Annette Hurley (SA, Australian Labor Party) Share this | Link to this | Hansard source

I present the report of the Economics Legislation Committee on the provisions of the Australian Climate Change Regulatory Authority Bill 2009 and other related bills that form part of the government’s Carbon Pollution Reduction Scheme, together with the Hansard record of proceedings and documents presented to the committee.

Ordered that the report be printed.

Richard Colbeck (Tasmania, Liberal Party, Shadow Parliamentary Secretary for Agriculture, Fisheries and Forestry) Share this | Link to this | Hansard source

I present the report of the Select Committee on Climate Policy, together with the Hansard record of proceedings and documents presented to the committee.

Ordered that the report be printed.

Kerry O'Brien (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

I seek leave to move two motions relating to the two reports just tabled so that they can be debated together and the time for today’s debate limited to 60 minutes.

Leave granted.

I move:

That the total time for the debate today not exceed 60 minutes.

Question agreed to.

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

I move:

That the Senate take note of the reports together.

Question agreed to.

I understand that informal arrangements have been made to allocate specific times to each of the speakers in today’s debate. With the concurrence of the Senate I will ask the clerks to set the clock accordingly.

Annette Hurley (SA, Australian Labor Party) Share this | Link to this | Hansard source

Both the standing and select committees reported on both the original CPRS legislation and the changes that were announced by the government on 4 May 2009. The CPRS legislation was the result of a very long process of analysis and consultation by successive federal parliaments and governments. The Senate Standing Committee on Industry, Science and Technology started examining the issue over two decades ago. Its report to the Howard government in 1991 concluded:

... the committee supports concerted action to reduce greenhouse gas emissions ... a target of 20% reductions by 2005 ... it is now time for action. That action must be speedy and must be a practical solution in the short term. Setting up committees to further examine greenhouse issues or putting out press releases imploring the community to be more energy conscious does not constitute action that will result in sufficiently significant reductions of greenhouse gas emissions.

They are very strong words indeed from that standing committee over two decades ago. Unfortunately they were not acted upon.

On top of the government’s exhaustive public consultation process, including the green paper, the white paper and exposure draft legislation, the Senate has had extensive opportunity to scrutinise the CPRS. The Senate Economics Committee inquiry into the exposure draft bills held seven days of public hearings around the country, the Senate Select Committee on Fuel and Energy has had 12 days of public hearings around the country, the Senate Select Committee on Climate Policy has held 10 days of public hearings around the country and the Senate Economics Legislation Committee inquiry into the legislation held two days of public hearings. After all this, many witnesses indicated to us that they were inquiried out.

The parliament has held 13 committee inquiries to look at how we are going to deal with the challenge of climate change, and there have been more than 787 appearances before these committees. Despite this, we are still faced with the absurd proposition from those opposite that we should delay taking action yet again. This follows a moving feast of positions by the opposition on the release their targets, first after Garnaut’s report, then after the Treasury modelling, then after the white paper, then after the Pearce report they commissioned from the Centre for International Economics, then after the select committee inquiry and then after yet another inquiry from the Productivity Commission. And now they are saying they will make a decision after Copenhagen and after the US laws are finalised. The reality is that they have no united position and so will continue to prevaricate and delay rather than working cooperatively to at last move forward on this critical issue.

It has been increasingly clear that the developing countries are not able to continue using resources at the same rate as in the past, and that the current pollution rate will be unsustainable. This is particularly so as developing nations such as China and India experience rapid growth and utilise resources themselves. There are many countries in Asia, South America and Africa that would also look to be on a growth trajectory. It is therefore important that developed nations take a responsible position.

The CPRS has been designed to enable Australia to effectively make a transition over time to a low-pollution economy. The scheme will include all greenhouse gases under the Kyoto protocol and will include around 75 per cent of Australian emissions. According to estimates in the white paper, companies with mandatory obligations under this scheme comprise approximately 1,000 businesses. The CPRS builds the cost of climate change into all our decisions by attaching a cost to pollution for the first time. It puts a cap on our pollution and creates the financial incentives to find cleaner ways of doing business.

