Andrew Robb (Goldstein, Liberal Party, Chairman of the Coalition Policy Development Committee) Share this | Hansard source

Yes, indeed. In the next 10 years it will see a $10 billion tax on small businesses, with no compensation and, for many, no capacity to avoid it.

It is a scheme that defies explanation. It is incomprehensible. It is an extraordinarily expensive act of faith. Not only do many government members privately disagree with the scheme; no government member, from the Prime Minister down, can explain it. This is not one ETS scheme but a thousand ETS schemes as bureaucrats impose individual arrangements, definitions and requirements on just about every one of the 1,000 ‘covered’ companies. Its complexity has been deliberately used by the Rudd government as a Trojan Horse to hide the introduction of a great big new tax. It is a con. It will be a huge tax on Australia’s 150-year success with resources and energy while our competitors face no tax. It makes no sense. It will see an increase in everyone’s power bills of around 20 per cent and indirectly see an increase in the price of most services and items purchased. It will be equivalent to increasing the GST from 10 per cent to 12½ per cent.

Yet, without our major competitors engaging in some form of ETS, Australia’s actions will have absolutely no impact on the Great Barrier Reef or on the environment generally. In fact, global emissions could actually increase as investments and jobs, especially from major regional centres, leave Australia and go to developing countries where less efficient factories pump out much more CO2 than Australia does. And without our major competitors engaging in some form of scheme the cost to Australians will be much greater. This cost will be measured in the premature closure of many coal mines, cement works, coal powered generators and fuel refineries and the loss of major investment in new smelters, metal refineries, LNG gas projects, cement works, exploration and much more.

There will be a significant direct and indirect tax on agricultural and manufacturing businesses competing against foreign products where no such tax applies. For example, the average dairy farmer will face a $9,000 tax, with no capacity to offset this cost. The scheme will see tens of thousands of jobs at risk, the permanent and serious shrinkage of major regional centres, and the loss of major investments; yet little or no impact on CO2 emissions. In fact, work commissioned by the state governments suggests that 126,000 jobs will be at risk and key regional centres will shrink by 20 per cent. One $4 billion investment to extend an aluminium smelter in the Hunter Valley will be shelved. This project alone will see the loss of 15,000 construction jobs and 3,000 permanent jobs. It is why Australia must not find itself, effectively, going alone.

These problems were obvious last year. Yet, to add salt to the wound, the government has ignored the implications of the fiasco in Copenhagen. None of the world’s top five emitters of greenhouse gases look like introducing an emissions trading scheme. For nearly two months now the Rudd government has ducked any debate about Copenhagen’s failure to make any progress on a global approach to carbon emissions, or to discuss the extraordinary problems confronting the IPCC. It is a case of ‘see no evil, hear no evil’. It only serves to reinforce community suspicions that the Prime Minister is more interested in the politics than in good policy for Australia.

The Prime Minister cannot keep demanding that it is ‘my way or the highway’ when so much is at stake and attempts to achieve a global approach to carbon abatement are in disarray. It is totally wrong and disingenuous to suggest that a climate change disaster is the inevitable consequence of not supporting this deeply flawed emissions trading scheme, or to suggest that Australians have no choice or no alternative but to lock themselves into this ETS ahead of our major competitors.

There is nothing God-given about the Prime Minister’s scheme. There are other designs for emissions trading schemes and there are other direct action plans. In fact, a large number of countries, including the United States and most of our major competitors, at this stage are looking at reducing emissions without an emissions trading scheme—using direct action such as incentives and regulations combined with energy efficiency measures, renewable energy, reafforestation, storing carbon in soil, cleaning up industrial practices and coal fired electricity generation, algae, fugitive emissions, transport, nuclear power and more. Many of these mirror the coalition’s direct action plans.

