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Transcript of interview with David Speers: Sky News, PM Agenda: 7 June 2011: carbon price policy

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


GC 161/11

7 June 2011




SPEERS: Greg Combet thanks for your time. The modelling that the Treasurer did talk about today that’s being done by Treasury, looks at, is based on a carbon price starting at $20 a tonne. But what level of household compensation is that also based on?

COMBET: Well what the modelling is fundamentally about is having a look at the macro-economic implications of a carbon price. So the first point - I’ll come to the household assistance in a minute - but the first point that the Treasurer is making is that at an example of a $20 a tonne carbon price, the economy will continue to grow, jobs will continue to grow and national income per person will continue to grow as well. And these are important macro-economic outcomes and I think may provide some assurance to people that, as Tony Abbott is trying to suggest in his scare campaign that the world’s going to end. It’s not going to end. The economy will still perform very very strongly.

As to the household assistance package that the Government’s committed to, we’ve of course said that at least half of the revenue from the carbon price will go towards assisting households, particularly pensioners, lower middle income households. We’re doing the design of the delivery of that package at the same time and when we’ve concluded all of the carbon price package in totality we’ll be able to present that to people.

SPEERS: But these assumptions from Treasury don’t actually involve any decision or model on where that compensation would cut out, what household income level it might cut out at.

COMBET: Well they make various assumptions about what might apply in a carbon pricing arrangement and those assumptions will be transparent when the modelling is released. But at a Government level we’ve got to do a range of policy design issues about how assistance can be delivered. That is through the tax and transfer system for example and how best to target the groups in society that need help the most and particularly obviously pensioners and lower middle income households.

SPEERS: Sure of course, but just another question though on this model though the Treasury has done. Starting at a price of $20 a tonne, going where by 2050, what would be the price by 2050, under this model?

COMBET: Well I’m not in a position to be laying all of that out. We’ve done all the modelling and we’ll release it with the package, you’ll get to see that -

SPEERS: But you’re being selective about, with what you’re talking about in this Treasury modelling. You’re saying the economy’s going to grow and everything’s going to be okay. Why can’t you tell us what the model’s going to be based on?

COMBET: All of the modelling hasn’t been finalised yet and the Treasury, that’s responsible for doing this modelling of course, will finalise that during the course of June.

SPEERS: But this modelling is based on an increasing price isn’t it?

COMBET: Well the model’s based on the framework that we’ve announced, that is an emissions trading scheme that will commence with a short period of a fixed price. That was in the framework we announced in February this year.

SPEERS: But just to be clear, it’s based on an increasing price that Treasury has modelled and you’re not willing to say or they haven’t actually ...

COMBET: No the framework. Well, the $20 per tonne carbon price the Treasurer was using as an example, would be an example of a starting price in the fixed price period. But once you get passed the fixed price period it’s the market, under an emissions trading scheme arrangement, that sets the price. And the price can move around as we’ve seen in emissions trading schemes overseas.

SPEERS: But does Treasury make an assumption?

COMBET: When the Treasury produces its modelling it will show what the expected price path will be at different scenarios if you like.

SPEERS: So it may not be the sort of economic impact that you’re talking about, it may be a bigger impact, it may be a less impact, depending on where that price goes.

COMBET: I think that what we’ll see is that on any carbon price scenario the economy is going to continue to grow well, jobs are going to continue to grow and national income per person will continue to grow also.

SPEERS: But the figures you and the Treasurer are talking about today really will depend on where that price goes. So it’s not iron clad that the economy will grow and income will grow by 1.1%.

COMBET: Well no, I’m assuring you that this is not going to be the end of the world as Tony Abbott is suggesting. Carbon pricing reform is a manageable reform, very manageable economic reform for us to make. But the intention at the end of the day of course is to make sure that we’ve got a continuing growth in our economy, continuing growth in living standards, continuing growth in employment and at the same time we’re reducing our

pollution levels. That’s what a market signal, a price tag on every tonne of pollution, is designed to achieve.

