Thursday, 11 October 2012
Clean Energy Amendment (International Emissions Trading and Other Measures) Bill 2012, Clean Energy (Charges — Excise) Amendment Bill 2012, Clean Energy (Charges — Customs) Amendment Bill 2012, Excise Tariff Amendment (Per-tonne Carbon Price Equivalent) Bill 2012, Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment (Per-tonne Carbon Price Equivalent) Bill 2012, Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment (Per-tonne Carbon Price Equivalent) Bill 2012, Clean Energy (Unit Issue Charge — Auctions) Amendment Bill 2012; Consideration in Detail
In accordance with the resolution agreed to on 19 September, the bills will now be taken together. Any proposed amendments are to be moved and debated now. The question will be put on government amendments. One question will be put on amendments moved by opposition members and any necessary questions will be put on amendments moved by other members. Any further questions necessary to complete the detail stage will then be put.
Thank you, Mr Deputy Speaker Scott, and congratulations on your election. I present a supplementary explanatory memorandum to the Clean Energy Amendment (International Emissions Trading and Other Measures) Bill 2012 and seek leave to move government amendments (1) and (2) as circulated together.
by leave—I move:
(1) Schedule 1, page 55 (after line 11), after item 80, insert:
80A Paragraph 126(2)(a)
Omit “a particular provision of Division 2 of Part 3 in so far as that provision”, substitute “Division 2 of Part 3 in so far as that Division”.
80B Paragraph 126(2)(b)
Omit “that provision in so far as that provision”, substitute “that Division in so far as that Division”.
80C Subsection 126(4)
Omit “provisional emissions number of the person for the relevant eligible financial year under a particular provision of Division 2 of Part 3 in so far as that provision”, substitute “total of the provisional emissions numbers of the person for the relevant eligible financial year under Division 2 of Part 3 in so far as that Division”.
(2) Schedule 1, page 55, after proposed item 80C, insert:
80D Subparagraphs 127(1)(d)(ii) and (iii)
Omit “a particular provision of Division 2 of Part 3 in so far as that provision”, substitute “Division 2 of Part 3 in so far as that Division”.
These amendments remove a potential ambiguity in some of the drafting of provisions of the Clean Energy Act 2011 concerning interim emissions numbers. The amendments ensure that there is no ambiguity about the application of the policy behind section 126 of the act. They make it clear that, apart from the specific circumstances set out in section 127 of the Clean Energy Act 2011, all liable entities for facilities will have an interim emissions number in 2012-13 and in subsequent fixed price years and will, therefore, have a provisional surrender obligation in those years.
The government made this policy position plain in paragraph 4.26 of the explanatory memorandum to the Clean Energy Bill 2011 and therefore there is no material policy change. It is simply a clarifying amendment.
In particular, the two amendments make it clear that an interim emissions number is not dependent on having two provisional emissions numbers arising for a facility under the same provision of the Clean Energy Act 2011 for two consecutive years. Rather, they make it clear that a provisional emissions number for a facility may arise under different provisions of part 3, division 2 of the Clean Energy Act 2011 with respect to those years. I commend the amendments to the House.
Congratulations, Mr Deputy Speaker Scott, on your appointment. On a day when the government are making much of a minor error elsewhere, this amendment is to clarify a minor error. Unlike the government, we will show good faith and good grace and let them correct their error without any major criticism. We just put that in the broader context. We will of course oppose the bill as a whole.
Question agreed to.
I move Greens amendment (1) to the Clean Energy Amendment (International Emissions Trading and Other Measures) Bill 2012 as circulated in my name:
(1) Schedule 1, page 59 (after line 8), after item 81, insert:
81A After section 160
160A Review by Productivity Commission of financial assistance for coal-fired electricity generation
(1) As soon as practicable after the commencement of this section, the Productivity Minister must, under paragraph 6(1)(a) of the Productivity Commission Act 1998, refer the following matters to the Productivity Commission for inquiry:
(a) the matter of the reasons for, and need for, financial assistance for coal fired electricity generation;
(b) the matter of the following impacts of the existing arrangements for financial assistance for coal-fired electricity generation:
(i) impacts on Australia’s electricity generation mix and timeframes for retirement of existing electricity generation plants and investment in new generation plants;
(ii) financial impacts for coal-fired generators in receipt of compensation and for other generators across the industry;
(iii) impact on Commonwealth finances;
(iv) impacts on the competitiveness of the Australian electricity market.
