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Tuesday, 11 August 2009
Page: 4551

Senator PAYNE (9:33 PM) —I begin by commending Senator Adams on her consideration of the potential impacts on the agricultural sector in this country by a scheme such as the one before the chamber tonight in the Carbon Pollution Reduction Scheme Bill 2009 and related suite of bills. The considerations that she raises are very important.

The CPRS legislation, in global terms, presents for the chamber and the parliament’s consideration the question of tackling climate change. I want to indicate that this is an issue that I take very seriously. I cannot be categorised in the disparaging way that those opposite have endeavoured to characterise others. That approach is perhaps not terribly constructive, but I guess that is their problem and not mine.

Climate change is best tackled from a position of economic strength. To effectively meet the huge cost of tackling greenhouse gas abatement requires a few fundamentals in place: people in jobs, businesses performing strongly and an economy in a state of growth. As a country that produces—as others among my colleagues have said—only 1.4 per cent of the world’s CO2 emissions, there is no Australian solution to climate change; there is, in reality, only a global solution. The design of any Australian emissions trading scheme must be responsive to the existence or absence of a global agreement. We see at the moment stark differences emerging between this government’s approach and the legislation endorsed by the President of the United States, Mr Barack Obama. Amendments that were made in May to the draft US emissions trading legislation include very specific provisions providing 100 per cent protection to US export and import competing industries in any future emissions trading scheme until 2025. What is more, that bill now says that a reduction in protection of these industries will only occur after 2025, when more than 70 per cent of global output from that sector is produced or manufactured in countries that have a scheme equivalent to that operating in the United States.

You would think that that would be a wake-up call for the Prime Minister and for Senator Wong. It is absolutely unclear to me why this government is so unwilling to acknowledge the importance of taking into account the United States scheme. A submission, for example, from BlueScope and OneSteel to the Senate Economics Legislation Committee on 4 June this year made exactly that point:

Given the global significance of the US, we believe that it is important to obtain a clear understanding of the design of the United States’ emissions trading scheme ... and to fully consider the implications of the US approach for the design of Australia’s CPRS.

If an emissions trading scheme does not take account of what is or is not happening in other countries, it will, by definition, end up flawed. It will also seriously damage the competitive position of many of our own industries and ultimately see Australian jobs, investment and CO2 emissions being exported to countries when no price is going to be imposed on carbon. It seems to me that a badly designed scheme is worse than no scheme at all.

Now, we were promised by the now Prime Minister, before the election, that there would be an introduction of an emissions trading scheme which would produce deep cuts in CO2 emissions but would not disadvantage Australia’s export- and import-competing industries. The fact is, though, that that promise has not been fulfilled and the government’s scheme is in disarray. It is in disarray because it has been rushed to suit a cravenly political timetable. It is in disarray because the design is not flexible enough to cope with the global financial downturn and fails on all counts. It is in disarray because it will cost jobs, kill investment and do very little, if anything, to reduce CO2 emissions.

It is reckless in the extreme to rush the introduction of this scheme without knowing the outcome of the December global climate change summit in Copenhagen, without knowing what the United States will do and without knowing the full impact of the global financial crisis on our real economy. And when we do look at the international scenario we see that the government seems to be taking great pleasure in inferring that around the world a great deal of action is taking place on emissions trading schemes. But the evidence actually does not add up. Of course, I have already noted that the United States scheme is currently under development, and even individual states’ schemes in the United States have not advanced very far—mostly because community focus has shifted to the impact of the global financial crisis.

The Canadian scheme, for example, has been put on hold while they wait and see what the US does. And in Europe effectively it is little more than a pilot scheme so far. They require business to purchase from the government at auction just four per cent of permits. In contrast, what this government will require is for business to purchase 70 per cent of permits, while the United States administration is looking at a requirement that business purchase 15 per cent of permits. So in terms of setting the price on carbon there is very little in place, or even in advanced planning stages, as far as this issue is concerned, in the rest of the world.

So, under the design of the government’s proposed scheme we would be taking a major leap in comparison with the rest of the world. And our very great concern, which has been articulated so effectively by a number of my colleagues, is that the Rudd government has deliberately ignored the impact of this proposed scheme on Australia’s competitiveness and on jobs in the first years of transition if our major competitors do not reciprocate. The design of the scheme assumes that Australia’s major competitors will move to put in place a major new tax on carbon across their own economies, including their export- and import-competing industries, in the early years of the scheme. In fact, the government seems to have assumed that the United States would introduce an equivalent scheme by 2010, China by 2015 and India by 2020. But none of this is remotely possible. Let us suppose that China, India, Indonesia, the countries of the Middle East and South America and other competing developing countries do not apply a tax on carbon for 15 years or 20 years or even longer; we cannot even rely on Treasury for modelling of alternative scenarios or methods.

So all we have before us is a self-serving, misleading and irresponsible exercise, and that is before we even get to contemplate the costs of this proposed ETS. For most Australian families it seems that the annual tax that the government will impose, through this scheme, on electricity and other energy intensive companies, will result in a 30 per cent to 40 per cent rise in power bills, and, indirectly, in increases in the price of most services and items purchased. There will be significant added direct and indirect tax on agricultural and manufacturing businesses, which are competing against foreign products where no such tax now applies.

What is even more concerning is the potential for tens of thousands of jobs to be put at risk, the permanent and serious shrinkage of major regional centres—both Senator Adams and Senator Nash have referred to that this evening—and the loss of major investments. But this has been for what gain in terms of the impact on CO2 emissions? Possibly little or none. One $4 billion proposed investment in my own state of New South Wales to extend an aluminium smelter at Kurri Kurri in the Hunter Valley will be shelved. That decision alone will see the loss of 15,000 construction jobs and 3,000 permanent jobs.

