House debates

Wednesday, 25 June 2014


Carbon Farming Initiative Amendment Bill 2014; Second Reading

5:33 pm

Photo of Mark ButlerMark Butler (Port Adelaide, Australian Labor Party, Shadow Minister for Environment, Climate Change and Water) Share this | | Hansard source

I am sure everyone in the building is fixed to their TV screens to watch the parliamentary debate on this instead of the joint press conference between the member for Fairfax and the former Vice President of the United States! I proceed, I am sure, with a huge audience in the chamber!

Photo of Kevin AndrewsKevin Andrews (Menzies, Liberal Party, Minister for Social Services) Share this | | Hansard source

I am with you.

Photo of Mark ButlerMark Butler (Port Adelaide, Australian Labor Party, Shadow Minister for Environment, Climate Change and Water) Share this | | Hansard source

The Minister for Social Services is staying, such is his commitment to good climate change policy.

I rise in opposition to this bill but before addressing the amendments that are contained in the bill I want to make a few remarks about the Carbon Farming Initiative, to which essentially the government is seeking to attach at least the Emissions Reduction Fund component of their Direct Action a policy. I want to be particularly clear on behalf of the opposition that we have a very high level of support for the Carbon Farming Initiative. It has been a well-supported initiative from the Labor Party both in the climate change portfolio but also in the Agriculture portfolio, as a means of enabling the land sector to engage in carbon abatement activities—reforestation and a whole range of other things; soil carbon as an emerging opportunity for carbon abatement—and to have that abatement credited through ACCUs, carbon credit units, and to sell those units under approved methodologies either to liable entities under the existing carbon price mechanism or to companies that might be engaged in voluntary offsets programs, for example, airlines and the like.

For the very relatively short time I was the minister for climate change—only a matter of some weeks before we moved into caretaker mode before the last election—I had a very good level of engagement with stakeholders from the carbon farming sector, peak organisations, but also a range of people working on the land to incredibly innovative stuff to participate in the Carbon Farming Initiative. I greatly enjoyed that. I think it is fair to say, and I think I am right in saying this, that this is probably the only area of the broader clean energy package that the former government put in place where there is a level of bipartisan support. The Carbon Farming Initiative and the Carbon Farming Futures program to drive research and development in the land sector is the only area of bipartisan support. I think it is notable that this bill seeks to attach a policy—Direct Action, or particularly, the centrepiece of the policy, the Emissions Reduction Fund—to a system or a framework in the Carbon Farming Initiative that has such a high level of support. One can only infer that the government is seeking to attach its hopelessly discredited Direct Action policy to the Carbon Farming Initiative in the vain hope that there will be some reflected glory, that there will be some credibility that accrues to Direct Action that has been completely unable to attract over the last four years, simply by virtue of being associated with this very, very good program. May I say—through you, Deputy Speaker—to the government that nothing will give Direct Action credibility and nothing will give the Emissions Reduction Fund any credibility. In one of his more colourful moments, my leader, the Leader of the Opposition, said yesterday at a press conference that Direct Action is a 'smelly bag of fish' as a policy. It does not matter how much Brut 33 you spray on a smelly bag of fish, it remains a—slightly better—smelly bag of fish.

The policy that this bill seeks to facilitate, the Emissions Reduction Fund, reflects the generally dismissive attitude that, particularly, this Prime Minister has about the challenge of climate change. There have been a number of other opportunities to speak about climate change policy in a broader sense this week and there will be a heavily curtailed opportunity to talk about climate change policy in this place tomorrow, but I do very briefly want to address the attitude that this Prime Minister, particularly, has to this area of policy, because it fundamentally underpins the policy that is being facilitated by this CFI amendment bill.

The lack of commitment this Prime Minister has to strong and sensible action on climate change rests on a number of myths about climate change that he has peddled—and continues to peddle—across this continent since he was handed the leadership by Senator Minchin. The first myth is that the science of climate change is not settled, that the jury is still out on this and that the Intergovernmental Panel on Climate Change is wrong when it expresses a 95 per cent level of certainty about global warming being a fact and being caused overwhelmingly by human activity. This is a myth that the Prime Minister continues to peddle across the nation, in company with a number of other MPs in the coalition party room.

The other myth that the Prime Minister has been peddling now for three or four years is that, to the extent that there was some global warming over the course of 20th century, it largely stopped at the end of the 1990s. Indeed, the Prime Minister is on record a couple of times saying that, if anything, the world is getting cooler—slightly cooler but cooler nonetheless—and has been since the late 1990s. Earlier this week, the Prime Minister's senior business adviser, Maurice Newman, wrote another op-ed in The Australian newspaper, indicating that warming had stopped since September 1996, apparently—a new date, pushing it back further and further. That is a statement that flies in the face of any number of pieces of advice from the World Meteorological Organization, the WMO; from NASA; from our own Bureau of Meteorology; and from the CSIRO—all those hotbeds of left-wing conspiracies. It flies in the face of all of that scientific advice.