The scheme is also backed up by robust, long-term modelling by the Australian Treasury. This modelling concluded that responsible action now is less expensive than delayed action later. This is a critical point, since it is a significant change to our economy and it is important to achieve as smooth a transition as possible for the sake of our economy and the companies and people who are part of it. The modelling concluded that coordinated global action reduces the economic cost of achieving environmental objectives, reduces distortions in trade-exposed sectors and provides insurance against climate change uncertainty. The modelling showed that we can still reduce our emissions while continuing to grow our economy—it was unequivocal that we would continue to grow the economy even with the introduction of the CPRS—and that acting now to reduce emissions will be cheaper than acting later or, worse, not acting at all.

Crucially, the modelling suggests that real GNP per capita growth slows by one-tenth of one per cent per year as a result of putting a price on emissions. With our economy as it is, we should be able to absorb that slowing of growth. This is one-fifth of the cost of population ageing. Moreover, this does not take into account the costs avoided by successful global action on climate change.

Throughout the inquiries we heard mounting evidence from peak industry groups, the financial and investment sector, international law firms and the renewable energy sector that failure to pass the legislation would have an adverse effect on certainty for business in making capital expenditure decisions. The committee heard that large companies impacted by the scheme have been preparing for its introduction for some time—keeping in mind that the reduction of greenhouse gas emissions has been formally recommended since 1991. Australian businesses know that climate regulation is inevitable, but ongoing uncertainty about what form the legislation will take is imposing real costs today. Uncertainty is the enemy of investment and, therefore, job creation. We need to give investors a clear signal so they can make investment decisions that factor in a carbon price, which will be essential to reducing our pollution.

A crucial aspect of the CPRS legislation and other government policies is that funding will be given to renewable energy sources and industries that will thrive under the new regime. Critical for Australia is carbon capture and storage and geosequestration. These are fledgling technologies that are yet to be fully proven. Without funding and the certainty of a carbon cost, the chances are that these technologies will either never be proved or be proved slowly. It is vitally important for our coal and energy industries that these technologies are developed.

The passing of the CPRS legislation is widely supported by peak industry, environmental and social welfare organisations, including the Australian Industry Group, the World Wildlife Fund and the Australian Council of Social Service. Whilst not all will agree with every aspect of the proposed legislation, there is overwhelming recognition of the need to support the legislation, establish the framework for the operation of the scheme, secure investment certainty and place ourselves in a strong position for the international negotiations in Copenhagen—that is, there is no positive economic, environmental or social value in further delay.

It is unfortunate that those opposite have yet again turned their back on this reality despite the commitment of the previous government to introduce an emissions trading scheme. However, it is not just the Labor Party and the Liberal Party that promised to introduce emissions trading. Family First went to the election with a commitment to introduce emissions trading, Senator Xenophon has made it clear that he believes we need to act on climate change, and it goes without saying that the Greens have campaigned on climate change for years. It is difficult, in that context, to understand why they would block laws that would reduce Australia’s carbon pollution by up to 25 per cent. It is baffling to me that some groups choose to stand on an elevated pedestal rather than put in place a scheme that will begin to make a difference.

Without the CPRS in place Australia would need to adopt other measures to meet the targets to which it will agree at Copenhagen. Business unfriendly regulatory measures would raise the cost of reducing Australia’s emissions, and those costs will be passed on to all Australians through higher prices and lower standards of living. The Senate Standing Committee on Economics concluded that the proposed alternatives are a distant second best and much more costly. The report therefore concludes that now is the time for responsible action and that further delays can only lead to higher costs both for the environment and our long-term prosperity.

I would like to thank the secretariat, particularly the secretary John Hawkins, who performed that role for both the standing and select committees. It was a busy and very demanding role. Thanks also to Maya Stewart-Fox, who spent some time with the secretariat as a secondee from the Department of Climate Change. Thanks also to the many submitters and witnesses, especially officers from the Department of Climate Change and from Treasury—and, in particular, Meghan Quinn, who took committee members painstakingly through the economic modelling of the CPRS on many occasions.

Richard Colbeck (Tasmania, Liberal Party, Shadow Parliamentary Secretary for Agriculture, Fisheries and Forestry) Share this | Link to this | Hansard source

It gives me great pleasure to speak on the report of the Senate Select Committee on Climate Policy. This is the inquiry that the Labor Party was not prepared to have. This is the inquiry that Wayne Swan initially set up, but when the political pressure got too hot he decided he had to withdraw it. This is a committee the government could have controlled had it been managed through the House of Representatives committee, where it was initially set up. But I think that in the overall context it was probably better that it was not controlled by the government and that we were able to hear from witnesses across the country in an unfettered way.

