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Monday, 7 November 2011
Page: 8415


Senator XENOPHON (South Australia) (20:48): by leave—I have a series of amendments to move and I would like to get on with it and move them together. I know that time is short because the debate has been truncated, which is very unfortunate—

An opposition senator: Gagged.

Senator XENOPHON: 'Gagged' would be a good word, but I have to make the best of a very bad situation. I move amendments (2) and (3) on sheet 7165:

(2)   Clause 3, page 5 (before line 14), before subparagraph (c)(i), insert:

(ia)   take action directed towards reducing Australia's net greenhouse gas emissions to at least 10% below 2000 levels by 2020; and

(3)   Clause 3, page 5 (line 17), omit "that action", substitute "those actions".

I will be ruthlessly efficient with these amendments because I know time is incredi­bly short. These amendments introduce a target reduction of emissions to 10 per cent less than 2000 levels by 2020. Under the government's legislation, the only specified target is a reduction to 80 per cent below 2000 levels by 2050, but we have heard earlier today that the amendments will lead to a five per cent target by 2020. It is important to note that this target is more ambitious than the government's own target. It is important to note that this target is based on modelling undertaken by Frontier Economics, commissioned by me and the opposition back in 2009, showing that there is an alternative approach that is more economically efficient and can achieve this target of 10 per cent below 2000 levels by 2020.

Having said that, it is very important that any legislation that is of this significance to the economy must be dealt with in the context of giving the people of Australia a say on this issue. That is a non-negotiable position, from my point of view. But it is also important that we have a debate about the policy. My concern is that the coalition's Direct Action Plan just does not do that. It is a simplistic plan that will not deliver the best outcome in terms of reducing greenhouse gases and doing so in the most economically efficient way. An intensity based scheme will see economic cost savings because the scheme will result in lower energy price rises, and this will make the low-carbon transition more acceptable to consumers. Furthermore, through a range of additional efficiency initiatives, the Renewable Energy Target and a white certificate scheme, which I have amendments to introduce to establish, I believe that having a higher target will actually drive investment and drive supplementary emissions reduction targets to support it.

This is not a criticism, but I think it is interesting to note that, when this was being debated two years ago, the Greens moved for an unambiguous 25 per cent cut by 2020. I did not support that; I did support a 20 per cent cut based on Frontier Modelling data. But I think it is important to note that right now all this bill will deliver is a five per cent cut by 2020, and that to me is not satisfactory. I also want to make the follow­ing points. Frontier Economics used the same modellers, the Monash University Centre of Policy Studies, and the same model, the Monash Multi-Regional Forecast­ing model. What has been modelled here means less impact on small businesses. The problem is that you have a situation where the big end of town, the big emitters, will be compensated but the small and medium enterprises will not. I do not believe the coalition's Direct Action Plan deals with that. We will see a massive spike in electricity prices. We will see enormous uncertainty, and my concern is that, if you do not push up prices as much, you do not need to compensate as much and as such you have less revenue churn, and less revenue churn is the key here to having an efficient scheme.

I think it is also worth noting that recycling involves a tax interaction effect. I would welcome a contribution in this debate from Senator Sinodinos, for instance, who has long experience in issues of policy in his former role as chief of staff to the Prime Minister's office in the Howard government. But I think it is very important that we look at the tax interaction effects. We also need to look at the impact that this will have on the small business sector. The small business sector will be hit very hard by this, and there is a better way of getting a much better outcome.

This is a fundamental issue. This is, in a sense, a litmus test about having an efficient scheme. The difficulty here is that this scheme involves a combination of carrot and stick. The government scheme seems to involve a lot more stick and less carrot. Once you recycle revenue, you will have distortions in the economy. You will have a situation where you will cause, I believe, significant damage given the design of this scheme, and I think we can do better. The Frontier scheme provides that way forward. I know the coalition will not be supporting it at this stage, but I ask that you keep your options open.

Senator Wong: They did for a brief period.

Senator XENOPHON: Sorry?

Senator Wong: For a brief period they did.

Senator XENOPHON: For a brief period they did—thank you, Senator Wong—but they walked away from it. But this is still good policy. Senator Wong admires me for my loyalty and she accuses me of my loyalty to Danny Price of Frontier Economics. But I am loyal to good public policy, and I think it is important that we put this in perspective. In terms of the breadth and magnitude of economic effects, this scheme is arguably the most significant policy change in Australia's history, and as such there is a substantial onus on the government to demonstrate that, whatever policy is introduced, it is the best that can be developed. I believe we have not done that in relation to this scheme. If we look at the distortionary effects of such a scheme and at the impact on taxes then I think we will see a significant flow-on effect on the economy which will be negative.

Let us look at what the Obama administra­tion proposed at the beginning of this year: having a clean energy standard. That is consistent with the Frontier scheme. That is consistent with a more efficient approach to achieving a better outcome. That is why I would urge my colleagues in the coalition to at least consider this—if not now, some other time. The fact is that the direct action scheme will not cut it. The direct action scheme will not provide the long-term benefits and a much more efficient way of dealing with this policy problem. But, again, I make it clear that I move these amendments against the backdrop of ensuring that the Australian people have a say before any such scheme is implemented.