission, which I think business has a degree
of confidence in, and it's imperative that those review processes are robust and can with the
knowledge of another couple of years revisit this question of whether that allocation is right.

ALI MOORE: Would you have liked to have seen some sort of commitment that government would have to
adopt a recommendation to the Productivity Commission reviews? Because at the moment of course,
they can be ignored?

GRANT KING: Yes, I would always like to see governments adopt sensibly-based conclusions, but I'd
be surprised if governments subordinated their responsibilities in that respect.

ALI MOORE: What was it like sitting around the business roundtable? I mean, was it - some try to go
the middle way. I assume that might have been where you were: the steel people over here yelling
one thing and the coal people over here yelling another? What was the whole process of consultation
like?

GRANT KING: I think you've made two observations, or those involved'd probably make two
observations.

Those that felt very strongly about the issues spoke strongly about the issues. And from both
industry and government side, strongly-held views were articulated, yes, I think with great
strength.

I think many of us in business would say in a forum where there's 40 or so people that meet for two
hours, that's not going to see any outcome or any decision made.

And I think the way to think about that round table process was that it did at least home in on
where some key issues were and did set up subsequent conversations that tried to work on the
details.

So, one of the features of this scheme now compared to 2009, the withdrawal of generation capacity.
So that was something that came out of those processes. And I think the additional assistance for
steel industry was something that you could say came out of those processes.

ALI MOORE: You could argue he who yells the loudest gets the most?

GRANT KING: I'd like to think that he who makes the most - or she, for that matter - who makes the
most cogent case is the one who - as I say, logic should prevail. It doesn't always, but logic
should prevail.

ALI MOORE: Well of course as we talked about earlier with Tony Wood, there's a $10 billion Clean
Energy Finance Corporation to encourage investment in renewables. Do you fear that this does amount
to picking winners?

GRANT KING: Well the literal description of that Clean Energy Finance Corporation in fact adds a
substantially important new feature, and that is a low-emissions component of that fund. And I
think in the language of it, it sort of implies that it's 50/50, actually. It's about 50 per cent
renewables and 50 per cent low emissions.

ALI MOORE: Clean.

GRANT KING: And that's a really important change, because in our view there's actually a lot of
easier choices to be made.

It isn't as - been as extreme as replacing coal-fired power stations with renewable energy ones. It
is about substituting the various fuels and technologies we have for more carbon-intensive to be
substituted with less carbon-intensive.

That's an important feature. I think it's important that the mechanism that's been used to bring
forward renewable energy, which is the renewable energy target, being a market-based mechanism,
will clear the most cost-competitive technologies, but it may not allow other technologies to
demonstrate what they can do.

Now, properly managed and administered - and it comes back to that same point: the right group of
people, the right government arrangements should be able to use such a fund for an appropriate
purpose, but that is nearly always a great challenge to do so.

ALI MOORE: Will renewables and clean energy in our lifetime replace baseload power?

GRANT KING: Well I'm hoping that I'll live for a very long time, but this will be a slow
transition. Because at the end of the day, I know above all other things that our customers want a
reliable supply of energy as well and we're not willing to jeopardise the reliability and security
of our system, I think, for some other purpose.

So I think we want to - we do want to see a reasonable balance. We want to make progress in
de-carbonising our fuel, but we do want to preserve a reliable, competitive supply of energy for
our customers, so it will take a long time.

ALI MOORE: You've made a lot about the fact that this does at least provide some certainty for
business and certainly certainty for investment. A question I put to Tony Wood: do you worry,
though, that that certainty is not permanent given that the Opposition has vowed to repeal this
entire package?

GRANT KING: Yeah, look, that degree of uncertainty, that's a form of political uncertainty, I
guess.

ALI MOORE: But you have to deal with that.

GRANT KING: The scheme itself: should it be implemented, yeah, does says a lot more to us about the
sorts of technology society wants us to use. Look, we will have to sit back and make some judgments
about that.

I think the important thing to understand in our industry is we make decisions that take years to
implement. It takes five to 10 years to plan, permit, design, build and commission a power station.

So there's a little bit of time yet; that's a judgment we'll have to make. The legislation is
intended be in place and effective July next year. If that was to be the case then I think that's
the time we'll have to make that judgment.

The scheme itself does answer quite a few of the questions that we would want to know about what
sort of investments does society want us to make, but I accept that there is still a degree of
political uncertainty about that.

ALI MOORE: Do you believe that if it was passed, the legislation was passed, if it was put in
place, that it could be repealed, lock, stock and barrel?

GRANT KING: Um, look, I don't - so I think the simple answer to that question is if you're asking
one day after it's passed could it be changed, the answer's yes. The further we get into it, the
more complex the system has become, the more decisions that are being made based on that world, it
will be hard to unwind.

ALI MOORE: Grant King, many thanks for talking to Lateline tonight.

GRANT KING: Thank you.

Grant King, many thanks for talking to 'Lateline' tonight.

Thank

BSkyB bid jeopardised by phone hacking

ALI MOORE, PRESENTER: The fallout from the News of the World phone hacking scandal is making News
Limited's bid for full control of the British pay television channel BSkyB look increasingly shaky.