A bit over 14,000 representations were made to this inquiry, which gives an indication of how it was viewed in the community. We travelled across the country and went to nearly all states. More than 200 witnesses appeared before the committee over the weeks of hearings. We were prepared to hear from witnesses whom other committees were not prepared to hear from. We placed no restrictions. We allowed industry to come and tell us their story firsthand. We spoke to the environment movement and we spoke to individuals. What we found was that we are being presented with flawed legislation to deal with this important issue—a flawed approach and a flawed scheme. It is a scheme that is designed around the Kyoto protocol, which was determined back in the 1990s. So we have a CPRS that looks backwards to the 1990s not forwards to the 21st century. In fact, even Wayne Swan admitted last week that the scheme may have to be changed after Copenhagen.

One of the key weaknesses in the approach that the government has taken to this is the modelling, and our reports deal with that quite extensively. One of the key concerns that came up consistently through the inquiry was the transitional approach—the transitional impacts and the regional impacts. The government has done no modelling at all on the regional impacts of this CPRS that it is proposing. It claims that modelling would not be reliable. We know that the New South Wales government have done some research—and we understand that some of the other state governments have too—but they are not prepared to release it. So we do not have the advantage of considering that information. But we do know that there will be significant transitional impacts. Industry has told us that. In fact, Treasury even told us that when they said:

What happens is that there is a shift between industries and that means a movement of capital and labour between industries in response to relative price.

So even Treasury acknowledge that there will be transitional impacts, but nobody knows—least of all the government; it has no idea—where these transitional impacts are going to take place or what kind of effect they are going to have. It is interesting that the government continues to quote the Australian Industry Group. Ms Heather Ridout said to our committee:

… some people think that we will get in the Tardis booth in 2010 and get out in 2020 and everything will be hunky-dory …

Treasury’s modelling acknowledged that they could not fully capture those transition costs. I go back to what I said after the Treasury modelling came out: it is not easy to capture transition costs. And we are not in a Doctor Who Tardis box. The government has absolutely no idea of what the transitional costs of this scheme will be. They have not been modelled. The government has not done any work. Treasury have admitted that. The Australian Industry Group—one of the groups that the government continues to quote as supporting its scheme—acknowledges that there are severe impacts to be had from the changes to the scheme, and the government has absolutely no idea where they are. There will be jobs lost now—there is no question that that is going to occur—but we have no idea when or where the new jobs will appear.

For my portfolio area, which is agriculture, this scheme is absolutely diabolical. The government say that they will not bring agriculture into the scheme until 2015 and they will not make a decision on that until 2013. But tucked away in the white paper is a clause that says that, even if the 2013 decision excludes agriculture, mitigation measures should still be applied in agriculture which result in costs of emissions similar to those under the scheme. In other words, if the government put agriculture into the scheme or they do not, the measures will still impact on agriculture.

This scheme—again, a scheme modelled for the 1990s not for the 21st century, looking backwards not looking forwards—does not allow the agricultural sector to take advantage of the many opportunities that there may be to store carbon. The Leader of the Opposition has indicated his preference for some work on biochar, and we heard in our committee a large number of witnesses talking about soil carbon, but unfortunately under the CPRS as it is designed these are all locked out, because we have a backward-looking scheme.

Then we go to the modelling on agriculture. Late last year, when ABARE released the modelling it had done based on instructions from Treasury, you had to smell a rat. Agriculture was truncated at the farm gate and there was no consideration at all of the impacts on agriculture from the processing sector. New modelling was released in March that indicated that there was an impact, and it was not until June—in the last couple of weeks—that ABARE released information that concurs with what the farmers and the farm groups were telling us: that there will be a significant impact on agriculture from the CPRS.

The minister came out saying, ‘Don’t worry; for dairy in the first year of operation it is only 1.9 per cent’—quite deceptive, given that in the first year of the CPRS the carbon price is capped at $10. The real impact is more like nine per cent, which is where it will be when the carbon price goes up to $28. That is for the dairy industry. There will be a 13.2 per cent reduction in returns for the beef industry when the carbon price gets to $28. There has been no attempt to get this work done at the outset. It is just a disgrace that the agriculture sector has been absolutely left out in the cold in respect of this scheme.