The third myth that the Prime Minister peddles regularly and peddled during his trip to Canada and other places over the last several weeks is that the rest of the world is either not acting at all on climate change or, as he said in Ottawa, I think, actually reversing action on climate change. I do not propose to talk about this at great length—I prefer to talk about the bill—but, again, it is a myth that flies in the face of a whole range of things happening in very important jurisdictions, including, most importantly perhaps, in China and in the United States. The Prime Minister's scepticism about this area of policy, or lack of commitment to taking action on climate change, is by no means his alone. As I indicated, it is an attitude that is very broadly shared in the coalition party room. I am sure we will hear more of it during the debate on this bill. The emergence of that position over the last four years is essentially why the parliament finds itself in the position it finds itself in generally this week—not only about this bill but about the bills that will be debated tomorrow. That is why we are in here debating these bills as the government and the opposition, while the member for Fairfax is another part of this building, holding a joint press conference with a former Vice President of the United States.

The positions I have outlined—the myths that the Prime Minister has been peddling for some years and continues to peddle—were not always the positions of the coalition. You do not have to go too far back in time to find a very different position on this area of policy than the one that is enunciated by the Prime Minister and so many others in his coalition party room now. Only some years ago, the coalition had very clearly rejected the sort of so-called direct action approach that is fundamental to this piece of legislation. The Shergold report, for example, commissioned by Prime Minister Howard in 2007—from Peter Shergold, the then head of the Department of the Prime Minister and Cabinet—indicated that a direct action approach 'would impose a far heavier burden on economic activity' than an emissions trading scheme. That attitude of Peter Shergold was reflected very centrally in the election policy that John Howard took to the election in 2007. Those views were very proudly proclaimed by members of the coalition party room who are now very senior members of this government.

I will just pull out a few quotes from that time. In the endgame, if you like, of the Howard government, as an ETS was being proclaimed and promoted by Prime Minister Howard and his government, Senator Brandis said in the other place, in September 2007, about the coalition scheme:

This will be the most comprehensive emissions trading scheme in the world, broader in coverage than any scheme currently operating anywhere. This world-leading scheme will cover 70-75 percent of total emissions, or almost 100 percent of industrial, energy and mining emissions.

That was the proud proclamation of Senator Brandis about what was then coalition policy.

The now Treasurer, the member for North Sydney, a couple of years later, while the coalition were in opposition, said on Q&A in February 2009:

Our very strong view is, we were the initiators of an emissions trading scheme, and we believe in a market-based approach, and Malcolm Turnbull as Environment Minister actually put in the framework for an emissions trading scheme.

That was the view—in 2009, at least—of the now Treasurer.

The now Leader of the House stated on countless occasions the coalition's proud advocacy of a market based approach, particularly in the form of an emissions trading scheme. In July 2009, some time after this had been put forward by Prime Minister Howard, he said:

Let's not forget it was the Opposition—

that is, the coalition—

that first proposed an emissions trading scheme when we were in government. The idea that somehow the Liberal Party is opposed to an emissions trading scheme is quite frankly ludicrous.

That is what the member for Sturt, now the Leader of the House, said. Earlier in that year, he said:

By leading on solutions to the issue of climate change, the new generation of Liberals—

which I assume he considered himself a part of—

can demonstrate that they believe progress is in the interests of the party and the country …

Thus was the position of the coalition, not for a short period of time but for some years.

The member for Wentworth, who became the Leader of the Opposition, the leader of the coalition parties, in 2008-09, in accordance—obviously; it has been clear—with his own personal philosophy but also with a clearly stated party position that had been taken to the election of 2007 by coalition candidates, engaged with the then Rudd government to seek to deliver the nation a bipartisan emissions trading scheme. He engaged in good faith, it must be said—I remember—with the government of the day to seek to put in place an emissions trading scheme with bipartisan support that would give business certainty, that would give investors certainty.

But of course it is now very clear in hindsight that the member for Wentworth did not reckon with Senator Nick Minchin, then a senior player in the coalition in the Senate. The member for Wentworth often gets up in question time and quotes the latest film or goes back to Shakespeare or a Greek tragedy, but it is quite clear that the member for Wentworth should have paid much closer attention to the 'lean and hungry look' of Senator Minchin at the time. The now Minister for Social Services, as I recall, was also a part of the shenanigans in the coalition party room at that time. It is quite clear in hindsight that, in spite of those proclamations of policy purity that we heard from Senator Brandis, from the now Treasurer and from the now Leader of the House, Senator Minchin and some others in the party room were nursing their denial of climate change and ultimately ambushed the member for Wentworth at the height of the negotiations I talked about around an emissions trading scheme.

Senator Minchin, as he has been very adept at doing—as a South Australian, I know this—for many, many years, was able to collect the numbers to defenestrate the member for Wentworth and dangle the party's leadership before all of the candidates who put themselves forward to replace the member for Wentworth. He dangled the party's leadership before those candidates on the basis that they would reverse the party's clearly stated election commitments around an emissions trading scheme and move to a position of deep scepticism about climate change.

