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Transcript of interview with Fran Kelly: ABC Radio National Breakfast: 2 July 2012: carbon pricing



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THE HON GREG COMBET AM MP Minister for Climate Change and Energy Efficiency Minister for Industry and Innovation

TRANSCRIPT

GC 175/12

2 July 2012

TRANSCRIPT OF INTERVIEW WITH FRAN KELLY - ABC RADIO NATIONAL BREAKFAST

E & O E - PROOF ONLY

SUBJECT: Carbon pricing

E & O E - PROOF ONLY

KELLY: As of yesterday 294 of the nation’s biggest polluters will pay $23 for each tonne of CO2 they pump into the atmosphere. More than $24 billion will be raised and forty per cent of that money will spent shielding emissions intensive trade exposed industries like steel and aluminium. The rest will be used to compensate household for the 0.7 per cent in the cost of living which works out, according to Treasury, about $9.90 a week. According to the Treasurer ninety eight per cent of families up to an income of $150,000 will get some relief through tax cuts and increased family and welfare payments. More than half, mostly low income earners, will be over compensated, says the Government by up to twenty per cent.

The battle over the carbon tax will go all the way to the next election and if today’s Neilson poll is any guide the voters have already made up their minds. Two thirds of Australians are now opposed to a carbon price as opposition to the tax claims to its highest level in an over a year.

In this atmosphere we are joined by Climate Minister Greg Combet. Greg Combet welcome back to Breakfast.

COMBET: Thanks very much Fran.

KELLY: The money is flowing to Australians, it’s in the bank accounts...

COMBET: Yes.

KELLY: And yet it seems voters still don’t want your tax. Two thirds of Australians according to this Neilson poll don’t like it and about half think they’ll be worse off. They don’t believe you, they don’t by your tax - that’s the message isn’t it?

COMBET: Well I certainly accept we’ve got lots of work to do but I can assure you we intend to do it because it’s an important reform that the country needs to make. At a starting level we need to make our fair share, a fair contribution to international efforts to tackle climate

change. When you accept that responsibility and accept the science that’s telling us that we need to cut greenhouse gas emission it’s important to do it in the most cost effective way. And that is exactly what we are doing and as you said in your introduction all it involves is asking quite a finite group - certainly around 300 to 400 of the largest emitters of greenhouse gases in our economy to purchase a permit for every tonne of greenhouse gas they emit. There is a lot of support for the competitiveness of the industries that are trade exposed and very emissions intensive - support for the jobs in those industries. But around sixty per cent of the revenue is going to support households and the average assistance will be around $10.10 per week and as you said also that will mean millions of the lowest income household will be better off as this things start to flow, the pension increases start to flow, the tax cuts that started from yesterday.

One of the key reforms from this is that we’re taking the revenue paid by the largest polluters and using it to implement a significant income tax reform that will treble the tax free threshold from $6000 to $18,200 liberating 1 million people from having to pay tax and file a tax return and that will be a lot of low income earners, casual workers, part-timers, a lot women and the like and I think as the message gets through and we keep arguing our case I am sure we can win the support back.

KELLY: How long do you think that’ll take because you have been saying that, with respect, I think we’ve been talking to you on and off for the last twelve months now about this and you keep saying people will get it once they get the money in their bank accounts - they’re starting to get that - and the indicators are that the opposition to the tax is getting more

entrenched. How long do you think it will take?

COMBET: The important thing is that we’re moving from fiction to fact. Until now the debate has been held in a circumstance where the policy isn’t in place. A lot of claims have been made that are quite notorious - towns falling off the edge of the country and individuals industries destroyed, hundreds of thousands of jobs gone and unimaginable price increase. Now it can be tested against reality and we have always been confident about testing this policy against reality once it’s implemented so that the absurd claims that people like Tony Abbott have been making can be properly tested and I think the lived experience - Australians are practical people - the lived experience will be very important in the twelve months up to the next election.

KELLY: Australians are practical people. Do you think people, the message perhaps has got lost - there hasn’t been enough emphasis on reminding people on why Australia needs to do this - the environmental payoff for this?