Similarly, in the forestry modelling there are extraordinary impacts on rural lands across the country from what was suggested as reafforestation, and yet now ABARE are starting to resile from their comments on that. They say:

Given the modelling framework and assumptions, ABARE’s projections should be considered as an upper bound for afforestation potential.

Again, there are concerns about the scheme and its design.

There are so many reasons not to pass this legislation now. There are so many weaknesses in it. There are so many elements that are not complete. A large proportion of the bill comes in regulations which we have not seen. The government have not finished negotiating with industry. In fact, they have not even finished defining some industries. The negotiations on assistance measures are not completed and the government are absolutely nowhere near designing the complementary measures that were a feature of our discussions and that need to be designed to work alongside the scheme. The government are also nowhere near being able to understand the global position on this issue. As I have said repeatedly, this CPRS looks backwards, not forwards past Copenhagen. There are opportunities in complementary measures in the built environment, transport and, as I have discussed, the land and agriculture sector.

In one of our hearings we heard from ERM Power, who talked about the impact on their business. What they told us effectively was that, because there was a question mark around the whole electricity sector, their capacity—as a winner under the CPRS—to attract investment was diminished. That is quite an extraordinary impact. The government does not seem to understand what it is actually doing here.

In the few moments I have left—and I am sure there will be plenty of opportunity to debate this further in coming weeks—can I commend the recommendations of the majority report to the Senate. A lot of work has gone into this report. It is vitally important. Can I thank in particular the secretariat staff, who worked an extraordinary number of hours. I would also like to thank my colleagues on the committee. (Time expired)

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I would like to comment on the report of the Select Committee on Climate Policy and begin where Senator Colbeck left off and add my thanks to the secretariat who worked assiduously throughout the whole process and put in some incredibly long hours to get us to where we are now. I really want to thank them for that. It was an interesting process, and I would like to thank my Senate colleagues who were part of this committee. I have served on many Senate committees since I came here in 2005, and this committee worked in a very collaborative and respectful way. There were 10 members of the committee, and for the majority of the hearings the 10 members came and actively participated. There was a collaborative atmosphere for the most part in the way that the committee was conducted. I want to thank the chair and members of the committee from all political persuasions. It was a good way of working, because the commitment we made from the start for this inquiry was to try to elicit information. That is what we set out to do.

I would also like to thank the community for their overwhelming response. I do not have the final number in front of me but around 14,000 submissions came to this inquiry from around Australia. People say that the community is now disengaged from the political process, that democracy is not alive and well in Australia and so on. I think that that number of submissions to a policy committee on climate policy shows there is active interest throughout Australia from all perspectives on this particular issue. I would like to thank people who took the trouble to send in submissions.

That having been said, the history of this committee was that the Greens had a proposal for a Senate inquiry into the science of climate change already on the books of the Senate. The coalition had determined that they would like to move for an inquiry along exactly the same lines as the Treasurer had moved in the lower house. So the coalition and the Greens worked together to come up with agreed terms of reference that would look at some of the issues around the CPRS but also at the wider policy debate, because there had not been a look at the complementary measures that could lead to emissions reductions in addition to the Carbon Pollution Reduction Scheme. We looked at issues pertaining to renewable energy and to energy efficiency on the demand and supply sides but we also looked at the land use side as well as the actual climate science issues.

I would like to start by referring to the climate science issues. There was a degree of inevitability that there would be a degree of disagreement over the extent to which Australia should cut its emissions, and that is no surprise. That is why the Greens have cited in a minority report what we think the science was telling us to do, which was not a conclusion of the committee—that is, that Australia must enter the climate treaty negotiations at the end of 2009 with an unconditional commitment to reduce emissions by at least 25 per cent below 1990 levels by 2020 and a willingness to reduce emissions by 40 per cent in the context of a global agreement.

If you look at the evidence from the scientific roundtable and from scientists such as Dr Graeme Pearman, Professor David Karoly and Mr Andrew Macintosh who were gathered there, it was certainly the view of those climate scientists that we need to go to deep cuts and we need to go quickly in any attempt to stabilise the climate at safe levels. In fact, Dr James Risbey from the CSIRO—although he was appearing in a private capacity—told us that what we should be aiming for is closer to 350 parts per million because that would reduce the risk of exceeding two degrees Celsius to more moderate levels. So that was the fundamental disagreement of the Greens with the report.