To his credit, apparently the now Treasurer resisted that temptation. To his enduring credit, he resisted that temptation on the basis of his deep commitment to a market based mechanism to deal with a very real challenge of climate change—such is the reportage, anyway, that we mere mortals from the Labor Party have to rely upon. But there was no such constancy, it must be said, from the member for Warringah, the now Prime Minister. There was no such constancy from him. Maybe he had read his Julius Caesarand, in addition to Caesar's concern about the 'lean and hungry look' of Cassius, he also wanted to avoid Caesar's habit of being as 'constant as the northern star'. You can accuse this Prime Minister of many things, but you certainly cannot accuse him of being as 'constant as the northern star'. He admitted himself that he is something of weathervane on this issue, and frankly, as we have found through this budget, he is a weathervane on many, many issues besides.

It is now historical fact that the Prime Minister was very well rewarded for his willingness to turn his back on Prime Minister Howard's election policy of 2007, a policy to which the member for Warringah committed himself as a candidate at that election. The reward for the member for Flinders, the now Minister for the Environment, was perhaps not so sparkling: what he got was to lose his summer holidays over 2009 and 2010 to write at least some modicum of a policy to deal with climate change. It was Direct Action, a policy which largely went unaltered from the 2009-10 summer up until the coalition parties took government last year.

The member for Wentworth does have a way with words, and I am still not sure that there is any better description of the Direct Action policy than the descriptions that the member for Wentworth memorably put into the Fairfax newspapers after his defenestration. He called the Direct Action policy a 'fig leaf to cover a determination to do nothing'. He belled the cat on this being a 'fig leaf to cover a determination to do nothing' because, in his view, as Senator Minchin had put it to him, a majority in the coalition party room simply did not accept the science on—or, to use the language sometimes used on the other side of this place, did not believe in the idea of—human induced global warming. Later on, in a debate in this place, the member for Wentworth described Direct Action as 'a recipe for fiscal recklessness on a grand scale'. Those two descriptions are as good, as pointed and as accurate as any descriptions I have read about this policy.

It is also a matter of record that this policy has failed to get any significant support whatsoever over its four-year life. Peter Shergold, who had been asked by Prime Minister Howard to develop a climate change policy for the Howard government and recommended an ETS, a recommendation that was accepted, wrote in The Australian Financial Review in 2010 about the Direct Action policy. He wrote that it was a 'more expensive and less effective response to climate change'.

Even if I had three or four hours, I would not have time to go through the very long list of experts, commentators, businesspeople, academics and economists who have scathingly rejected the premises and the detail of the direct action policy. I will give just perhaps two more in the lead-in to the election to illustrate the point. Just before the election, in August 2013, the AECOM consultancy conducted a survey of a very large number of businesses and found that only seven per cent of them supported the direct action approach to dealing with climate change. A short while later Fairfax conducted a survey of leading business and academic economists and found that 86 per cent of them supported a market-based mechanism, a market-based price on carbon. I think maybe one of the economists surveyed supported the direct action approach. Hopefully, that illustrates the point sufficiently.

Direct action failed to attract any serious support even in its fullest form, the form that the member for Flinders, the now Minister for the Environment, wrote over that quite tumultuous summer of 2009-10. It failed to attract any significant support whatsoever even in its fullest form. What we have seen since, particularly over the last 12 months, is the minister being forced to backtrack, backtrack and backtrack again and be left with a vastly stripped back version of the original policy.

From having a look at the key element of direct action, which is the so-called clean air plan, as described by the minister, you get an idea of the degree to which there has even been roll back on what was an inadequate policy in its fullest form. The clean air plan has as its centrepiece the Emissions Reduction Fund, which is the fund that seeks to be facilitated by this legislation. In addition to that, there was the solar roofs plan. One million solar roofs were to be funded with the $500 million that was promised in the 2010 campaign, a promise reiterated on many occasions by the now minister through that term of parliament, 2010 to 2013, and reiterated following the election of the coalition parties last year. That $500 million was gone in a puff of smoke in the budget. There was no explanation as to why—whether the government had reached the view that it was no longer a worthy policy. The minister was just pushed out the door and told to announce to the community, which he had reassured so many times before, that this policy was simply gone. The $100 million to fund solar towns and solar schools was whittled down to $2 million. So from $600 million we saw the delivery of $200 million. In percentage terms I am not quite sure what that is—I think it is probably a 99.8 per cent loss. It clearly illustrates the degree to which even the Direct Action Plan has been whittled down.

Most importantly perhaps, we have seen the government back away from the so-called safeguards mechanism. This mechanism was apparently intended to ensure that beyond those sectors that were actually participating in the ERF, the Emissions Reduction Fund, there would be some control on carbon pollution, so if the government was going to pay for people to stop polluting through the Emissions Reduction Fund the benefit of that payment was not lost through other sectors of the economy, other companies, lifting their pollution levels. Without going to whether that is a particularly good way to deal with this, the point is that that mechanism, which is probably the only element of the policy that could vaguely be argued would have some rigor and some control on carbon pollution across the economy, has simply been kicked into touch.

Commentator after commentator has complained about that. Mr Danny Price, who is a well-known economist in this area and was appointed by the government as the chair of the expert reference group, has called this the biggest threat to the chance that direct action has of achieving its stated objectives. We read of intensive lobbying from different parts of the business community towards the government to simply drop this entirely or, if it is not dropped, to dilute it to the point of meaninglessness. The point is though that it has been kicked into next year. We were told time and time again that it is utterly central to the direct action policy, yet if the government has its way it will not be put in place at all or at least for 12 months after the government has succeeded in dismantling the clean energy package.