COMBET: I think the debate will come back to that I am looking forward to it. I think, as I have had the opportunity to speak to others around the world that have been introducing carbon pricing, particularly in a democracy where it is debated, it has often been remarked to me that the debate comes back down to the impact on the cost of living and on jobs and you got to fight your way through that argument and get the policy implemented and ensure people can

experience it. And the debate ultimately returns to why are we doing it and will it be environmentally effective and we are very confident it is because despite all the debate about a carbon tax it is actually an emissions trading scheme that will put a cap on our greenhouse gas that we can work towards so that we can achieve a targeted emissions reduction by the year 2020 for example and that’s a very important feature of it and will be environmentally effective and it will mean in the year 2020 we will be taking the equivalent of 45 million cars off the road. Once people see that it is environmentally effective, it’s economically

responsible and manageable and we have implemented it in a socially fair and equitable way I think we can win this argument.

KELLY: At the moment we’re smack bank in a cost of living argument. Tony Abbott said yesterday that the carbon tax will quote ‘play havoc with household budgets, food, electricity, gas and the prices of essentials all go up’. The Government says he is fear mongering but he is

right, the prices will go up. He’s also right when he says some jobs will go because that’s the point for dirty carbon having to meet the targets - heavy carbon emitting industries will ultimately disappear and be replaced by clean energy industries.

COMBET: Can we take them one by one. First of all of course he is fear mongering. He has said the price increases will be unimaginable - unimaginable, beyond the capacity of human beings to consider. It’s actually less than one cent in the dollar, about the quarter of the GST coming into the economy and it’s only the top emitters of greenhouse gases that directly pay this obligation.

KELLY: You keep telling us that and people according to the latest polls just don’t believe it.

COMBET: Well let’s just see the lived experience. Tony Abbott’s has been claiming these things, people are fearful of it and now we will actually see. Did price go up in Coles and Woolies yesterday? No. Are electricity prices going up? Of course they’ve been going up for years, nothing to do with carbon pricing and only $3.30 per week - this has been confirmed by regulators around the different states, the carbon price impact on average is $3.30 and we’re providing on average cash assistance of $10.10 a week. People will now see that experience now coming through - they’ll be getting their tax cuts, pensions increases. And on the jobs front the effective carbon price on the trade exposed parts of the industry where they are companies like steel and aluminium - high emitters of greenhouse gases - we’re of course offsetting they’re liability by an average of around 94 per cent so that they’re carbon price is effectively a $1.30. They’ll still have an incentive, an important incentive to reduce they’re greenhouse gas emissions but we are supporting jobs. I’ve spent most of my life as a trade union official representing working people and what I have done in designing this and the Government has done is ensure we are underpinning the competiveness of those industries, ensuring there is an incentive there for them to improve their efficiency and cut their emissions but supporting working people jobs and it’s a very important feature of it. And this change will take place gradually over time.

KELLY: And just a case in point really of the message not getting out or people not buying the message. We’ve just a had a tweet from one listener saying this is the first time they’ve heard about the tax-free threshold tripling. So that message is not getting through. In fact that tripling of the tax-free threshold is not linked to carbon tax compensation, is it?

COMBET: That’s rubbish. It is completely funded by the implementation of the carbon price. We are taking the money of the purchasing of the permits by the largest polluters in the country, which number well under 500, and we are using that money to implement a massive income tax reform - a trebling of the tax-free threshold.

KELLY: So will people see that in their pay-packets in the next fortnight?

COMBET: Yes, all PAYE earners will start to see that and it’ll particularly provide a tax cut for people earning up to $80,000 a year. And that plus the family tax benefit increases are fundamentally why the Treasurer is able to say that households, families, earning up to $150,000 will receive assistance.

KELLY: Okay. In terms of the immediate future, the Coalition had been warning of a cobra strike now they’re taking about a python squeeze. You say none of this will eventuate. What if jobs investments are lost, how far will you prepared to go in your words ‘tweaking’ this tax?