Having said that, I would like to concentrate for a few moments on the positive information we were able to elicit in relation to land use, land use change and forestry, and I include in that the agricultural sector. Our committee elicited some very important information about the impacts on the primary industry sector, and in particular on the processing sector, and the perverse incentives to do things such as downsize existing operations, which does not make sense but would be one of the perverse outcomes of the CPRS as it currently stands. What came out very strongly in the land use sector—and we have debated this previously in the House with the carbon sink forests legislation—was the way the current situation is structured. Because of the accounting systems under the Kyoto protocol there is an incentive to take food production land out of food production, there is competition for water, and we are not going to be driving the biodiverse plantings that the government claims will be the case. The fact is we cannot afford to lose one hectare of food production land.

While we need to make sure that we have restoration of ecosystems and biodiverse plantings, we need to make sure that we are not driving wood production into old growth forests and using plantations to displace food-growing land. That would be the worst case outcome. We have to make sure that that is not the case. We had a lot of evidence to that effect, saying: we need a complementary measure to the CPRS to look at incentivising those things which maximise carbon storage in the land, in the landscape; we need to incentivise protection of old growth forests and native vegetation; we need to make sure existing plantations are used for what they are planted for, which is wood production; but we need to make sure we do not incentivise the conversion of food production land and water into plantations as opposed to food production. We received a lot of really good evidence, and I would encourage people to go and read the evidence that we got, particularly what was given to us in relation to that.

The other area in which we had very strong evidence was energy efficiency. So much of the debate has been devoted to coal-fired power stations and coalmines and not nearly enough to the potential to reduce demand on electricity through energy efficiency. The committee heard from many people talking about the gains that we would make by implementing energy efficiency measures at the residential, the commercial and the industrial scale. That is clearly an area where we have ad hoc policies and small numbers. We need systemic change, and that came out strongly through all the evidence.

In terms of renewables, what also came out strongly from the roundtable that was held, in particular from the business sector involved in rolling out renewables, is that they not only want a renewable energy target but they want a gross feed-in tariff because there is strong recognition that a renewable energy target will bring on those technologies which are already relatively cost-competitive with coal but you need a gross feed-in tariff to bring on those other technologies which are going to be more expensive than coal in the short term but which we will need if we are going to meet the kind of energy demand for the future we are talking about. To that end I was in Newcastle last week looking at the solar thermal towers and the huge potential there is there to be generating large amounts of energy. Also it is a fantastic opportunity for adaptation in rural and regional Australia, where people with large properties where they can no longer maintain their stocking or their crop regime as they have done in the past because of the changes to the climate now have the opportunity to enter into leasehold or partnership agreements in order to get their income from farming renewable energy as well as the other pursuits that they have. Overwhelmingly it was a very positive experience to be part of the committee and to hear from such a large number of people across Australia from all different backgrounds.

The other area where the Greens disagreed with the committee was in relation to carbon capture and storage. We do not agree that this is a technology that the community should pay for or that will be brought on in a timely manner. We believe the coal industry should actually focus on that.

Australia really has to pull out all stops, as does the whole of the planet, if we are going to have any hope of achieving a safe climate. The evidence has clearly been put before the Senate through this committee from Australia’s leading scientists, and nobody in the future will be able to say that they were not told or the evidence was not made available to the parliament of Australia. It has been. It is now up to people to determine what they do with that scientific information.

In conclusion, I again thank other members of the committee for the collaborative manner in which this committee inquiry has been carried out.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

This current scheme is the form of Mr Rudd, who in his attempt to cool the planet has decided to put the air conditioner on the outside of the house and then switch it on to cool the world rather than cooling the house. Two things are going to happen. First of all, you are not going to cool the planet. The second thing is that you are going to go broke in the process. This is exactly what the scheme is: it is the metaphorical air conditioner on the outside of the house in a vain attempt to cool the planet.

