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]
To start with, I would like to put some facts on the record so that people can understand what we are trying to do here. Australia is one of the world’s most carbon-intensive economies. To reduce our contribution to climate change we have to change the way our economy works. That is not an easy task. If it were easy, previous governments would have done it. If it were easy, we would not have this Senate still debating this issue some nine months or so after the draft legislation was first released.
One of the key policy balances that has to be struck is how you manage that transition and how you manage to support existing industries—which will face a carbon price which they have not previously faced—whilst you develop the incentive for new industries. In trying to strike that balance we have consulted widely; we have spoken to industry, to NGOs and to the community. We have considered very carefully not just Professor Garnaut’s report but also the results of that consultation.
Senator Milne puts forward a view that somehow we have given everything away. I just want to make this point, because it is a very important point: if you look at the percentage of auctioning as the marker of an environmentally effective scheme, the scheme before the committee, even with the amendments that have been negotiated with the opposition, has a higher level of auctioning than the European Union’s scheme when it first started, or even in its second phase, and a significantly higher level of auctioning than the scheme that is currently before the United States congress.
I just remind the committee that the ETS in the European Union had less than three per cent auctioning in phase 1 and less than 10 per cent—depending on the country—for phase 2. It is not until phase 3, which I am advised does not commence until post 2012, where you would have a majority of auction permits. The scheme that is currently before the US congress—the Waxman-Markey scheme—and also, I am advised, the Senate bill, has 85 per cent allocation. So, what is that—15 per cent auctioning to start with? So the proposition that somehow we have gone way beyond where other nations have gone is simply factually incorrect.
Secondly, on the next point, it is important to recognise that at the commencement around two-thirds of our permits will be auctioned. The emissions-intensive trade-exposed sector we anticipate would be around 30 per cent or less at the outset. I think the electricity sector adjustment scheme is in the order of six per cent of permits and you have the additional permits for coal. But the majority of permits will still be auctioned.
The next point I make is really the same point I make when people talk about a carbon tax. There is a lot of talk—and the senator used the phrase ‘rent seeking’—about people coming to government seeking assistance for the transition. Why does anybody think that changing how you implement a carbon price is going to resolve that issue? Firms are still going to ask for assistance, it will just be in a different form. Under Senator Milne’s scheme it would be in the form of cash, as opposed to permits. Under a carbon tax it would be around how that tax was levied, the quantum of it and who could get exemptions from it or how that would work. These policy issues are not avoided, because they are central; they are about how we best and most fairly share the costs of moving to a lower carbon economy.
We have, in terms of the plan before the committee, the single largest share of revenue under this scheme going back to Australian households, because this is about how you support the community and the economy through the transition. My advice is that in excess of 40 per cent of the revenue goes back to Australian households. In fact, I think it is more than that when you add the proportion of household assistance which would be provided through the fuel tax offset, which I know the senator opposes. I make that point because I think there seemed to be in Senator Milne’s contribution some suggestion that this is wildly at odds with what the rest of the world is doing. Actually, we are doing quite well if you regard the percentage of auctioning at the outset as a marker of the environmental effectiveness of the scheme.
The senator suggested there is no incentive for clean energy. We have invested a very large amount of money in clean energy initiatives. My recollection is that just in the Solar Flagships program there is $1.5 billion or $1.6 billion and there is some $460 million in Renewables Australia, and a four-fold increase in the renewable energy target. These are not investments that can simply be waved away, and we make no apology for the transitional assistance in this bill—absolutely none. This is about supporting existing jobs at the same time as giving the incentive for those industries to become more efficient and for Australian companies to invest in clean energy projects and lower carbon goods and services.
The government opposes these amendments. The senator chose to focus on the emissions-intensive trade-exposed program. This is a set of amendments that provides assistance in cash. We do not believe that is the appropriate way of providing assistance. We also suggest that the provisions add significant complexity to the EITE—emissions-intensive trade-exposed—regime. It also does not deal with the issue for business, which is how you manage the hedging against the carbon price. One of the benefits of providing assistance in permits is that there is an inbuilt hedge because the value of the permit correlates with the carbon price. If you are providing assistance in cash, one would anticipate that if the carbon price is higher than anticipated at the time that the cash is provided you will get companies seeking additional cash assistance from government.
Finally, I think these amendments also deal with removing the fixed price and the price cap mechanism. We do not agree with these. We have consciously sought to have a measured start to the scheme. We do want to give business and the community time to adjust to the introduction of a carbon price. That is why we have a fixed price and a price cap for the first four years. We think that is an important transitional assistance.