The key problem though with direct action is it simply will not work. It will not match up to the stated objectives that have been reaffirmed time and time again by the minister, but not so clearly by the Prime Minister. The Prime Minister has prevaricated on quite what the emission reduction target for Australia under an Abbott government is, but certainly the minister has reiterated time and time again that it remains the government's intention to achieve at least five per cent carbon pollution reduction by 2020 on 2000 levels and that direct action is the way to do that.

The problem for the government is that no expert who has looked at this thinks that this has a snowflake's chance in hell of getting anywhere near the five per cent reduction target. Again the list of independent analyses and modelling about this is far too long for me to go through. I might just mention the RepuTex report that was released only this month that modelled and found that the direct action policy, with its architecture and budget, would fall about 70 per cent short of its emission reduction targets. The Grattan Institute gave evidence to the Senate inquiry into direct action which reported in March 2014:

The Grattan Institute pointed to published analyses—

Because there are many—

Which suggest that 'the target cannot be achieved with the allocated funds, given assumptions of emissions projections, abatement costs and budgetary allocation'.

The Grattan Institute is just one of many organisations that have no faith in the capacity of this policy to do what it intends to do. There is no evidence to the contrary. We asked at Senate estimates and during consideration in detail of the budget whether the environment department or the minister, through some other mechanism, had conducted modelling of the emissions reduction that would be delivered through the Emissions Reduction Fund and we have been given no answer that would indicate the modelling has even been done, let alone that the modelling indicates that what the minister says will occur will actually eventuate.

The other thing about this policy is that it simply will not attract co-investment. That is quite clear. The taxpayers' money the government is going to dole out through this dressed up slush fund simply will not attract any serious coinvestment. The CEO of the Investor Group on Climate Change, Mr Nathan Fabian, testified about this issue at the Senate inquiry I have already referred to. On page 91 he is quoted as saying:

… from what we know of the ERF the scale, duration and carbon prices of deals likely to be on offer will not provide sufficient incentive for investors to participate. We think the banks will take a similar view.

I have read reports in the media of banks indicating they would not touch the Emissions Reduction Fund with a barge pole, to use the words in the report. If that case eventuates, the government does have a mechanism in the Clean Energy Finance Corporation which could be a vehicle for coinvestment in the Emissions Reduction Fund, but if the member for Hume gets his way that will also go the way of the dinosaurs—no pun intended.

Labor's position in this area is very clear. We do not support this bill—this amendment to the CFI framework—because it essentially facilitates a vastly inferior way of dealing with climate change. We took to the election a very clear policy of moving to terminate the carbon tax as quickly as we possibly could, were we elected, and replacing it with a floating price—an emissions trading scheme with a firm, legal cap on carbon pollution—and then letting business work out the cheapest and most effective way to operate within that. That remains Labor's position. It will be the way Labor votes in this place, and in the other place, on this bill and also on the carbon repeal bills that will be before this House tomorrow.

Before I conclude, I propose to move a second reading amendment to the bill. I move:

That all words after 'That' be omitted with a view to substituting the following words:

'whilst not declining to give the bill a second reading the House notes:

(1) the Government’s poor record on environmental and climate change issues;

(2) that payments from the Emissions Reduction Fund need to be financed from the federal budget, and paid for by taxpayers rather than big polluters;

(3) the need to fully examine the range of changes proposed to the CFI and the impact this will have on the existing land sector projects;

(4) the lack of robust and defensible assurance from the Government about the ability of the CFI amendment and the Emissions Reduction Fund to achieve Australia’s emissions reduction target;

(5) that since the 2013 election Australia’s international reputation on climate change action has been damaged by becoming the first nation to move backwards on climate change while the rest of the world, including China and the US, is moving forward; and

(6) the need for the Government to pass an Emissions Trading Scheme to place a cap on carbon pollution and drive a clean energy future for Australia.'

Photo of Craig KellyCraig Kelly (Hughes, Liberal Party) Share this | | Hansard source

Is the amendment seconded?

6:03 pm

Photo of Bernie RipollBernie Ripoll (Oxley, Australian Labor Party, Shadow Minister Assisting the Leader for Small Business) Share this | | Hansard source

I second the amendment and reserve my right to speak.

Photo of Craig KellyCraig Kelly (Hughes, Liberal Party) Share this | | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Port Adelaide has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The question now is that the amendment be agreed to.

6:04 pm

Photo of Angus TaylorAngus Taylor (Hume, Liberal Party) Share this | | Hansard source

I rise to speak on the Carbon Farming Initiative Amendment Bill 2014, the centrepiece of the government's Direct Action Plan. We know this bill will deliver on the coalition's commitment to establish an Emissions Reduction Fund, providing positive incentives to reduce emissions in place of the punitive carbon tax instituted by the previous government. Of course, the objective of this exercise is to reach our bipartisan target of a five per cent reduction on year 2000 emissions.

At a personal level, I have followed developments in climate science for over 25 years. Despite the blizzard that has dumped snow on the mountains just south of here, where I was brought up, I have watched the climate changing. I have watched the snowline rise, and I firmly believe our best bet is that human activity is at least partly responsible. I firmly believe the world needs to act.