All through this inquiry one thing that kept on coming up on the economic side—I am speaking on behalf of the economics committee and my role in the economics committee—was the cost. Out there in the public there is not a great understanding of exactly what an ETS is, but people will understand that perfectly once they start paying for it. More and more we are seeing, through discussions of people such as Lord Christopher Monckton and Professor Ian Plimer—and there is also an emeritus chair, I think, in Harvard—what the cost of this scheme is. There are two questions that have to be asked: do you have the potential to pass that cost on or do you wear the cost? We are speaking on behalf of the people who will wear the cost. And the person who will wear the cost is the lady pushing the shopping trolley out of the supermarket, who has to pay for the groceries, whose price will go through the roof because agriculture will come in, and the cost will be delivered back to her. The farmer will pay the cost. The coalminer will pay the cost because he or she will lose their job. And the person who loses their job will therefore deliver that cost back to the family, who cannot make the house payment and cannot make the car payment and who will lose their social standing in their own community and get the locks changed on their house because of a political gesture. This is a gesture. It does nothing to the global climate. It is a political gesture and poisonous in how it will affect those people it is delivered to. When this parliament decides to start voting for political gestures we are in a very dangerous process, because there are a lot of gestures out there, there are a lot of great ideas out there, but the reality of them when they are delivered back to the people can be absolutely overwhelming and detrimental not only to them personally but to our nation as a whole.

People have tried to categorise this that therefore you do not believe anything that is environmentally appropriate. That is rubbish. There are so many things, such as biofuels, solar, geothermal and tidal—all these things—that have the capacity to be looked at. But no, what the Labor Party insist on is a very peculiar subset of possible carbon pollution reduction schemes. There is a myriad of carbon pollution reduction schemes, but the Labor Party, in their intolerance in this debate, have said: ‘No, you must only accept one. This our ETS; this is the one you have to vote for.’ They are not playing for the environment. We have proved categorically—even Professor Garnaut acknowledges it—that this will do nothing to the global climate. They are playing this for a political point-scoring mechanism and they are doing it in the middle of the greatest economic turmoil since the Great Depression. That is how belligerent this is as a policy.

The position the National Party has on this is no, we do not believe in this ETS. That has been reflected in the report: no, we do not believe in it. The answer on this ETS is no. The position on other ETSs? Well, there are no other ETSs. There is no alternative policy on the table, so we do not have to have a discussion on something that does not exist. Do you therefore rule out all forms of carbon pollution reduction scheme? Quite obviously not and quite evidently not, because in the past there have been methods that have reduced carbon output and there have been no questions asked. We have sulphur content rules for fuel. There have been tree-clearing guidelines and a whole raft of things that have gone forward.

This is a politically motivated piece of legislation for a political outcome—that is, the Labor Party is gearing itself up for a double dissolution so that it can try and bunny hop the consequences of the next budget, when the Australian people will see in its full glory the complete and utter basket case that the Labor Party has turned the finances of our nation into. As far as the evidence provided to the Senate Economics Legislation Committee is concerned, this emissions trading scheme is the worst possible outcome for our nation. It is absolute economic bastardry of our nation.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

At the outset, I join in the remarks by Senators Hurley and Colbeck in thanking the Senate Economics Legislation Committee and the secretariat—in particular, the secretary, John Hawkins—who have worked tirelessly on this for a considerable period of time and have put in hundreds and hundreds of hours of work.

Anthropogenic climate change is real and is an urgent threat to our very existence. Perhaps there is room for some debate about how big a threat this global problem presents, but I would say to those who deny the threat of climate change, ‘Are you willing to bet the world—literally—that you are right and thousands of scientists are wrong?’ Dealing with this problem will require a global political response that is usually seen only during wartime, but we have to deal with it, and the question is how.

Australia has a small, open economy and, while our overall emissions are relatively modest in the scheme of things, our per capita emissions are amongst the highest in the world. I believe Australia must take early emissions reduction action in order to lead by example and uphold the sort of global cooperative agreement required to address global climate change. In truth, the success of our domestic policy will be judged by how many other countries our lead will motivate to get on board. Therefore, our scheme must be credible internationally and sustainable domestically. Clearly, the overarching goal is environmental in the form of an abatement of greenhouse gas emissions. This abatement will fundamentally be driven by investment.

The second challenge relates to adjustment issues. Adjustment issues range from the income effects on households stemming from the introduction of a price on carbon to the impact on asset values on what the government has called ‘strongly affected firms’. Issues related to carbon leakage and the loss of competitiveness also represent adjustment issues. If we deal with these issues properly, others will follow; if we get it wrong, we could stand as an excuse for other nations, especially our neighbours, not to get on board.

