House debates

Thursday, 24 May 2012

Matters of Public Importance

Carbon Pricing

3:30 pm

Photo of Greg HuntGreg Hunt (Flinders, Liberal Party, Shadow Minister for Climate Action, Environment and Heritage) Share this | Hansard source

The carbon tax was, very simply, designed to destroy jobs in the aluminium sector, it was designed to destroy jobs in the electricity sector and it was designed to destroy jobs in the food-cooling and trucking industries—and it is doing that right now. Let me begin with a real world example. Yesterday Norsk Hydro announced the loss of 344 jobs at its Kurri Kurri plant in the Hunter, right on the doorstep of the Minister for Climate Change and Energy Efficiency's own seat. This plant was started in the 1960s precisely because of the cheap electricity available to it. Its foundation stone, its fundamental principle, was that it had access to cheap electricity. For those reasons, this plant at Kurri Kurri was established. For those reasons, for the best part of 40 years there has been employment in the aluminium sector. But all of that is coming to a halt.

What did Norsk Hydro said in its statement yesterday? The government would have us believe that the carbon tax is simply a coincidence, that it is, like every other misfortune, just bad luck, somebody else's fault, something else coming along. But the statement from the company could not have been clearer:

Following a thorough review it is clear that the plant will not be profitable in the short term with current market prices, while long-term viability will be negatively affected by a number of factors including increasing energy costs and the carbon tax.

Let us look at what is happening here. With Norsk Hydro, we see that there is a bad situation, a difficult climate, for aluminium production in Australia. The worst thing you could do is take their long-term comparative advantage of relatively low energy costs—the reason that this plant was created in this place—and trash it. That is what the carbon tax does, and the evidence from the company could not have been clearer.

What was the government's response? Did the government say, 'We're sorry, we acknowledge it, we realise it'? The government went into denial. The minister for climate change said in his press release yesterday:

I have spoken with the company today, which confirmed that today's announcement has been driven by current financial losses that are unrelated to the carbon price …

So it was nothing to do with the carbon price. We thought: this does not seem right. The Leader of the Opposition asked the minister for climate change directly about statements by the company. At 2:29 pm yesterday the minister for climate change said in this House:

I spoke to a company representative again today in relation to this issue who emphasised to me that the announcement today is not driven by the implications of the carbon price.

The Prime Minister then said:

Minister Combet has spoken directly to the company today, and they are very clear that their current financial pressures have nothing to do with the carbon price.

That was despite the fact that, in its statement, the company was express, clear and absolute. But what we then discovered this morning was that the minister knew all along that the carbon tax was absolutely at the heart of it. In an interview with Aaron Carney on ABC Radio in Newcastle this morning the minister for climate change was forced to fess up that the company said something very different. He said about the discussions with him personally: 'They have described it as one of many factors in the long term.'

What are we saying here? The company told the minister. The minister said to the parliament: 'They never talked to me about it; it was never one of the factors.' The company told the minister. They also told the world via press release that the carbon tax was fundamental to their decision. The company told the minister and he deceived the parliament. The company told the world. We all knew, and the Prime Minister denied it. So what we have from this government is a denial about the jobs impact of the carbon tax, a denial about the very thing the carbon tax was intended to do.

Let us look at their own modelling. Treasury's modelling says there will be a 60 per cent reduction in aluminium production in Australia compared with what would have been the case without the carbon tax. This is not against other factors; this is against the sole variable of the carbon tax. Treasury's modelling, released late last year, says the carbon tax will see a 60 per cent reduction in aluminium production in Australia. And that is what it was intended to do; that is the way it operates. It reduces Australia's emissions by moving our production offshore to China. That does not help the world, it does not help Australia, but it sure helps China.

