Senate debates

Monday, 30 November 2009

Carbon Pollution Reduction Scheme Bill 2009 [No. 2]; Carbon Pollution Reduction Scheme (Consequential Amendments) Bill 2009 [No. 2]; Australian Climate Change Regulatory Authority Bill 2009 [No. 2]; Carbon Pollution Reduction Scheme (Charges — Customs) Bill 2009 [No. 2]; Carbon Pollution Reduction Scheme (Charges — Excise) Bill 2009 [No. 2]; Carbon Pollution Reduction Scheme (Charges — General) Bill 2009 [No. 2]; Carbon Pollution Reduction Scheme (CPRS Fuel Credits) Bill 2009 [No. 2]; Carbon Pollution Reduction Scheme (CPRS Fuel Credits) (Consequential Amendments) Bill 2009 [No. 2]; Excise Tariff Amendment (Carbon Pollution Reduction Scheme) Bill 2009 [No. 2]; Customs Tariff Amendment (Carbon Pollution Reduction Scheme) Bill 2009 [No. 2]; Carbon Pollution Reduction Scheme Amendment (Household Assistance) Bill 2009 [No. 2]

In Committee

4:15 pm

Photo of Christine MilneChristine Milne (Tasmania, Australian Greens) Share this | Hansard source

by leave—I move Green amendments (5), (9), (17), (18), (21), (22), (26), (27), (31), (32), (57) and (61) on sheet 5786.

(5)    Clause 4, page 5 (line 2), omit “or for a fixed charge”.

(9)    Clause 13, page 33 (line 15), omit “free”, substitute “auctioned”.

(17)  Clause 82, page 128 (line 9), omit “or for a fixed charge”.

(18)  Clause 82, page 128 (line 13), omit “free”, substitute “auctioned”.

(21)  Clause 88, page 131 (lines 13 and 14), omit paragraph (b).

(22)  Clause 88, page 131 (lines 15 and 16), omit paragraph (c).

(26)  Clause 90, page 135 (lines 29 to 32), omit paragraph (1)(b), substitute:

             (b)    the unit is to be issued as the result of an auction.

(27)  Clause 93, page 137 (line 1), omit “free”, substitute “auctioned”.

(31)  Clause 101, page 141 (line 20), omit “free”, substitute “certain”.

(32)  Clause 101, page 141 (line 23) to page 142 (line 3), omit paragraph (1)(a), substitute:

             (a)    a person has been issued with:

                   (i)    an auctioned Australian emissions unit in accordance with the emissions-intensive trade-exposed assistance program; or

                  (ii)    a free Australian emissions unit in accordance with Part 11 (destruction of synthetic greenhouse gases); and

(57)  Clause 353, page 437 (lines 23 to 25), omit paragraph (1)(ea).

(61)  Clause 382, page 459 (line 33) to page 460 (line 2), omit “free” (twice occurring), substitute “auctioned”.

The purpose of this particular set of amendments goes to the question of how permits under the Carbon Pollution Reduction Scheme are allocated. The Australian Greens believe that there is no case whatsoever for allocating free permits. We believe that there should be 100 per cent auctioning of these permits. This is an absolutely critical matter for us and I indicate to the committee that this is a matter on which we will seek a division later.

As Professor Garnaut noted:

Whether a permit is sold or granted freely, the recipient will acquire the full economic and financial benefit it bestows because it is a scarce and valuable resource.

That is absolutely right and as the cap tightens then, of course, the value of those permits, in theory, increases. I cannot understand for the life of me why the government would not seek to get the economic and financial benefit of the permit through an auctioning process rather than by allocating so many free permits. Once you go down this path of a combination, as the minister has clearly chosen to do in the scheme, then you get into a situation where it is highly complex. There is pressure on government decision making and you get rent-seeking behaviour. If ever we have seen rent-seeking behaviour in Australia, it has been from all of the companies who are here declaring why they should get free permits and from the coalition going into bat saying: ‘Yes, even more free permits. Every player should win a prize here, everyone should get free permits, more free permits and more free permits on top of that.’

This is one of the fundamental aspects of this scheme which is grossly unfair because it provides an economic benefit to the biggest polluters for which they do not have to pay. It deprives the government of the economic benefit which would accrue from the full 100 per cent auctioning of the permits, which they could use, as Professor Garnaut noted, to address some of the market failures in the development of new low-emission technologies. We have had endless debates in this chamber; the government argues constantly against a gross national feed-in tariff saying, ‘Why should the community have to pay an equivalent amount? It is a regressive tax et cetera’, in order to provide a benefit to low-emission and new breakthrough technologies. So it continues to oppose it and argues that the renewable energy target is enough.

