Ursula Stephens (NSW, Australian Labor Party) Share this | Hansard source

I too rise to make a contribution to this debate on the carbon tax bills. I listened with interest to Senator Boswell, but I fear that the facts might have gotten in the way of a good story. We need to acknowledge that the climate change challenge, particularly the need to lower CO2intensity and thus improve energy efficiency across the economy, is actually closely related to the need to increase productivity-improving investment. That is why Labor see climate change as an opportunity rather than a barrier to a stronger economy. That is why we pursued the clean energy policy that would spur investment in research and development and promote innovation and the use of new technologies and do that at a negligible cost to the economy.

We have always believed, despite the government's denials, that climate change is fundamentally an externality problem, where the costs of the activity are not fully represented in the institution or the market where the decisions are being made about the activity and that then leads to excessive social costs and what the economists would call a suboptimal welfare outcome. We also believe, despite the government's denials, that climate change is fundamentally a global problem and, as with any international problem, coordination issues are the key. We further believe that climate change is a problem whose solution implies costs for certain powerful vested interests in the economy, and we know whose interests are being protected with the repeal of the carbon tax. Finally, Labor believe that climate change is a problem on timescales that are larger than the human life span. So climate change is a long-term, intergenerational problem with the complicating issues that such problems entail.

Professor Ross Garnaut called it a diabolical public policy problem. Others in the field of public policy describe these problems as wicked. That is not to suggest, as many on the other side would, that climate change is a problem that is not solvable. In fact, the most challenging aspects of the problem are practical not conceptual, in particular the need to create a coordinated international approach. Conceptually we certainly understand the externality problems well. We understand the specific nature of climate change externality and we understand the mechanisms needed to overcome the intergenerational aspects of the problem. From a domestic point of view, if the will to address the problem were shared by both sides of politics, it would actually cease to be a policy problem for government at all and would instead become a practical engineering and scientific problem for industry and academia. The challenge would become purely one of invention and investment, and its solution would benefit the economy and our long-term competitiveness and prosperity.

Climate change is not the result of true disagreement about the best solutions that governments and countries might argue as the best policy approach. It is actually the effort to delay or avoid the implementation of real solutions that causes this dilemma. These efforts are born either of a denial of the problem in the first place, which we hear constantly from the government, or of a misrepresentation of the scientific uncertainty in order to delay the implementation of solutions and to delay harm to vested interests. We have heard that argument consistently from the government as well. Both of those explanations apply to the government's position and its action on repealing these bills.

Labor accepts the science of climate change and we believe that we need to do something about it. Mr Abbott and the coalition do not. This bill removes the legal cap on pollution and allows the big polluters carte blanche to pollute, courtesy of the pollution fund being set up by the government. The bill is nonsensical in every way, just as the Direct Action Plan is nonsensical. Experts agree that this will cost households more, while failing to cut pollution.

Several economists, in submissions to the Senate Environment and Communications Legislation Committee's inquiry into the government's Direct Action Plan, have highlighted that any real solution needs to include several features. A broad based carbon price is the first. It will: incentivise investment in deployment of and research in low-carbon technologies; incentivise abatement across the whole economy, which will allow private actors to make low-cost abatement decisions; raise revenue in an economically inefficient manner—taxing a good which produces a negative societal externality is one of the few methods available of raising revenue that does not produce the usual economic dead-weight cost on the economy—and ensure that an equitable approach to climate change is taken. Revenue raised will need to be used to support low-carbon investment, trade exposed industries and low-income earners. It needs to be able to be linked to global carbon markets and thus become part of a global solution to climate change. It needs to be permanent in order to provide policy and investment certainty with long-term carbon allocations decided on the basis of fair Australian effort and scientific advice. Labor's clean energy future legislation satisfied all of these features, and the fact is that the Abbott government does not have an alternative that meets the same standards.