And so we see clear express Treasury modelling—undeniable. We have a clear express statement from the company that employed those 344 workers who will now lose their livelihoods, who will now be seeking work, who will now be wondering how they can meet their mortgage, pay their commitments and deal with the concerns of their family. These are real jobs expressly linked to the carbon tax by the company and then all denied by the government—except that the minister had to concede that what he said in this place yesterday was simply not true. And the situation for the aluminium industry and jobs gets worse. As we see, Bell Bay in Tasmania is under review. Point Henry in Victoria is under review. And, yes, it is absolutely true that there are real and profound challenges with the high dollar and with the low metals price in relation to aluminium production. That makes it even more the case that this is the worst possible time to impose a unilateral tax on Australian production that does not apply to the product of overseas competitors being brought into Australia.

The government will say, 'Don't worry; we're giving them compensation.' The Aluminium Association's own work shows that the bill for the aluminium sector will quadruple as that compensation collapses and as the price of the carbon tax increases. Over 10 years the impact on the industry will quadruple, and that is the way they make decisions about capital allocations. That is the way they make decisions about who has a job and who does not have a job. That is the real world of decision making in business in Australia, and what we see here is that jobs are being expressly, clearly and absolutely destroyed because the cost of electricity is being driven up, because the cost of operating an aluminium plant, with their direct emissions, is being driven up and, compared with the rest of the world, an already bad situation is being made worse.

Let me turn to the cost of living side. The question in relation to electricity is absolutely central. We hear from the government, 'Look, there's only been a 10 per cent increase'—and we should be thankful for that! The New South Wales Treasury says this will become a 15 per cent increase in short order. The Electricity Supply Association, who, I would remind the government, are the very people that issue the bill—not the government; the Electricity Supply Association members issue the bill—say it will be a 20 per cent increase because there is a second whammy coming in April 2014, when they have to buy forward permits under the government's scheme. So that second price is coming as sure as night follows day—not to mention incremental price rises along the way.

For this year, if you are in New South Wales, you probably face a 16 per cent increase in your electricity bill, of which half or more is coming from the carbon tax. A bad situation is being made far worse. When the government says, 'Look, it's only 10 per cent now,' let us be absolutely clear that the next 10 per cent is coming right down the track and so we do this on top of what KPMG says is a 74 per cent rise in the cost of electricity over the last five years in my own city of Melbourne. All of this means that consumers will pay the bill. They are the ones that are going to pay the price.

Let us go forward to councils, because we heard from the minister today that the councils are not going to pay. Well, 104 councils from around Australia—Albury, Ballina, Bathurst, Bega, Bellingen, Murray, Muswellbrook, Newcastle, Orange, Bundaberg, Cairns, Central Highlands, Etheridge, Gold Coast; it goes on right around the country—received a letter from the Clean Energy Regulator in the last week which said: 'You are possibly operating a significant landfill which potentially could mean that you will be liable under the Clean Energy Act. Please advise in writing by 31 May 2012.' The reason? It is because 'you are likely to be a liable entity for the 2012-13 financial year'. That entry will be recorded in the register.

What does that mean? It means that councils around Australia, firstly, do not know for certain whether they are about to be hit; 104 councils are struggling to understand whether they will be a target. Secondly, the price of going to the tip is going up as of 1 July, and the minister knows it and the parliamentary secretary knows it. Let me give you an example from the Prime Minister's own electorate that this price rise is coming now. It comes from the budget papers on the published record of Wyndham council. Wyndham council is interesting because it is in the Prime Minister's own electorate. What have they budgeted as the amount of money they have to raise through increased rates because of the carbon tax on their landfill this year? $13.02 million. One council, Wyndham City Council, in one electorate, the Prime Minister's electorate, needs $13 million precisely because of the impact of the carbon tax.

Mr Dreyfus interjecting

If the parliamentary secretary doubts it, I am happy to table the Wyndham City Council's public records for this year. Let me go further than that, though, because the question is: why has this happened? It is because they are going to have a liability for potentially 30 or 40 years for the waste which is deposited as of 1 July. The government tries to say, 'Look, they don't have to worry about that for 12 months.' But they have to collect the money now to cover that charge, because in 12 months time they are not going to be able to find who deposited the waste, who put it there. That is why Treasury has advised the Manningham City Council that they should be increasing rates now. The government knows that the price rises are coming, the government is advising councils that the price rises are coming and the government is in denial that city tips, council tips and regional tips right around the country are about to be hit. But you cannot walk away from 104 councils which have received letters from the Clean Energy Regulator in the last week.