(2) In referring the matters to the Productivity Commission for inquiry, the Productivity Minister must, under paragraph 11(1)(b) of the Productivity Commission Act 1998, specify the period ending on 31 December 2012 as the period within which the Productivity Commission must submit its report on the inquiry to the Productivity Minister.
Note: Under section 12 of the Productivity Commission Act 1998, the Productivity Minister must cause a copy of the Productivity Commission’s report to be tabled in each House of Parliament.
(3) For the purposes of paragraph 6(1)(a) of the Productivity Commission Act 1998, each matter mentioned in subsection (1) of this section is taken to be a matter relating to industry, industry development and productivity.
160B Commonwealth Government response
(1) If the report on an inquiry referred to in section 160A sets out one or more recommendations to the Commonwealth Government:
(a) as soon as practicable after receiving the report, the Productivity Minister must cause to be prepared a statement setting out the Commonwealth Government’s response to each of the recommendations; and
(b) the Productivity Minister must cause copies of the statement to be tabled in each House of the Parliament before the end of the period of 7 sitting days of that House after the day on which the Productivity Minister receives the report.
(2) As soon as practicable after the Productivity Minister tables the report in each House of the Parliament, the Productivity Commission must publish the report on the Productivity Commission’s website.
Note: The Productivity Minister must cause a copy of the report to be tabled in each House of Parliament—see section 12 of the Productivity Commission Act 1998.
160C No limit on Productivity Minister’s powers
This Division does not limit the Productivity Minister’s powers under paragraph 6(1)(a) of the Productivity Commission Act 1998.
When the price on the pollution package was agreed to, it was agreed to as a package. A number of people were coming from a number of different positions, all coming with goodwill, all wanting to see Australia take its first steps towards a clean energy future. As a result, there was a significant amount of negotiation, which is not surprising when you consider the disparate interests that were involved: Labor, the Greens and the rural Independents.
Ultimately there was agreement on the price to be put on pollution, even though people might have started from different positions and preferred a different outcome. There was agreement on the architecture, even though some people might have preferred that things had been a different way. There was agreement on the scope of what would be in and what would be out of this package of legislation, even though some people would have preferred the inclusion of certain kinds of transport, which were ultimately excluded because that was necessary in order to reach an accommodation. Agreement was also reached on compensation, not just to emissions-intensive trade-exposed industries but also to coal fired power stations, even though it was also a contentious subject.
I think that everyone involved in the discussions was and remains agreed on the principle of energy security—that is, it is important that the transition to a clean energy economy be made in a way that does not compromise the energy security of this country. There was debate, however, about the best and most efficient way of making the transition. We as the Greens, along with Professor Garnaut, said publicly that one of the best ways to ensure that the transition, as it affected coal fired power stations, did not disrupt energy security would have been to offer loan guarantees to coal fired power stations, which would have meant that the Commonwealth did not have to expend any money, that security would have been guaranteed and that the stations could have had an orderly transition out of operation as had been intended. But that was not the government's position, and ultimately the package gave what we consider to be quite generous compensation, over and above what we argued was necessary, to coal fired power stations. But we as the Greens agreed to the compensation because, under the energy security heading, was a very important part of the package: the agreement to pay for the closure of around 2,000 megawatts of the dirtiest coal fired power stations in this country.
I read from the clean energy documents, where it is stated under the heading 'Energy security fund':
First, there will be scope for payments for the closure of around 2000 megawatts (MW) of very highly emissions-intensive coal-fired generation capacity by 2020. This will start the process of replacing existing, highly polluting electricity assets with cleaner generation.
They go on to say:
Closing some of our highest-polluting coal-fired generation capacity will make room for investment in lower-pollution plant.
That is right, and it was a key plank of the package which was negotiated. The fact that this plank was included in the package allowed us to sign off on what we felt was overgenerous compensation to coal fired power stations. We did so because, on the one hand, they would be getting the money, but, on the other hand, around 2,000 megawatts of their generating capacity would be closed.