But over 25 years I have also watched developments in climate policy and I have come to recognise, somewhat reluctantly at times, that overly aggressive and poorly directed unilateral action by any country is meaningless and futile. Overly aggressive and poorly directed action presents two fundamental problems for Australia. First, we risk trashing our economy for absolutely no reason. Second, we ignore the fact that the fundamental problem is one of reducing carbon emissions globally, not domestically. The atmosphere makes no distinction between carbon emitted from the US, China, Australia, Africa or anywhere else in the world, for that matter.

We know we are a long way from an international deal on this issue. In fact, the whole spectre of Copenhagen taught us a great deal. Above all, it taught us that getting to a global agreement was going to be extremely difficult—far more difficult than many thought it would be. In fact, a wonderful piece written by the former adviser to former Prime Minister Kevin Rudd, a guy called Andrew Charlton, laid out very clearly the extraordinary challenge the world faces in coming to a global agreement—a challenge which those on the other side of the House seem to ignore in taking the positions they do on this issue.

Often all of this is presented as a choice between progress and planet. I do not believe we need to make this choice. Progress versus planet is the narrative of the green revolutionaries, but the history of humanity is one of reconciling progress and planet. The two can, and should, live together. So the issue here for the coalition and for me personally is not the target, because that is a bipartisan target, but the means of getting there. And, of course, the comparison needs to be made in context, so let's look at the critical characteristics of the Australian economy in thinking about this problem.

First of all, and perhaps most importantly, our exports are extremely emissions intensive. Those from the other side of the House and elsewhere like to quote our carbon emissions per capita. What they forget to quote is the extraordinary emissions intensity and energy intensity of our exports, and amongst them are aluminium, alumina, coal, cement, fertiliser and the full range of agricultural products. It seems to me that those opposite are very quick to ignore the importance of these industries to Australia—their historical importance and, unquestionably, their future importance to our great country. The second characteristic of the Australian economy that those opposite ignore is the emissions intensity of our electricity grid. We emit about 0.9 tonnes of carbon for every megawatt hour of electricity. It is high by global standards. That level is actually a measure of the dominance of coal in our grid and the competitive advantage we have created as a country by having low-cost coal and low-cost energy.

Because of those characteristics of the Australian economy, the reality is that reducing carbon emissions is challenging and risks being expensive. It is an expensive place to reduce carbon emissions, particularly in our electricity grid. Cheap coal is, of course, a big contributor to that but increasingly, as we know, expensive gas is an important component of that as well. Across the world, countries are coming to the conclusion that the fastest way to reduce carbon emissions is to swap coal for gas. In Australia, with so much of our gas being exported and our gas price being determined by the international price, that is a very expensive thing for us to do.

The risk for us if we move too aggressively is that we will lose our export industries. Let's take a couple of examples of how this might play out in practice and what impact it will have on atmospheric concentrations of CO2 and carbon emissions across the world. For instance, if we were to cut our coal exports to China, that coal would then come from one of two places: from within China or from Indonesia. And let me tell you, Deputy speaker, we know that coal coming from either of those two sources will result in far higher emissions than coal coming from Australia.

If we look at Europe we see a very good example of how flawed policy can lead to counterproductive outcomes. There have been a whole series of papers and research done on the impact of the European trading scheme on global emissions and the one clear message coming from them is that the European scheme has failed. I am quoting here from a research paper published in April 2012 by a guy called Boitier. He tested a very clear hypothesis which has been confirmed in a series of papers and found:

… the de-industrialisation of the developed countries—

particularly in Europe—

in favour of developing countries led to a displacement of the pollutant activities towards the developing countries without a similar reduction of manufactured goods consumption in developed countries.

What that means in practice is that if you put an aggressive scheme in place and you push too hard and you do not think hard enough about how you structure the scheme, you simply export the emissions. That is exactly what the Europeans have done.

I have a chart in front of me that shows that in 1996-97, when Kyoto went into place, the Europeans consumed 10 per cent more carbon in what they ate and what they used than they produced, but by 2008, as result of the carbon scheme they had put in place, they consumed 25 per cent more than they produced. So what had the Europeans done? They had sent their carbon emissions off to China. If we design schemes the wrong way, as I believe the Labor Party and the previous government did, we will achieve nothing. In fact, a carbon tax structured the way the last government structured their carbon tax is a penalty on the competitiveness of our economy and our export industries. It is a penalty on one of our biggest sources of competitive advantage. The result is that it is costing every Australian household $550, it is costing jobs and it is costing investment. That happened because, in an alliance with the Greens, they put in place the world's highest carbon tax in on-again off-again way where no-one really knew what was going on at any point.

Let's contrast that with Direct Action. There are two fundamental features of Direct Action that make it a good program. The first is that it is an incentive, not a penalty. So we will not be exporting our emissions, we will not be punishing our exporters, we will not be punishing our economy. Just as importantly, it is broad based, not narrow. It is not just a tax on electricity. It is a program that extends deep into many activities our economy, including sources of abatement like agriculture, forestry and land use—and I will give some examples in a moment. At the more detailed level, it seeks to find the lowest cost emissions reductions through reverse auctions; it seeks genuine emissions reductions by requiring additionality, so an emissions reduction cannot be mandated by another source of policy—from the states, for instance—it has to be additional to any other program; and it involves streamlined administration. It will be much easier to participate in than the last government's Carbon Farming Initiative.