But the problem we have here is that there is no money anywhere for research and development, commercialisation and scale-up from pilot to small-scale and medium-scale enterprises in the renewable, in particular, and energy efficiency technologies. We argue that we do not have the money to do it, and here we have a perfect income stream with which to do it and the government has chosen, in a most unfair way, to shoot the benefit to the people who have caused the problem—the big polluters who get these free permits and to all the associated rent seekers. In the case of the energy-intensive trade-exposed, there is no set of underlying principles, which goes to the compensation behaviour. So it has become a political auction, not an auction in terms of what ought to be occurring—that is, that everybody should have to purchase their permits and then the government would have the revenue which it could then use to encourage new technologies. It would have a revenue stream to assist, for example, in meeting our obligations to mitigation and adaptation in developing countries. It would also have an income stream which it could use to pay cash payments, if it chose to do so, to some of the polluters. It could also recognise that it could go for accelerated depreciation on new investment in some of those instances whereby they reduce their emissions. It would actually place the cash in the government’s hands to start wit, to actually drive the low-carbon to zero-carbon economy.

Instead of that, the government has said, ‘No, we choose not to have the money. Instead, we will give these free permits out in increasing and vastly increased quantities to coal fired generators, to the energy-intensive trade-exposed and so on out there. We are giving out the free permits.’ Does that mean that they will not pass on that price rise to the customers? No, of course it does not. They will get something for nothing and they will continue to pass on a higher price. The higher price will be compensated in part by the government’s compensation package to low- and middle-income earners, but we have already seen that almost $6 billion out of that compensation package was taken directly out of the pockets of consumers and put into the pockets of these coal fired generators and energy-intensive trade-exposed. For the life of me, I cannot understand why a government which says it is committed to principles of fairness and social justice wants to have one of the largest wealth transfers in Australian history across to the people who have caused the problem. There is no justification for it, as Professor Garnaut noted in his review:

The Review concludes that there are no identifiable circumstances that would justify the free allocation of permits.

Professor Garnaut was appointed by the government to do an assessment of the emissions trading scheme. He has come back and said that the review concludes that there are no identifiable circumstances that would justify the free allocation of permits, and if we have learnt anything from the European Union and the mistakes they made with their emissions trading scheme, and also from some of the mistakes that have been made in the north-eastern Regional Greenhouse Gas Initiative in the United States, that is to recognise that they all say that they made a mistake in going with the free allocation of permits to the extent that they did, and they are now all on track, moving towards to the full auctioning of permits. In my view, and it is a view in which we concur with Professor Garnaut:

… it would be inappropriate to use freely allocated permits as part of the proposed transitional assistance arrangements for trade-exposed, emissions-intensive industries.

Doing so would suggest that assistance is being provided on compensatory ground, and this would be wrong. Professor Garnaut goes on to talk about that in the review.

I would be very interested to hear the government’s justification as to why it did not take the advice of Professor Garnaut and why it did not look at the experience of the Europeans and the state of the budget and recognise that it had in its hand the capacity to have 100 per cent auctioning and the income stream from that 100 per cent auctioning to go and do the things it needed to do—like upgrading the national grid, for example—so that it could maximise renewable energy and energy efficiency. It could have used the money to support R&D, commercialisation and scale-up of new technologies. It could perhaps have allocated some of the money to the overseas commitments we are going to have as part of a fair financial mechanism.

Given our discussion on this last week, I note with interest that the minister was unable to tell us last week what Australia’s position was on financing, but it seems that the Prime Minister was able to tell people at the Commonwealth Heads of Government Meeting, only a day or so later, that Australia would be contributing to that. We have yet to see a figure. I do not know whether he gave one or not, and the minister might be prepared to inform the Senate as to whether the Prime Minister actually told people at the Commonwealth Heads of Government Meeting what Australia would contribute to the fast start-up financing—which, I indicate again, the Greens support, always have supported and will support. We would like to know where the money is coming from, since the government have chosen to give free permits to the big polluters rather than having the money to allocate to whatever cause they chose in terms of meeting the carbon challenge—including some cash payments, some accelerated depreciation and some mechanisms to assist some of the big polluters to make the transition that they need to make. Instead, they have locked in coal fired power.

For those people who say, ‘Oh, look; just pass this and then fix it up later’, they have probably not realised that what the government has done—by the requirements on the coal fired generators—is to require the big polluters to keep on going and keep on polluting out to 2020. All the business analysts are now recognising that, far from driving the transformation, the government’s new arrangements actually lock in the generators to coal fired power well beyond 2020. As I indicated in this debate on Friday, the emissions trajectory from Australia’s energy sector does not come down, even under the government’s analysis, until 2034—and that is way, way too late to address the problem.

I am looking forward to hearing from the minister as to why the government went down the path of free permits to the big polluters and why it chose not to have 100 per cent auctioning and get hold of the income stream that would have helped to drive that investment in the new technologies that we know are out there and that are desperately in need of cash. As they will all tell you, there is no money at the moment and no incentive under the Renewable Energy Target Scheme for geothermal, solar thermal, wave power and that next tranche of technologies which cannot at the moment compete with wind, for example, let alone coal, and will not be able to do so unless there is some money out there to actually assist them to scale up and do this. This was the opportunity to have the cash, and it is not there. There is a preference to give it to the big polluters rather than to use it in the national interest.

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