That then brings me to the last area, the fact that we are going to see rises in refrigeration. The government says, 'Look, it is only going to be a little bit.' Here is a letter from Iceman Transport Refrigeration's Cynthia Marshall to the member for Moreton, Graham Perrett. In it she says that the carbon tax component is going to take the cost of her refrigerant gas from $5,200 a month to $20,200 a month. It is going to quadruple the price. And lest you think that this firm has it wrong, the government's own Calculating the Equivalent Carbon Price on Synthetic Greenhouse Gases information brochure shows that some prices will be, in carbon tax equivalent for a tonne of refrigerant gas, $75,000. That is not a fabrication. That is not somebody else's view. That is the government's own information. So that is what is happening in the real world: people are paying with their jobs and people are paying with their hip pockets. It is no surprise that we are seeing the most dishonest advertising campaign put forward by a government in living memory. What we saw on budget night was that the campaign was taken to $70 million. It included an extra $36 million of advertising—$14 million between budget day and 1 July. That is $270,000 a day of public money to tell them why they should learn to love the carbon tax—except for the fact that it does not mention the carbon tax. Not once does $36 million buy you a mention of the carbon tax. Last night we heard why: an honest official—whose name I will not raise, because I do not want him to be purged—said before estimates that the Prime Minister's own department excluded the name because people might be confused if carbon tax was mentioned. They did it on the basis of information that the term 'carbon tax' confused people, because it really let them know that they are the ones who are going to pay with their jobs and they are the ones who are going to pay through their hip pocket. It is time this government was finally honest— (Time expired)


Tibor Majlath
Posted on 29 Jun 2015 7:54 am (Report this comment)

Which gas are we talking about? Which gases will be attracting $75,000 of tax?

This reference might be to R404A which attracts that tax. It is 3260 times more
potent as a greenhouse gas than CO2. Now a carbon tax of $23/tonne of CO2 means
the carbon levy on R404A is

Carbon levy for R404A = $23/tonne x 3260 = $74,980/tonne or $74.98/kg

The list price went from $92.88/kg before the CT came in on 1 July 2012 to
$167.86/kg = $92.88/kg + $74.98/kg. That is an 81% increase due to the carbon

No business would pay list price. However, the amount of R404A represented
by $5200 @ $92.88/kg before the carbon tax

kg. of R404A = $5200/($92.88 per kg) = 56 kg

The list price went from $167.86 to $377.71 = $92.88 + $74.98 + $209.85
on 9 July 2012. That is the 'supply charge' increase of $209.85 is
125% of $167.86 cost imposed by the refrigerant industry.

The cost of 56 kg of R404A @ $377.71/kg on 9 July 2012
= $377.71 x 56 kg = $21,152

Truly remarkable agreement if we are both talking about R404A.
But the claim is misleading in that it leaves out more than it says.
The claim is that the CT is entirely responsible for such a massive
rise in costs. Just not true.

AG Coombs warned in 2012 out that the list price of $377.71 is not only due
to the $75 'equivalent carbon levy' but also due to substantial supply
price increase influenced by global refrigerant supply problems.
Who would have believed it?

Now, the percentage component of the $21,152 cost of R404A

Pre tax list price of $92.88 : 56 kg x $92.88/kg = $5201 or 24.6% of $21,152
Carbon levy of $74.98 : 56 kg x $74.94/kg = $4199 or 19.9% of $21,152
Supply charge of $209.85 : 56 kg x $209.85/kg = $11,752 or 55.6% of $21,152

The smallest component of that $20,200 is the carbon levy.
More than half of the cost comes from the supply charge slapped
on by the refrigerant industry.

Why did no one manage to point this out? The nation had a right to know.