It includes a crediting mechanism and a purchasing mechanism with $2.55 billion allocated across the forward estimates, and it will include a safeguard mechanism. Despite what we heard from the member for Port Adelaide, the safeguard mechanism is anticipated and it will be a component of the scheme in time. It makes use of existing structures and processes like the Carbon Farming Initiative, the National Greenhouse and Energy Reporting Scheme and the Clean Energy Regulator. We did not want to create any more layers of bureaucracy than the last government already had.

As I said a moment ago, one of the really critical features of this scheme is that it covers a much broader range of activities than is even possible with a carbon tax. Let me give you some examples of the sorts of activities and the sorts of projects that could be supported by the Emissions Reduction Fund. It could involve cleaning up Australia's waste sector by capturing methane for flaring or generating electricity, improving local air quality in the process. It could involve capturing methane from waste water facilities at abattoirs and chemical-processing facilities, something of great importance to my electorate, where there are a number of abattoirs. Those abattoirs are looking at these options as part of what they anticipate will be the ERF. It includes energy efficiency improvements in the commercial building sector, including offices, retail chains and education facilities. This could include partial and full retrofits of existing commercial buildings, installation of energy efficient lighting or fans, or installation of co- and tri-generation. It will include projects to destroy the methane that is generated from manure in piggeries and dairies and projects to reduce emissions by feeding dietary additives to milking cows. This is a far broader ranging scheme. We know that the broader ranging the activities included in the scheme are, the lower the cost of reducing emissions, which is why those opposite are puzzled as to why we will be able to do this so cheaply.

Let me give you a couple of examples of the sorts of projects that are already working under the Carbon Farming Initiative that we will seek to expand as part of this program. Blantyre Farms, in my electorate, run by Edwina and Michael Beveridge, are capturing biogas generated by the decomposition of the piggery manure waste in anaerobic lagoons and the combustion of the methane component of the biogas. The methodology involved is destruction of the methane generated from manure in the piggeries. Already they have been issued 20,000 credits. Another example, just outside of my electorate, at Corowa, is the Rivalea piggery biogas project. They are capturing biogas generated by the decomposition of the piggery manure waste in anaerobic lagoons, and the methodology is destruction of that methane. They have been issued 16,000 credits to date.

One of the things that those opposite like to say is that this scheme is not similar to, is not being replicated by and has no analogy in any other part of the world. But, if we look across the world, the overriding approach to reducing carbon emissions is direct action. Let me give you a few examples. We see in Norway's Carbon Procurement Facility a direct abatement purchasing scheme. We see the same in Japan's Joint Crediting Mechanism and in the all-important United Nations Clean Development Mechanism. We are seeing, in a whole range of countries, energy efficiency such as energy intensity and efficiency target schemes, in place in countries like China, India, Indonesia, Japan, South Africa, Mexico, Russia, New Zealand, Thailand and Turkey, and in many states in the US—all examples of direct action. Those opposite love to crow about what President Obama is doing, but, frankly, what he is doing is direct action.

We realise that there is further work to be done in this area. There are further issues that need to be resolved in our broader carbon reduction policy. One of those is the RET review, and it is important that in the RET review we look at the lowest cost means of reducing carbon emissions. We also know that, in time, we will need to link what we are doing with what is happening internationally, but let's not get ahead of ourselves, because the international developments in this area are still relatively immature. I commend the Minister for the Environment on the work that he has done to get the bill here and I commend this bill to the House.

6:19 pm

Photo of Pat ConroyPat Conroy (Charlton, Australian Labor Party) Share this | | Hansard source

I will begin my remarks by pointing out the inherent contradictions in the previous speaker's comments. He claimed that Direct Action was broader than the current architecture and then nominated two projects that are under the current architecture. The two biogas projects that he nominated are currently under the Carbon Farming Initiative and are accruing credits that are being sold to liable entities under the carbon price right now. The previous speaker, the member for Hume, contradicted himself and yet again demonstrates a complete misunderstanding of carbon pricing and climate change policies.

To begin on the legislation before us, the Carbon Farming Initiative Amendment Bill 2014, this legislation is built on a lie. It is built on a lie that the government is taking climate change seriously. It is built on a lie that this government cares about the future of our children and our children's children. This government is betraying future generations of Australians as we speak with this legislation. This legislation is being debated as the rest of the world moves further down the road of carbon pricing. Over one billion people right now, and by 2016 three billion people, will live in nations or provinces where a carbon price or an emissions trading scheme operates. Our top five trading partners have ETSs at national or subnational levels. Another eight of our top 20 trading partners have ETSs at national or subnational levels. That means that 13 of our top 20 trading partners have emissions trading schemes right now applying to their economies.