The government has since decided not to proceed with the closure of 2,000 megawatts of the dirtiest power production in this country. Either the government did not proceed because the minister who was responsible, but who is not the minister sitting at the table now, did not have his heart in it, or they did not proceed because—and this is the public justification that is given—to do so would not have represented good value for money. (Extension of time granted)One of the only reasons that the companies which own the coal fired power stations could say there was no economic incentive for them to close the stations is that they are being so generously compensated. A $5.5 billion compensation package is going to these companies—$1 billion in cash and $4½ billion in free permits to come—and that influenced the companies in their discussions with the government on the package. If we accept that the discussions took place in good faith, then the companies went armed with the knowledge of changed international circumstances, a big stack of cash in the pockets and the promise of free permits to come and, as a result, the companies are not now closing the coal fired power stations as envisaged in the promise that the government made to the Australian people in the clean energy package. Even worse, there is the prospect that some of the dirty coal fired power stations, which were meant to transition out of operation as part of the package, will receive windfall profits. In other words, if the package is passed, the cash that they have already received plus the compensation in the form of free permits that they are about to receive might make them financially better off than if the package had not been passed.
Because the government changed the goalposts by taking out one key element of the package, it is important to adjust it, because the package was agreed on through compromise by all sides, and, if one part of it is taken out, we should recalibrate it. One of the best ways of doing so would be by taking this opportunity to say: 'Over the coming years, if these coal fired power stations aren't doing as poorly as might have been thought and if in fact they stand potentially to make a windfall profit, then they have potentially been overcompensated. Let's get the Productivity Commission in to give a genuine review of the adequacy of their compensation.' We accept that the payments in cash have been made—that is done and dusted—but there is no reason that the future $4.5 billion worth of compensation, in the absence of evidence that is absolutely necessary for energy security, needs to go to the companies. In fact, there is now a very strong case that the overcompensation of the companies which own the dirty coal fired power stations is distorting the intention of the legislative package and getting in the way of replacing dirty coal fired power with clean and renewable energy. In the context where the goalposts have been changed, in the context where they might be getting windfall profits that will keep them in business longer than they otherwise would be, in the context where we are not closing 2,000 megawatts of the dirtiest coal fired power, it makes absolute sense to preserve the integrity of the original agreement by having the Productivity Commission review whether or not this compensation is too generous. When one takes the compensation package as a whole, that is $275 per woman, man and child in Australia that is going into the pockets of these dirty coal fired power stations and that could be going to clean and renewable energy.
I commend this amendment to the House. It is a sensible amendment. One should have no concerns about the Productivity Commission looking at the adequacy of this compensation in the light of changed circumstances.
The government opposes the amendment put forward by the member for Melbourne because it is economically irresponsible and indeed breaches the agreement that the government entered into with the members of the Multi-Party Climate Change Committee, and also for the reason that the existing provisions of the legislation in relation to energy security are absolutely fundamental to investment confidence in the sector.
I have no disrespect whatsoever for the member for Melbourne; I understand his motivations for moving this amendment. But the fact is that, contrary to his assertion, this amendment breaches an agreement that the Greens party reached with the government in the context of the Multi-Party Climate Change Committee. We entered into that agreement as a package, as he indicated. There have been no changes in the goalposts whatsoever. The government has discharged its obligations under that agreement to the word, and it is unprincipled to come in here and put forward an amendment that breaches that agreement.
The assistance to the generators, the Energy Security Fund payments, was a very important part of the agreement. The government made the decision after years of analysis into how to best transition highly emissions-intensive electricity generators into a cleaner energy environment. Of course, it is a transition that will take some period of time. The current arrangements that are in place are the result of in-depth electricity sector analysis and modelling since 2007, and nothing that has happened since the MPCCC agreement was concluded changes the reality and the conclusions that were reached as a result of that detailed work.
Since 1 July when the carbon price commenced, the pass-through of carbon costs in the energy market and to household bills reflects exactly the Treasury modelling which informed the decisions on the basis of the Energy Security Fund payments. Advice was taken from key energy market institutions like the Australian Energy Market Operator, who advised that the government's measures, reflected in the MPCCC agreement, reduced the extent of generator financial distress, supported investment confidence in the sector and could be expected to improve reliability and security outcomes in the short term and reduce spot prices and expedite the transition to a lower emissions fleet over the longer term.