COMBET: We’ve done a lot of work in designing this. For example let’s take the Latrobe Valley about which has been a lot speculation because of the high emissions brown coal fired power stations. AGL just completed a purchase of one of those large brown coal power stations and French company that owns the Hazelwood Station and Lo Yang B Station in the Latrobe Valley they’ve just completed a $1.6 billion refinancing.

In the coal industry that Tony about said would be dead from yesterday - every job gone, it would die, it would never revive - there’s $100 billion of investment coming. Resources sector $400-500 billion investments coming. Unemployment is at 5 percent, the economy is growing at 4.3 per cent. We’ve got AAA credit ratings interests are coming down. I mean how much nonsense have we got to listen to and doom and gloom from Tony Abbott? And this is why I say it’s all garbage he has gone on with.

We will see as this reform settles down that there has been a lot hullaballoo about not much at all. It will environmentally effective, economically responsible and done in a social just and fair way. Just imagine how important it is for a Labor Government to treble the tax-free threshold so that the lowest income households in the country get a tax boost and that’s done by putting an incentive on the largest polluters to reduce their pollution. They’re very important policy goals at the core of this that people will start to see now that it is in place and as the weeks and months roll forward I can assure that I am going to argue the case as fiercely as I possibly can.

KELLY: Can we just go to the environmentally effectiveness of it because Tony Abbott is of course pledging axe the tax - to make that move from the first day of a Coalition elected government - but we heard earlier on the program from Andrew McIntosh, Director of the Centre Climate Law and Policy at the ANU, suggesting that neither a carbon tax or an ETS might be needed to reach the five percent target in emissions cuts by 2020. Let’s have a listen:

“McIntosh: According to my calculations we might have forty percent of our abatement task already in the bag up to 2020.

Presenter: And what does that do to the five percent target? Are we getting off it a little bit easy here?

McIntosh: It’s certainly making it a lot easier. A lot people have said in the past meeting a five percent target would be extremely difficult. It’s actually a lot easier than people think to achieve the five percent target”

Minister, is Andrew McIntosh right - are we forty percent on the way towards getting our carbon abatement in the bag for a five per cent target?

COMBET: Well I think, and this has been the experience internationally, that once you start these reforms and for particularly with emissions trading schemes, which is what we are implementing, other countries have found it easier than was expected to achieve the emissions reduction targets.

KELLY: Especially if half it has been done from other means.

COMBET: Well I noticed just one thing with my engagement with the business community over this issue and that is because of the reform has been coming a long time they have been thinking about and now that is coming in they’ve started making changes. A number of electricity generators have started to look to ways that they can improve the efficiency and improve the performance of their power stations so that for the same electricity output they reduce their pollution.

They’re other businesses for example landfill sites or settlement ponds at abattoirs where with existing quite simple technology you can capture their methane gas emissions and use it to generate electricity. People are starting to think about this which is the intention of the carbon price mechanism. And if it easier to achieve our five per cent target and may be quite feasible to have a look at greater reductions in greenhouse gas emissions at quite low cost. That’s why we have set up the Climate Change Authority, chaired by Reserve Bank Governor Bernie Fraser, to have a look at people like Andrew McIntosh’s research and provide Government with independent advice about the settings of the caps for pollution when the emissions trading scheme gets underway.

KELLY: What about, just finally, what about other settings cause business is already lobbying to dump carbon floor price of $15 to 2020. If there is a carbon windfall does it make it more attractive to go straight to a floating price with no floor.

COMBET: Well we have legislated for a fixed price period to get the thing set and also provides time to get the machinery for emissions trading scheme into place. So we’ve certainly committed to that. But the Climate Change Authority will have a look at what caps should be set. It’ll take effect from 2020 and that allows us to achieve year on year, targeted emissions reductions

KELLY: Okay, Greg Combet, thank you very much for joining us on Breakfast, I am sure we will be speaking more over the coming months.

COMBET: Good on you Fran, bye bye.

KELLY: Greg Combet is the Minister for Climate Change and Energy Efficiency.

ENDS