The total clean energy investments around the world exceed $244 billion per annum, and we saw the landmark initiatives by the United States government earlier this month, which set a 30 per cent reduction target in emissions from coal fired power in their economy—a huge initiative—and left it up to the states to decide how to achieve these hard reductions, with most states probably going down the route of an emissions trading scheme. President Obama has stated that his preference is for an emissions trading scheme at a national level. Unfortunately, it has been stymied by the Tea Party Republicans in the houses of congress—exactly the same Tea Party economic illiteracy we see from the government. These are all the facts which make their legislation a lie. This legislation also betrays the traditional Liberal values of a commitment to a market based economy, instead emphasising a return to Soviet command and control direction of an economy that would make Lenin or Stalin very, very proud.

The truth is: the carbon price is working. Economic growth is solid, inflation is under control, Whyalla has not been wiped off the map and the carbon price is actually working to cut emissions. Emissions from the National Electricity Market have fallen by 17.2 million tonnes, or 10 per cent, since the carbon price began. Let me repeat that, because people on the other side repeat an untruth that the carbon price is not working: there has been a 10 per cent cut in emissions from our electricity sector in less than two years. On the government's own projections, in the first two years of the carbon price, emissions in Australia will be 40 million tonnes less than they would otherwise be, because of the carbon price. Labor makes no secret of the fact that we would prefer to go to a flexible price emissions trading scheme now. That was our policy at the election. That was our policy in 2007. It is only because of the populism that the other side pursued in 2009 that we do not have a fully flexible emissions trading scheme right now.

Let us not forget that in 2007, 149 of 150 successfully elected members of House of Representatives supported an emissions trading scheme on their election platform. Yet this government is intent on replacing an efficient market mechanism with a giant slush fund—a giant slush fund which it has yet to find a single reputable economist to support. A Fairfax media survey of 35 prominent business and university economists found that only two of those 35 preferred Direct Action to a market-based mechanism to reduce carbon emissions. Thirty of the economists supported the current carbon pricing scheme. Of the two economists they could find to nominally support Direct Action, one of them supported it because he did not believe in climate change, so he thought Direct Action would do nothing and, so, would do less harm. The other one had his own crazy hybrid scheme that he wanted to pursue. This is a scheme that is friendless. This is a scheme which not a single reputable economist will back. And they do not back it because it will not work.

Treasury's own modelling demonstrates that the Emissions Reduction Fund will not hit the target. It will not hit the minimum five per cent reduction target. Independent research modelling undertaken by SKM MMA and Monash University's Centre of Policy Studies shows that the Emissions Reduction Fund will actually see pollution increase by eight to 10 per cent above 2000 levels by 2020. It will reduce pollution by nearly one-third less than Labor's policy and it will require significant additional investment, of between $4 billion and $15 billion, to achieve the 2020 target of minus five per cent. That is the minimum target. This research says the scheme will need an additional $15 billion just to hit that minimum target, and the scheme will see both costs and pollution increase over time. Even with spending increasing to around $88 billion, pollution would still increase by about 45 per cent over the period from 2014 to 2050. It would also subsidise pollution by businesses who do not make changes, with these public subsidies calculated around $50 billion to 2020.

This research is not alone in finding this. One of Australia's pre-eminent economists, Professor Ross Garnaut, has found that the ERF would need to have an additional $5 billion per annum just to hit the minimum five per cent target. And, as the shadow minister for climate change mentioned in his remarks, RepuTex recently predicted that the Emissions Reduction Fund will be completely ineffective and will actually result in emissions at 16 per cent above 2000 levels by 2020.

We cannot even find in their budget papers their committed allocation. The forward estimates in the budget papers have only $1.15 billion allocated to this scheme. Yet the Minister for the Environment keeps repeating untruths that they have committed $2.5 billion across the forward estimates. Well, it is nowhere in the budget papers.

This is an incredibly inefficient mechanism to reduce emissions, for a number of reasons. Firstly, it does not provide a price signal for those who do not win at the auction. Those who either do not bid or are unsuccessful in bidding have no financial incentive to reduce their pollution. Secondly, even if you accept that this is a grant tendering scheme—and that is still up for debate—these have a very poor track record. According to the Grattan Institute, a similar model, the British Non Fossil Fuel Obligation scheme, produced far less capacity than it had been contracted for, because successful bids were never delivered. And the Howard government's own Greenhouse Gas Abatement Program was a spectacular failure. So these schemes have a track record of constant underdelivery.

Even if they do deliver—which they will not—they provide no handbrake on emissions from other parts of the economy. Without an adequate safeguards mechanism, which is not in this legislation, you cannot cap overall pollution; you cannot guarantee that we will hit our targets. Even if you are paying one polluter to reduce their pollution, another polluter over here might be increasing their emissions. There are no safeguards in this legislation. The government promised it again for next year. They have got a record of promising it on the never-never, and I have serious doubts about whether they will deliver it.

In this legislation the government have also demonstrated a form of economic xenophobia by not allowing international permits in, something that the Australian Industry Group has been a constant critic of their scheme for over the years. Their abatement target will be actually much harder to achieve if they abolish other abatement mechanisms in the economy, such as the Renewable Energy Target. This is a scheme without friends; it is a scheme that is incredibly flawed; it represents a broken promise; and it cannot be scaled up.