The Energy Security Fund was legislated with the Clean Energy Act, and all the regulators have now been awarded certificates of eligibility by the regulator for those Energy Security Fund payments. To interfere with that and to create uncertainty in relation to that would be disruptive to the investors and to the lenders that are engaged in the electricity generation sector. Changes to those legislated entitlements will directly influence investor perceptions of sovereign risk in the energy market. It would increase the risk premiums for clean energy investors. The advice of my department, consistent with the government's assessment, is as follows: proposals to review or change those legislated entitlements will directly influence investor perceptions of sovereign risk. This risk is exactly the type of risk the package was designed to minimise so that energy security is assured until sufficient alternative capacity is available in Australia's electricity markets. Increased risk in the market would also likely push up wholesale electricity prices and result in further cost pressures for electricity consumers unnecessarily. In addition, all investors in the energy market, including investors in clean energy technologies, would face higher costs for financing due to increased risk levels.
The government is not going to entertain the proposition of the Greens, whether it be by amendment or by any other form, for these reasons. It is in bad faith, in the government's judgement, that this has been put forward. It is in breach of the agreement that we reached. I want to make clear to investors in the energy industry that the entitlements that we have legislated through the Energy Security Fund will not be tampered with by the government. We will not entertain this amendment. It is economically irresponsible. We have in place a comprehensive package to secure energy security for Australian households and businesses. This was a policy initiative entirely separate to the issue of the Contract for Closure, which the government discharged. We stand by the package that was legislated and firmly oppose this amendment.
The government created two funds. It created a $2 billion Contract for Closure fund to close brown coal power stations and it created a $5½ billion Energy Security Fund to bail out brown coal power stations. It is not surprising that the smaller fund has failed. It is not surprising that the carbon tax is in chaos. It takes a certain type of genius to create one fund to close brown coal power stations and one fund to bail them out. I would ask the question: is there any other similar example in the western world in the last 20 years of two multibillion-dollar funds designed to do precisely the opposite things? I stand to be corrected but I am not aware of any other pairing of one fund to close power stations and one fund to keep them open. It is a unique policy achievement.
The member for Casey highlighted to me that the Minister for Climate Change and Energy Efficiency raised the issue of sovereign risk. The entire carbon tax and the entire mining tax are about sovereign risk. They are about changing the ground rules in a way that creates uncertainty, that creates higher costs on Australian production, because this is an electricity ta The carbon tax is an electricity tax. Its theory is to close down the power stations; its reality is that, because they are not subject to import competition, the power stations are simply passing on the power price. So mums and dads right now are paying higher power prices.
In New South Wales, 50 per cent of the electricity price rise is coming from the carbon tax. In Victoria, two-thirds of the electricity price rise is coming from the carbon tax. In Western Australia, not 70 per cent but 72 per cent of the price rises are coming from the carbon tax. In the ACT, between 75 and 80 per cent of the price rise is coming from the carbon tax. In western Sydney, 80 per cent of the price rise in electricity is coming from the carbon tax. In Queensland, where Campbell Newman has frozen the bulk of retail tariffs, between 80 and 100 per cent of electricity price rises for the coming year are as a consequence of the carbon tax. So the theory behind these two funds is based on a simple flaw: that the carbon tax would have an impact on the generators. In reality they are passing through the electricity prices, as they were always intended to do.
I just want to make one more comment. Our view is that this motion fails. I respect the views of the member for Melbourne, but this motion fails because the carbon tax, the $2 billion to close brown coal power stations and the $5½ billion to keep them open should all be ditched. Dealing with one part of the three elements of the equation is fundamentally flawed.
But what I do want to acknowledge is the amount of money being given in cash to the largest brown coal generators in Australia. Going from the government's own announcement, there has been: $14.9 million to Alcoa's Anglesea Power Station; $59 million in cash to the Augusta power stations; $8 million in cash to the Collinsville Power Station; $27 million in cash to Green Energy Bricks, which was of course before the second round of bailouts two days before the carbon tax began; $265 million to Hazelwood Power Station in cash; $240 million in cash to Loy Yang A power station; $59 million in cash to Loy Yang B power station through International Power Australia and $57 million in cash through Gippsland Power; $8 million in cash to Redbank Power Station; and $257 million in cash to Yallourn W power station.
So the biggest polluters, according to the government, are getting the biggest cash handouts in Australian history. It is no wonder the Australian people think that this carbon tax is a dud, because the biggest polluters are being given literally $5½ billion in cash and permits and the Australian people are picking up the bill in terms of higher electricity, gas and grocery costs.