Mr David Rossiter, who appeared before the environment committee's inquiry, reminded the committee that there is very little new thinking in the government's alternative. He said in his submission:

The DAP is very similar to the Greenhouse Gas Abatement Plan (GGAP) introduced by the Howard Government in 1999 as that plan also called for a reverse auction process for abatement action funding. It failed to deliver over a ten year period and was originally intended to be a four year programme. Ultimately despite the increase in implementation period only 36% of the funds were expended and the amount of abatement achieved was considerably less than was expected at tender and at a greater cost per tonne of abatement. It effectively delivered under 15% of its target in its original programme term.

He went on to say:

It would therefore be expected that DAP will suffer from similar problems, that is, it will have a considerably extended implementation period, an inability to disburse funds quickly and have increased abatement costs over those tendered for any abatement it does encourage. The current national target for abatement is a 5% reduction in emissions by 2020. It is unlikely that DAP will be able to achieve the quantum of abatement required by this target within the requisite timeframe. History shows us GGAP was regarded by the Howard Government as a failed experiment as they then adopted an emission trading scheme as their preferred mechanism to address climate change.

So here we have another revisionist policy and the government playing back to the future with everybody's future.

Last year, the OECD released a report confirming that countries could achieve higher levels of emissions reduction at much lower cost if they relied on emissions trading schemes. Emissions trading schemes are already being adopted in many countries around the world, including in the UK, France, Germany, South Korea, Canada and parts of the US and China. The GLOBE Climate Legislation Study, which covers 66 countries across the globe, found that Australia is the only country to be taking negative legislative action in climate policy. The study covers major nations including the US, China, India, Brazil and more.

The government senators' contributions to this debate have been superficial and unconvincing, simply because Mr Abbott and the coalition have not been able to come up with one credible scientist or economist willing to stand up and back their climate change policy. As we heard on Friday at the inquiry hearing, the Direct Action Plan requires setting baselines for a diverse set of projects over a wide variety of sectors. This is a very difficult and highly specialised task that should not be underestimated. It is highly site and geographic location specific. It is extremely resource intensive and it often exposes a lack of firm data from which baselines can be set.

The government claims that the Direct Action Plan will be simple, straightforward and streamlined to make it 'easy for businesses to participate'. But the reality is that the baseline system proposed is extremely complicated, detailed and data intensive if it is to be credible and accountable, as it will have to be, because the grants system proposed for allocating public money will require that. History also tells us that the system will inherently take a lot of time to reach decisions because of the baseline process. Consequently, the time frame for abatement will be reduced from the maximum of five years and costs per tonne will inevitably rise further. We are not that far away from 2020. About 60 actions are identified. This means that perhaps 600 or more baselines might be called for in the bidding process, with each being proposed and having to be independently verified. That alone is an extraordinarily enormous task. But, in addition, by the voluntary nature of participation in the measure, not all of the actions shown will be able to be bid for under Direct Action Plan. There may be too short a period for a return to be made or the risks associated with reliability of any innovation being proposed and other more costly actions will have to be invoked to achieve the abatement required to meet the full quantum of the target.

This issue was also revealed in the Howard government program and consequently any abatement cost curve produced in this form will represent a lower bound on cost and an upper bound on abatement quantity. In other words, the abatement costs will be higher and the total abatement quantity will be less than expected. Under emissions trading schemes, such cost abatement curves represent an upper bound on cost and lower bound on abatement quantity. In other words, there are more abatement options identified, costs are less and total abatement quantity can be higher. That reversal is because the incentive to reduce costs under emissions trading lies with the polluter and more options for abatement will be revealed as development and further innovation occurs. History shows us more abatement options have been revealed in many similar existing market-based mechanisms, such as the US sulfur dioxide reduction scheme.

Examples of the operation of the Direct Action Plan quoted by the government are very misleading. Several government senators have referred to the transport sector and have diligently quoted the Emissions Reduction Fund green paper, for example:

… fleet operators could be rewarded for reducing emissions per tonne of freight per kilometre.