We keep hearing talk about a bipartisan minus five per cent target. That is wrong. The bipartisan agreement was for a range of targets from minus five to minus 25 per cent, dependent on the actions around the world. The Climate Change Authority, a group of independent experts supported by legislation that those on the other side want to abolish, have already found that a more appropriate target is 17 per cent. It is a weak, weak argument to say that this will hit minus five per cent. But it is much weaker when you consider that our true target, to play our part in a global solution, is much closer to 17 per cent.

This situation is made much worse by the faulty permanence periods embodied in this legislation. The Carbon Farming Initiative legislation had permanence periods of 100 years. This legislation seeks to amend that by reducing it to only 25 years. So we have no guarantee that the promised abatement post 25 years can be delivered, which will lead to significant national accounting problems for our greenhouse gas emissions further down the track.

Even though the permanence period is only 25 years, they are only paying for five years of that. The Australian Industry Group have made the very good point that projects that promise significant long-term abatement will have to overcharge to recover all their funds in the first five years because they have no guarantee that they will get any further revenue beyond that.

The truth is that the government is a group of environmental vandals. They are doing their best to stop a clean energy industrial revolution. The truth is that the countries that will be able compete successfully in the next century will be those that successfully decarbonise their economies—the countries whose exports have less carbon intensity and which develop the technologies to decouple economic growth from carbon pollution.

Those on the other side are condemning us to being a rust-belt economy of the 21st century by abolishing the carbon price, by seeking to abolish the Clean Energy Finance Corporation, by abolishing ARENA—another breach of an election promise— and by attacking the RET. All these measures perform a very important part of the clean technology innovation chain, and the government seeks to abolish all of them because, in the era of the automobile, they want to return to the horse-and-cart era.

They claim a mandate for this. It is a false mandate, because in 2007 both major parties supported an emissions trading scheme, both major parties went to an election promising one. The CPRS was modelled on the Shergold report that Prime Minister Howard announced, yet in 2009—before the Copenhagen conference; they cannot hide behind that—those on the other side walked away from that in an act of petty populism to knife Malcolm Turnbull in the back. It was Tony Abbott's scheme to undermine their leader. He threw away years of economic agreement that an emissions trading scheme was the most efficient way of tackling climate change. But that is no surprise because the Prime Minister is on the record as being a weathervane on this. He is a weathervane and members on the other side of the chamber are following him down that narrow path.

We have an environment minister who uses Wikipedia to repudiate experts. We have a coalition government that ignores the evidence of 97 per cent of published scientific papers that climate change is occurring and that it is man-made. There is no more important debate in this parliament than how we respond to the challenge of climate change. It is not just an environmental problem; it is an economic problem. As I have said, the countries that will succeed in the future will be the ones that decouple growth from pollution. An emissions trading scheme—a market mechanism—is the best way of doing this.

This legislation is not the best way of doing it. The legislation would embody a Soviet command and control mechanism instead of a market mechanism. I have a lot of sympathy for the public servants and other experts who have been tasked with writing this legislation. If I said that they were trying to put lipstick on a pig I would probably be being too kind to the project they were facing. They have been trying take a faulty 10-page policy document hurriedly put together in 2009 and 2010 and put that into something that the public service could actually administer. I do not think they have achieved it, but I applaud their efforts in following the dictates of the day. That is what a good apolitical bureaucracy does in following the directions of an elected government.

But the truth is that we stand at a crossroads. We can be part of a solution. We can be part of the global effort to combat climate change. As I said, three billion people will live in economies under an emissions trading scheme by 2016. We can take advantage of this or we can go down as international pariahs. We can go down as a country that stuck its head in the sand on this measure.

The vision of the Prime Minister trying to put together a coalition of the unwilling a few weeks ago, when he travelled to Canada, was remarkable. He only found one friend for that measure. His conservative friends in the UK and New Zealand repudiated him immediately because it is a step into the past. But this is the kind of thing we see from this government—this coalition, who are hopeless, populist charlatans. When given the opportunity to act in our national interest and to follow the advice of scientists and economists, this government have instead pandered to cranks and sceptics. They appointed people like Dick Warburton and Maurice Newman to advisory bodies to follow those like Alan Jones in the talk-back ranks to repudiate the science of climate change.

I stand proud to support an emissions trading scheme as the most economically efficient way of tackling climate change. I will be able to look my daughter in her eyes and I will be able to look her children in the eyes and say, 'I did my best to represent the interests of this generation and future generations in attacking climate change.' Those on the other side cannot. They will be condemned by history. I am very proud to oppose this legislation.

6:34 pm

Photo of Steven CioboSteven Ciobo (Moncrieff, Liberal Party, Parliamentary Secretary to the Treasurer) Share this | | Hansard source

I move:

That the question be now put.

Photo of Ross VastaRoss Vasta (Bonner, Liberal Party) Share this | | Hansard source

Order! The question is that the question be now put.

The House divided. [18:39]

(The Deputy Speaker—Mr Vasta)

Question agreed to.

6:45 pm

Photo of Ross VastaRoss Vasta (Bonner, Liberal Party) Share this | | Hansard source

The question now is that the amendment moved by the honourable member for Port Adelaide be agreed to.

6:04 pm

Photo of Ross VastaRoss Vasta (Bonner, Liberal Party) Share this | | Hansard source

The question is that the bill be now read a second time.