Yet the government suggest that their ETS is necessary for business certainty. This is a furphy. The only certainty facing Australian business if we go it alone with an ETS would be that they face a great big new tax which fluctuates somewhere between $25 and $40 per tonne of CO2 in the first few years, costing between $12 billion and $16 billion a year, while their competitors face zero tax. Surely major uncertainty would exist in the making of long-term investments in Australia if companies have no idea if, and even when, their major competitors would face a price on carbon. It could be 10, 15, 20 or 30 years away.

The government suggest that their ETS will cap emissions. This rings somewhat hollow when Treasury modelling estimates that Australia’s emissions will continue to increase under the Prime Minister’s ETS until the mid-2030s, over 20 years away. It also ignores the fact that nearly half the government’s emissions reduction will not occur in Australia. They will occur in other countries who sell offsets to Australian companies to meet their obligations. In fact, according to Treasury modelling, Australia’s actual annual CO2 emissions in 2020 under the ETS will be a mere two million tonnes less than they will be in 2012, with 585 million tonnes as against 587 million tonnes without the ETS. Whereas the five per cent reduction in CO2 emissions under the coalition plan will occur in Australia, with emissions in 2020 reduced to 525 million tonnes, as against the government’s 585 million tonnes.

Furthermore, the ETS in Europe has failed miserably to cut emissions in Europe or to achieve any sort of cap in Europe. Most European nations will not even meet their Kyoto targets. That is why the Minister for Climate Change and Water refuses to guarantee that the Rudd ETS will cut carbon emissions. The government claim that the Prime Minister’s ETS is necessary and preferable because the polluter pays, and not the taxpayer. This proposition is simply dishonest. To begin with, if the polluter pays and not the taxpayer then why is it proposed to have billions of dollars of compensation? The truth is that ultimately the $12 billion to $16 billion tax is passed on to households in the form of higher prices and/or lost jobs, and to small and medium businesses in the form of higher costs, lost business opportunities and less growth.

Our electricity generators do not compete against imports and do not export their electricity. Apart from the billions of dollars lost in their asset values, these generators will pass on the billions of dollars of CO2 tax they will pay each year in the form of higher electricity prices. That is why electricity prices will rise quickly by around 20 per cent. The electricity price increase hits households and the 750,000 small to medium size businesses. Many businesses will pass on some or all of the cost increase, where they can, in the form of higher prices for goods and services. However, hundreds of thousands of businesses that export or compete against imports that have no ETS tax will not be able to pass it on. It will go straight to their bottom line and they will be less competitive. Less growth and job losses will be the end result.

Other large companies competing on export markets, like aluminium or coal producers, or competing against imports, like cement manufacturers, will be less competitive. For example, in the first 10 years of the Prime Minister’s ETS, coal producers will face an estimated total CO2 tax of around $14 billion and get compensation of $1.5 billion. This represents a net tax of $12.5 billion on our coal industry at a time when world demand for energy is expected to increase by 30 per cent in the next 20 years to 2030, and when coal is expected to fill 27 per cent of that 30 per cent increase in energy demand because of the lack of alternative energy sources.

This $12.5 billion tax will see the closure of some coalmines and fewer new coalmines open. It makes absolutely no sense. Jobs and investment will be lost and all for no global environmental advantage, as the coal will simply be sourced from other countries, often from sources of dirtier coal. If Australia goes it alone with this great big new tax, investment in all these large energy intensive and resource based companies competing on world markets will be reduced. Many will invest in other countries where there is no ETS. In effect, Australia’s ETS will lead to the export of Australian jobs and the export of emissions. In the end, the big polluters will not pay; households and small businesses will pay in terms of higher prices or lost jobs or both. These are the reasons why the coalition has rejected the government’s scheme twice and will do so again.

With the release of the coalition’s direct action plan there is now an alternative. Now the Australian people have a choice before them on the question of dealing with emissions abatement and emissions reduction. Australians have a choice between a practical, direct action approach to reducing emissions or a great big new tax which carries huge risks for jobs, for the cost of living and for many industries. Not only that; the Australian people have a choice between a practical, direct action scheme which is understandable and an emissions trading scheme which is incomprehensible. People now have a choice between an incentive based scheme or a highly punitive tax based scheme. People have a choice now between an affordable $10 billion scheme or an economically crushing $114 billion tax based scheme. Our scheme is much, much cheaper while meeting the same targets in 2020.