I will speak just very briefly on this. There are two issues of risk and principles. When the clean energy package was agreed to, those people who wanted to come and invest in Australia's clean energy future and begin to build the wind farms and solar plants and investigate solar thermal and geothermal took heart from the package. One of the reasons they took heart from the package was that it said around 2,000 megawatts of coal fired power, the equivalent of Hazelwood plus a bit, would be closed, making space for them in the market. Many of them began to see a future in Australia and, in particular, in Victoria for clean and renewable energy.
Not only that but many people in the Latrobe Valley who I have spoken to have said: 'Now we understand where we're going. There is a prospect that some of these stations will be closed and we can begin now to transition out.' The only uncertainty and risk that has been brought in has been of Labor's own making, because it was Labor who decided not to proceed with something it said it was going to do, which is close these coal fired power stations.
On the question of principle, we would not be here making this amendment if Labor had stuck to the agreement and we had seen power stations like Hazelwood close. We would quite happily have said, 'We do not agree with all the other aspects of it, and perhaps there is some overgenerous compensation, but that is the price we pay because there are some things in it that are good for clean and renewable energy.' We wanted to be in a position where there was an orderly replacement of some of the dirtiest coal fired power stations with clean renewable energy. Labor made the first move and pulled out a key plank of the package, and we are responding in what we think is a very reasonable and measured way to restore the integrity of the package.
Without wishing to prolong the situation, I really do need to place on the record that the government has discharged its obligations that it entered into under the Multi-Party Climate Change Committee agreement. That agreement never guaranteed the closure of 2,000 megawatts of high-emission coal fired electricity generated capacity. It never guaranteed that. The commitment was that there would be a process entered into allowing those generators to tender and enter into a negotiation with the government in an appropriate way for the potential closure of up to 2,000 megawatts of high-emission electricity generating capacity, providing it provided value for taxpayers' money.
The suggestion by the member for Melbourne that the government have not met their commitments is completely wrong and false. We have met the commitments that we entered into. If the Greens did not understand what they were entering into then that is most unfortunate. But, nonetheless, at the end of the process for the discussion and negotiation with the owners of the high-emission electricity generation capacity that had voluntarily come forward and participated in the contract for closure negotiations, the government could not agree with those entities that the values that were being discussed for those assets represented value for taxpayers' money. Indeed, on our calculation the cost of emissions reductions to be achieved, should the government have accepted the valuations of those assets that those companies believed were appropriate, would have vastly exceeded the $23 per tonne carbon price. This is not the sole criterion, but of course it was a consideration in the government's thinking. The fact is that the market will now decide the life of those electricity generators. That was always the position that obtained under the Multi-Party Climate Change Committee agreement and it is the position that the government discharged.
Having said that, it is important also to note that the market has already led to the mothballing, closure or curtailment of hundreds of megawatts of high-emissions electricity generation capacity, such as the Playford B and Northern power stations in South Australia, and the curtailment of significant electricity generation capacity at Energy Brix in the Latrobe Valley in Victoria. I think it is in order of 800 or 900 megawatts of brown coal high-emissions electricity generating capacity that has in fact been curtailed, without the necessity for the government to enter into contract for closure agreements with those particular operators. The market will attend to that issue under a carbon pricing arrangement. The government has met its obligations under the agreement. We therefore reiterate that we oppose the amendment.
Generally, in relation to the issues raised by the shadow minister, the package overall has been very carefully calibrated. There has been years of extensive engagement with stakeholders in every conceivable sector of the economy. It is not at all an issue of sovereign risk. Packages have been carefully designed and modelled in some of the most extensive modelling work ever undertaken by the Commonwealth Treasury and other organisations to ensure that this package will work, that it will lead to a reduction in emissions in our economy over time. We have attended to all of the issues that we believe are appropriate, particularly in the electricity generation sector and particularly in businesses that are in the trade-exposed and emissions-intensive part of the economy.
Furthermore, in relation to the pass-through of carbon pricing into electricity prices, it is of course the case that the majority of the carbon price revenue is being used to implement tax cuts, a tripling of the tax-free threshold, increases in family tax benefits and increases in the pension and other social security payments. Millions of people will be better off as a consequence of this important reform and Australia will play its fair share in global greenhouse gas emission reduction.
The question is that the amendment as moved by the member for Melbourne be agreed to.
A division having been called and the bells having been rung—
As there are fewer than five members on the side for the ayes in this division, I declare the question resolved in the negative in accordance with standing order 127. The names of those members who are in the minority will be recorded in the Votes and Proceedings.
Question negatived, Mr Bandt and Mr Wilkie voting aye.