SPEERS: The Treasurer said today that the assistance, the household assistance will be permanent, but can you clarify as the price of carbon increases, will the assistance increase, or does it stay the same?

COMBET: Well, as was suggested under the CPRS if you remember in the last term of Parliament, there were regular reviews to ensure that the assistance to households was maintained at an appropriate level but the assistance was permanent, and of course we’re thinking along the same lines on this occasion.

SPEERS: So the assistance will continue to be more than half of the revenue raised?

COMBET: That would be our expectation yes. When we release the package we’ll be able to show in the coming years what that means.

SPEERS: You received the Productivity Commission report last week. This is looking at what the other countries are doing, whether Australia is in step or getting ahead of the rest of the world. It’s going to be released to the public on Thursday. Does it say that a carbon tax is the best way for Australia to go?

COMBET: Well of course I can’t pre-empt the release of that report, by an independent body, the Productivity Commission. But the Treasurer did make some remarks at the Press Club today indicating that it does clearly demonstrate that the lowest-cost way to achieve reductions in pollution across your economy is through a market mechanism -

SPEERS: There are many market mechanisms though -

COMBET: There’s a carbon tax or there’s an emission trading scheme are the two principle market mechanisms that can be used. There are many other climate change policies that are in operation in Australia and the economies of our trading partners, for example feed-in tariffs and subsidies for particular technologies, but our own experience is that those are more expensive ways of achieving reductions in pollution and of course you only achieve it one particular little area. Whereas what we’ve really got to achieve to make significant cuts in emissions over time is to achieve it across the economy. But most importantly it’s a reform that’s got to be done at lowest-cost to the economy. And something like Mr Abbott’s subsidies-for-polluters program, that won’t work environmentally, it won’t achieve the cuts in emissions, but it’ll cost a bomb.

SPEERS: We don’t need the Productivity Commission to tell us though the main countries that we compete with for exporting resources, countries like Canada, Brazil, Russia, don’t have a price on carbon at the moment.

COMBET: Well wait and have a look in the Productivity Commission’s report because any of these policies, that might subsidise solar panels or particular changes in electricity generation etcetera. They all implicitly involve a price for reducing levels of pollution, that is, they implicitly involve having a carbon price. It’s a subsidy and that can be at quite high cost to an economy. That’s really what the Productivity Commission has been asked to shed some light on.

SPEERS: Often at a low cost to and often at no cost to those industries that we’re trying to compete with.

COMBET: Well have a look at the Productivity Commission’s report when it comes out.

SPEERS: I’d like to.

COMBET: Yeah well you’ve only got a couple of days to wait.

SPEERS: And a final question, the Treasurer said today no decision has been taken on petrol. I know you’re still thrashing out details with the Greens here, but surely you’re not going to see the price of petrol go up?

COMBET: Well I think I’ve said to you and many others before that we’re very conscious of the issues about the price sensitivity of petrol. At the end of the day we need to get a package together through the Multi-Party Climate Change Committee and as in all negotiations really, it’s not a deal til everything’s in the deal.

SPEERS: The Greens are pretty upset though that you’re even talking about this Treasury modelling today because they haven’t seen it. Are they getting a bit too big for their boots?

COMBET: What I can say is that they’ve had a very good opportunity to be briefed about the Treasury modelling some time ago, so I think they’re across it as well as the rest of us are. But you know, at the end of the day this is a reform we’ve got to make. Tony Abbott’s running around again today at a Visy plant in Brisbane saying that the hit on families will be “unimaginable”. This is completely absurd. I think what you’ll see ultimately at the end of the day, as we’ve been saying, is the cost of a carbon price for families will be very modest and of course the Government will be providing assistance. Tony Abbott’s just getting increasingly desperate, more shrill, more ridiculous, more unbelievable.

SPEERS: Greg Combet thank you.

COMBET: Thanks David.