The Labor member for Melbourne, Lindsay Tanner, describes the government’s ETS as an insurance policy. Well, the coalition’s direct action plan is also an insurance policy. Both insurance policies will deliver a five per cent cut in emissions by 2020, but the difference is that one carries a policy premium of $114 billion and the other a premium of $10 billion. Furthermore, the ETS insurance policy also carries an excess involving uncompetitive industries, lost jobs and the prices of everything we buy being driven up. The coalition’s plan provides incentives for Australian families and businesses to reduce their carbon emissions, while addressing some of Australia’s serious environmental problems. An emissions reduction fund will provide financial incentives to support practical carbon reduction activities by business and industry.

Businesses will put in a market tender for these incentives to help them finance the improvements of energy efficiency, the storing of carbon in the soil or trees, the harnessing of fugitive methane emissions at coalmines or landfills, the development of renewable energy, the phased closure of old and inefficient coal fired generators and so on. Those that can deliver the least cost abatement will be successful with their tender, as overseen by an independent board.

Carbon abatement can involve market mechanisms without the use of an ETS. As such, the centrepiece of the coalition’s direct action plan is totally consistent with Liberal market principles. Furthermore, rebates which the direct action plan provides will aim to see one million additional solar energy roofs on homes around Australia. Solar towns and solar schools will be created, along with encouragement of geothermal and tidal towns, green corridors and urban forests.

The coalition’s direct action plan mirrors similar direct action initiatives that dominate the response, for the foreseeable future, of our major competitors. In many ways the plan also captures the sort of excellent thinking that drove the development of the Howard government’s $10 billion direct action water plan for the long-term rehabilitation of the Murray-Darling system. There are very successful precedents for these sorts of direct action plans. They dominate the thinking and the approach being adopted in the United States, the biggest emitter, in China, the second biggest emitter, in India, the third biggest emitter, in Japan and in many other countries around the world. People are looking to see what progress they can make while there is further thinking being given to a global approach.

In conclusion, the coalition plan buys Australia time to see what the rest of the world is doing. It allows Australia to do constructive things, to meet the five per cent 2020 targets without breaking the bank or doing risky, job-destroying things by going it alone on this emissions trading scheme. It ensures we do not get too far ahead of the world. Yet it does not preclude Australia being part of any future global scheme if that should occur. It is plain common sense which protects jobs while making progress on emission reductions.

As Dick Warburton, chairman of the government’s Expert Advisory Committee on emissions-intensive trade-exposed activities, said after Copenhagen’s failure:

I think there should be a delay in whatever we do until we have a clear picture of the best course.

Mr Warburton said there was no rush—‘We need to get it right.’ Here is a man with enormous business experience, someone who involved himself deeply in helping the government with the design of the scheme, giving independent advice on the impact so that the major employing industries, the big resource and energy industries, the industries that we are so good at, the industries that we have led the world with for 150 years, are not disadvantaged. We are good at these industries. That is why we have to make sure they are not disadvantaged by the premature introduction of a scheme here when there is no equivalent scheme amongst our major competitors. We have to maintain our competitive position, as Dick Warburton signals with his comments, in any scheme that we bring in. We need to apply some plain common sense to protect jobs while still starting the process of encouraging important and effective investment in emission reduction technology and activities around this country.

The Prime Minister’s ETS is a dog of a scheme and must be opposed. People now have a choice: they can either incur the massive tax, the risk, the uncertainty, the increased cost of everyday living and the job insecurity that will come with the Prime Minister’s emissions trading scheme or they can choose a direct action scheme which is affordable and understandable and which will provide an incentive for industry in Australia to reduce CO2 emissions.

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