That is an example that has been widely and publicly referenced back to a major transport company by the government purporting to show how the Direct Action Plan will work. While the emissions intensity of that company may have dropped, National Greenhouse and Energy Reporting Scheme data published by the government for the company show that its total emissions have risen by 11 per cent, not fallen at all. The world's atmosphere is not concerned about emissions intensity—and Australia's international target commitments are not framed in such terms. Total emissions are the only issue at stake. The Direct Action Plan is structured counter-intuitively—the taxpayer pays the polluter and the polluter may or may not reduce their emissions. We have no idea how the government intends to encourage compliance with abatement proposals.

Climate change, as we all know, is set to have a major impact on Australia's economy and the environment and these impacts increase significantly with larger increases in temperature. Many senators have made that point in their contributions. We say we know climate change is well understood. Climate change is already occurring, and the independent modelling that has been undertaken has proven that the government's alternative climate change policies will cost billions of dollars more than Mr Abbott claims and will have no chance of meeting Australia's emissions reduction target. The government policy will simply be nothing more than an environmental fig leaf to cover a determination to do nothing meaningful or systemic to address climate change.

We need to be very clear about the government's alternative plan. Achieving the emissions reduction required to deliver its commitment to the five per cent target would require an additional expenditure of more than $4 billion to 2020. What do we have? We have the coalition's approach to carbon pollution, which is to create this $2.9 billion fund to pay Australian companies to reduce pollution. Where Labor's focus is to cap the amount of pollution that can enter the atmosphere and to have a system for business to find the cheapest way to reduce their pollution, the government will use taxpayers' money to pay big polluters. What will the outcome be? Independent research and modelling, undertaken by SKM-MMA and Monash University's Centre of Policy Studies, shows that the Emissions Reduction Fund will see pollution increase by 8 to 10 per cent above 2000 levels by 2020; reduce pollution by nearly one-third less than Labor's policy; require significant additional investment of between $4 billion and $15 billion to achieve the 2020 target; see costs and pollution both increase over time and even with spending increasing to around $88 billion from 2014 to 2050 pollution would still be increased by about 45 per cent over this period; and subsidise the pollution of businesses who do not make the changes, with these public subsidies calculated at about $50 billion to 2020.

The government is actually relentlessly pursuing an ideological agenda—part of its three-word campaign slogan from the last election. This is despite the fact that they are now in government and have access to all the data that informed the Labor government policies. Labor provided unprecedented support for renewable energy through the Renewable Energy Target, the Clean Energy Finance Corporation and the Australian Renewable Energy Agency. The government is intent on abolishing these. Labor provided support for business to become more efficient and productive, including the Clean Technology Program and the Jobs and Competitiveness Program. The government is intent on abolishing these. Labor also provided support to reduce land sector emissions through the Carbon Farming Initiative. It is interesting that the government is set to replace this with the Green Army of underpaid, undertrained young workers and a tree planting target that is simply unachievable.

Labor has contributed an extraordinary legacy: our wind capacity has trebled; more than a million households have solar panels installed; employment in the renewable energy industry has more than doubled to over 24,000 people; and during the first year of the carbon price around 150,000 jobs have been created while the economy continued to grow at 2.5 per cent and inflation remained low, pollution in the national electricity market decreased by seven per cent and, again, renewable power energy generated as a share of the national electricity market increased by 25 per cent.

In the area of agriculture, since 2011 farmers and landholders have been able to create offset credits under the Carbon Farming Initiative. Under that CFI, farmers are able to earn credits by reducing carbon pollution and then sell those credits to the 370 large business that are covered under the emissions trading scheme. That CFI means that farmers are able to do their bit in helping Australia to meet its international target while at the same time earning income by reducing carbon pollution. The government intends to decimate clean energy investment in Australia and their legislation to abolish the Clean Energy Finance Corporation has shown their complete antagonism to the sector. As the committee heard in the hearing last week, agriculture barely gets a mention in the government's green paper—something we certainly have not heard from any Nationals senators.

We want to tackle climate change in the most effective way possible. We put in place a very effective scheme. It was delivering on the long-term outcomes that Australia needed to deliver; it was providing best-practice guidelines for industry and innovation; and all the experts tell us that an ETS puts a legal cap on carbon pollution and lets business work out the best, cheapest and most effective way to operate within that. That is what this government is seeking to unravel, and it will be to the nation's peril.