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Wednesday, 19 August 2009
Page: 5437

Senator WONG (Minister for Climate Change and Water) (4:34 PM) —I will very briefly respond to Senator Brown. I have outlined the legal situation as it is expressed in the bill and regulations in relation to native forest wood waste. It is not for the government to make any specific allocation in relation to particular firms. It is for the regulator under the bill to apply the law in accordance with the principles that I have outlined.

I thank Senator Abetz for his indication. In accordance with what has been agreed, I propose to read into Hansard a range of propositions that we have agreed with the opposition on in order to ensure passage of this bill, which is important to the government for a range of reasons, the first being that 20 per cent renewable energy by 2020 is a good outcome and the second being that it delivers on a Rudd government election commitment.

I thank the opposition for their engagement on this issue on their negotiation with the government and their willingness this week, unlike last week, to put up specific amendments. That enabled the negotiations to proceed. The only comment I would make is that it would have been courteous for the opposition to formally respond to the government about what was put to them before they announced at a press conference that they had agreed with it. But that is a matter for those conducting the negotiations. In general, these negotiations have been constructive and we thank the opposition for being prepared to walk into the room.

I propose now to go through a range of things which have been agreed and to read them into Hansard, given that Senator Abetz, on behalf of the opposition, has indicated their approach and withdrawn the amendments. The first matter concerns exemptions for industry. The government will replicate the industry assistance provisions from the Carbon Pollution Reduction Scheme for the purposes of the renewable energy target. The government will provide partial exemption to all activities that would qualify for the emissions-intensive trade-exposed assistance under the Carbon Pollution Reduction Scheme.

The government will use the same eligibility thresholds as under the CPRS, with partial exemptions of 90 and 60 per cent depending on the emission intensity of the activity. The current criteria for determining eligibility under the CPRS has been robustly debated and extensively documented through the green paper, the white paper and the emission-intensive trade-exposed guidance document. Furthermore, the process has benefited from oversight by the Warburton committee. The need for a separate eligibility assessment process for activities that will provide partial exemptions under the renewable energy target will not be necessary.

As CPRS eligibility assessments are finalised, these will be used as the basis for determining eligibility under the renewable energy target and for preparing appropriate regulations. The government has also agreed that transitional arrangements will be subject to the recommendations of the 2014 review. I say on this that the government is very pleased that the opposition has backed the industry assistance regime under the Carbon Pollution Reduction Scheme.

In relation to aluminium and other emissions-intensive trade-exposed activities, the government recognises that the increased cost associated with the expansion of the renewable energy target has two components. First, if the renewable energy certificate price increases above the level of around $40 then the increased renewable energy certificate price increases the cost impact of meeting the current mandatory renewable energy target liability of 9,500 gigawatt hours. Second, the higher annual targets under the expanded renewable energy target increase the costs associated with the RET.

Accordingly, following the passage of the CPRS, the government’s intention is to provide additional assistance under the renewable energy target for eligible emissions-intensive trade-exposed activities by adjusting the partial exemption rate to ensure that the same assistance rate—being either 90 per cent or 60 per cent—applies to the increase in costs associated with the expansion of the renewable energy target. In calculating the increased costs above the existing mandatory renewable energy target liability, the government will use a renewable energy certificate price of $40.

In relation to food processing, the government will extend the current potential review provisions under the Carbon Pollution Reduction Scheme—as set out in the white paper at section 12.7.4—to industries potentially affected by the renewable energy target once the renewable energy target has commenced. These arrangements allow firms, including those that do not qualify for industry assistance, to make representation to the government to request that the government commission the Productivity Commission to undertake an assessment of the renewable energy target’s impact on their industry. The government will not necessarily refer all requests to the commission; it will take into account the nature and details of the request.

The Productivity Commission will make an assessment of this industry’s circumstances, taking into account the range of factors unrelated to the scheme that will also affect the profitability of firms and industries, such as exchange rate movements, capital and labour costs, and commodity price movements. It will assess whether the introduction of the renewable energy target—including the assistance provided under the renewable energy target and Climate Change Action Fund assistance programs—will substantially adversely affect the industry in which the firm is located within the next five years, result in carbon leakage and be likely to result in the premature closure of an industry that would be likely to be competitive in a carbon constrained world. Taking into account all of the above, the commission will make recommendations to the government about whether it should provide additional support to this industry from the Climate Change Action Fund and the appropriate mechanism for that support.

In relation to heat pumps, the government agrees that certificates must only be created for the bona fide installation of a solar water heater intended to remain in its original configuration and location for the life of the unit. To ensure this, the government proposes that regulations be passed to require a statutory declaration to this effect from the purchaser and also a statutory declaration from the installer stating that the installed unit is appropriate for the intended use. In terms of the eligibility of heat pumps overall, COAG has agreed to examine further by the end of 2009 some of the eligibility provisions of the renewable energy target for new small-scale technologies, as well as heat pumps, to ensure that the eligibility rules remain relevant over time to reflect new technologies and recent developments in renewable technology.