The Liberal Democrats leader and deputy prime minister, Nick Clegg, has called on Rupert Murdoch to
drop the bid.

And the politician who will give the final approval, culture secretary Jeremy Hunt, has written to
the communications competition regulator seeking new advice about the deal.

Europe correspondent Philip Williams reports.

PHILIP WILLIAMS, REPORTER: Everyone expected there'd be more and now there is. Fresh allegations a
member of the Royal protection force took money from the News of the World, presumably for
information about their charges.

The first convictions were over the hacking of Royal aides' phones. Former News of the World
reporter Paul McMullan appears to confirm the practices were commonplace.

JOURNALIST: You paid a policeman 30,000 pounds.

PAUL MCMULLAN, FMR NEWS OF THE WORLD DEPUTY FEATURES EDITOR: No, no; I paid someone who was looking
after someone's security who wasn't at that time - well, it doesn't really matter. I've actually
been told not to talk about specifics in case I implicate myself.

But that was the kind of money that was available for good stories. And the best story of all
throughout the '90s until she died was Princess Diana.

PHILIP WILLIAMS: A few hours ago the family of murdered schoolgirl Milly Dowler met with the deputy
prime minister, Nick Clegg, to pressure the Government for a comprehensive inquiry.

Milly's phone was hacked, giving her family false hope she was still alive. They want much more
from News International.

MARK LEWIS, DOWLER FAMILY LAWYER: They believe it is vital that the people responsible will be held
to account. There are very senior people who have to take responsibility for what happened in their
media organisations.

PHILIP WILLIAMS: And these are just two executives the Dowler family may have been talking about.

James Murdoch and Rebekah Brooks did not appear to be carrying a heavy weight as they emerged from
a Mayfair restaurant.

Earlier, Rupert Murdoch was making a very public statement, simply by being seen with Rebekah
Brooks. Asked what his priority was now, he said "This one," pointing to her.

But he also has another pet project: the takeover of broadcaster BSkyB. That is looking
increasingly shaky, with MPs lining up to urge a rethink.

NICK CLEGG, BRITISH DEPUTY PRIME MINISTER: Look how people feel about this. Look how the country
has reacted with revulsion to the revelations. So do the decent and sensible thing and reconsider,
think again about your bid for BSkyB.

ED MILIBAND, BRITISH OPPOSITION LEADER: The culture and practices at News International, following
the revelations last week, now look to be so widespread and so systemic that I think there is an
important question. And look, this ends up in a simple place, and a simple place is this: that I
won't rest until we ensure that this deal cannot go ahead until after criminal investigations are
complete.

PHILIP WILLIAMS: And the minister responsible for the final decision has referred the matter to
Ofcom, the communications competition regulator.

JEREMY HUNT, BRITISH CULTURE SECRETARY: The question is whether there are things there that are
relevant to the decision that I have to take, which is a merger decision. And what I have to look
at is concentration of media ownership, and that's what I want to seek independent advice on.

PHILIP WILLIAMS: If Rupert Murdoch proceeds despite all this opposition, he'll do so in the clear
knowledge he'll offend more than a few powerful people. He has a fearsome reputation for defying
all, but this may be even too big a hurdle for a man used to getting his way.

Philip Williams, Lateline.

US withholds $800 million from Pakistan

ALI MOORE, PRESENTER: The Obama administration is holding back $800 million in military aid to
Pakistan in retaliation for what the White House sees as Islamabad's failure to fully confront
extremists in the country.

Tension between the US and Pakistan has been escalating since the discovery of Osama bin Laden
hiding in a military garrison town near the capital, Islamabad.

The first big military push against militants since bin Laden's killing went ahead after Pakistan
began downgrading ties by expelling 100 US military trainers, putting limits on visas for other
American personnel and threatening to close the base used by the CIA to mount drone attacks on
militant targets.

In another sign of deteriorating relations, US military chief Admiral Mike Mullen suggested last
week that the Pakistani government had sanctioned the killing of a journalist.

The New York Times published claims that Saleem Shahzad was murdered by Pakistan's Inter-Services
Intelligence agency, or ISI, after reporting that Islamist extremists had infiltrated the military.

Qantas pilots vote for industrial action

ALI MOORE, PRESENTER: Qantas pilots are threatening to strike.

Long-haul pilots today voted overwhelmingly in favour of industrial action within the next 30 days.

They're angry that the airline won't guarantee that Australian-trained pilots will always crew
Qantas flights.

The pilots are yet to decide exactly what they'll do, but they haven't ruled out a two-day work
stoppage.

RICHARD WOODWARD, PILOTS ASSOCIATION: We're very conscious of disrupting the travelling public. We
don't intend to do that. It'd be an item of last resort. We actually would rather have management
negotiate.

ALI MOORE: Qantas says it's prepared to negotiate sensible and reasonable pay and conditions, but
it's described the pilots' demands as excessive and unsustainable.

If you want to look back at tonight's interviews with Grant king or Tony Wood or review any of our
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