I said earlier that on any reading this proposal before the Senate is in disarray. It does not even adequately encourage complementary measures. The way it is currently designed means that actions that individual Australians or families take to reduce emissions will not do anything to reduce the overall output of greenhouse gases—it will just allow more emissions by industry up to the cap. Areas such as agriculture and our huge commercial building sector are effectively ignored as sources of abatement.

The government has argued—I heard Senator Wortley doing this earlier—that pushing this legislation through the parliament will give business certainty. Well, it seems to me that what businesses want is a scheme which preserves their international competitive position, not the certainty of being fundamentally unable to compete. As Anglo Coal Australia Chief Executive Officer Seamus French has said, certainty is not preferable to getting the design right for business. He said:

We don’t want the certainty of a bullet.

The government’s claims that their flawed emissions trading legislation needs to be rushed through the parliament have also been undermined by the executive secretary of the UN Framework Convention on Climate Change, Yvo de Boer, who revealed that the UN does not require countries to have legislation in place before the Copenhagen meeting. This view has received further support from Jonathan Pershing, US Deputy Special Envoy for Climate Change, who indicated that US legislation may not be passed by the time of the Copenhagen meeting. He said:

... it does not block a deal. You can have a deal without having the legislation.

As we have been saying repeatedly, Australia needs to go to the UN conference with a united position on targets, not a flawed scheme for the sake of some personal aggrandisement of the Prime Minister and the Minister for Climate Change and Water.

In the end, it seems to me that the only certainty that we have with regard to this scheme—the certainty that senators on the other side have spoken about—is that it will certainly produce job losses. Over recent months, corporation after corporation have publicly recorded the cost of this proposed scheme in terms of lost jobs. A number of those have been cited in the chamber again today. The Minerals Council has found that over 66,000 jobs will be lost or foregone. BlueScope and OneSteel say that hundreds of jobs would be lost across the country, and the 12,000 jobs that the Port Kembla steelworks supports in my own state would be under threat. And as was discussed in question time today, through my questions to the minister, even the Labor Treasurer of New South Wales, Mr Eric Roozendaal, is concerned about the effects of the scheme—the risk to jobs and the need to ameliorate risk, not to go headlong into the scheme that the government has before the parliament at the moment.

Let me be absolutely clear about one thing. I support and the coalition supports—and we supported it when in government—an environmentally-responsible ETS as part of a coordinated global response to climate change. It is our strong view that the design of the Australian ETS should be completed only after the passage of the US legislation through the congress and after the conclusion of the Copenhagen climate summit in December. Every other political party, conveniently ignored by speakers on the other side, and every other interested group with any credibility—except, apparently, the government—knows that this ETS legislation is flawed and it needs to be improved if we are to save jobs and protect small business and industry in Australia; prevent carbon leakage, which will only frustrate any net global CO2 abatement; and have a decent scheme in place.

The coalition has again and again endeavoured to find a better outcome on this legislation in the event that the Prime Minister remains determined to force through an early vote. Firstly, we set out nine principal issues that need to be addressed in Labor’s scheme for the coalition to support it, including, fundamentally, the principle that an Australian ETS should offer no less protection for jobs, small business and industry than an American ETS does for American jobs, small business and industry. The principles that the coalition has set out are practical and clear. They will ensure an effective Australian ETS scheme which protects jobs and industry and which could be converted, if there were a willingness to constructively engage on the other side, into appropriate amendments for legislation. But from the very start there has been an abject refusal to consider anything like that. They have adopted a take-it-or-leave-it approach, and that intransigence will ultimately cost this nation.

Faced with that and faced with the refusal to even discuss alternative views, the coalition together with Senator Xenophon—as he alluded to in his remarks this evening—commissioned independent economic research by Frontier Economics to measure the real impact of the scheme. The results, released yesterday, are compelling. They show that this emissions trading scheme will, effectively, unnecessarily drive up electricity prices, destroy jobs and expand the size of government. They make it clear that the government should recognise the flaws in this CPRS legislation and begin constructive engagement with the coalition, minor party senators and other stakeholders to design a more effective scheme.

In fact, with the changes that are proposed within the research to which I have referred, the CPRS could actually be made twice as green, with a much lower cost to consumers and the economy and a net improvement of 68,000 regional jobs. It could deliver an unconditional 10 per cent reduction in Australia’s 2000 greenhouse gas emissions by 2020, compared to the government’s five per cent unconditional target. By treating the electricity generation sector in a less punitive manner, household power bills would rise not by the extraordinary amount that the government’s scheme will produce but only by about five per cent in the near term. Five years into the scheme, average annual household power bills would only be around $44 higher, compared with the potential for $280 under the CPRS, based on this research. For regional Australia, the government’s scheme would cost 26,000 jobs; Frontier Economics’ proposed changes would lead to net gains of 42,000 regional jobs. Overall, the cost to the Australian economy over the next 20 years in net present value terms could be reduced by about a third. They are relatively modest proposed changes, and with them the ETS could be made far less harmful to jobs, to investment, to the regions and to the Australian economy and so, importantly, have a much more positive impact on the Australian environment.

On any assessment, the design of the Rudd scheme fails on all counts. It will cost jobs, kill investment and, frustratingly, do very little—this is such an important point—to reduce CO2 emissions. We believe that it would be premature to lock Australia into an emissions trading scheme that was out of step with the rest of the world, given that the next international climate change conference in Copenhagen is only a few short months away and given that the United States administration and the congress are well advanced in finalising US legislation for an ETS. Why wouldn’t we defer this consideration until after the Copenhagen meeting? But the government appears determined to push this through. If the government does not defer this, it will be choosing to create unemployment. It will be choosing to vote against Australian jobs, against the Australian economy and ultimately against the Australian environment.