There are also challenges in relation to governance issues. My concern is that the government’s own modelling has understated the costs in the short to medium term of adjusting to a carbon price. That is because the government’s modelling assumes full employment at all times and, therefore, a robust, fast-reacting economy, but that just does not happen in the real world. I think it is also important to add that the government’s cap-and-trade trade approach essentially acts as a penalty-only mechanism: it penalises all emitters as a function of their emissions but offers no direct reward to firms that cut emissions. It is the costs that result from this that lead to the government having to assume weak environmental targets.

It is as if the federal government decided to swat flies with a baseball bat, meaning it cannot swat too many flies in case it knocks someone out. I believe a better designed scheme can achieve much better environmental outcomes. It has been claimed that the government’s model provides certainty, but the scheme has already been adjusted on a number of occasions by the government and it can be manipulated by this or other governments in the future. The government says that there are absolute caps in this scheme and that it is almost as though they are etched in stone, but I would suggest that it is more a case that they are etched in playdough because of the malleability of the current scheme.

I believe that there is an enormous amount of churn with this scheme; that is economically inefficient and there is a better approach. The government’s approach is one of all stick and no carrot. That is why we need to look at an intensity based approach. This approach involves determining for a particular activity or sector an emission intensity baseline. Baselines across sectors and activities in an economy are set at the level that achieves a desired emission level and any producer emitting more than the baseline has to acquire permits in excess of the baseline. Any producer emitting below the baseline is allowed to create and sell permits to those who need to buy permits. This would avoid the churn. It would be more economically efficient. It would deal with the issue of fluctuating prices in the carbon market, as we have seen in Europe, giving investment certainty, which is desirable. It moderates the price effects. These are matters that need to be dealt with and I believe it is important that there be some thorough economic modelling done by Treasury of this and an independent assessment carried out by the Australian Productivity Commission. At the end of the day, it is important that we get the best possible scheme—one that works and one that delivers the outcomes.

I think that most of us in the Senate agree on the destination. We know where we need to go, but we also need to agree on the best way to get there. If the government insist on dictating the route, there is every change they will turn around only to see that no-one else is behind them.

Alan Eggleston (WA, Liberal Party) Share this | Link to this | Hansard source

The coalition senators on the Senate Economics Legislation Committee believe that badly designed ETS is worse than no scheme at all. That is a point of view which Professor Garnaut agrees with. As a country producing only 1.4 per cent of the world’s carbon dioxide emissions, there is no Australian solution to global climate change. We only represent one per cent of gross world product.

Mr Rudd promised before the election to introduce an ETS which would produce deep cuts in carbon dioxide emissions but which would not disadvantage Australia’s export- and import-competing industries. However, coalition senators are of the opinion that the government’s immensely complex ETS will damage our export- and import-competing industries, cost thousands of jobs, devastate regional areas and agriculture, stifle investment and yet not produce any meaningful carbon dioxide abatement. In the opinion of the coalition senators on the economics committee, to rush the introduction of this scheme without knowing the outcome of the December 2009 climate change conference in Copenhagen, without knowing what President Obama will do and without knowing the impact of the global financial meltdown on our real economy is reckless in the extreme.

Providing certainty to business is one of the Rudd government’s most repeated reasons for passing this legislation. However, business have said they do not want the certainty of not being able to compete. They want a scheme which preserves their internationally competitive position. At the hearings into the CPRS amendments, the evidence given by the CEO of the Minerals Council of Australia, Mitch Hooke, suggested the adoption of the Rudd-Wong CPRS would inflict enormous damage on the Australian economy by reducing our international competitiveness and, secondarily, causing the loss of thousands of jobs in the minerals industry. The government’s claim that job losses will be compensated for by the creation of so-called green jobs is one they have made frequently, but they have not told us what the price of that will be. Evidence given at the hearings by Dr Fisher on behalf of the Minerals Council of Australia suggested that green jobs would be lower paid and mean a much lower standard of living for many Australians.

The changes to the scheme announced by the Rudd government on 4 May are nothing more than tinkering, largely arbitrarily, with a flawed ETS likely to damage the economy. In the coalition senators’ view, the proposed changes make the government scheme even more complicated and fail to address several of the key objections levelled by business and community groups. That is, there is still no forecast for the near-term impact of the ETS on jobs and economic growth, Australia’s trade-exposed industries remain at a disadvantage, and there is no assurance that overall emissions will be reduced by investment in complementary abatement measures such as energy efficiency. Delaying the passage of the legislation through the parliament will provide an opportunity for the Rudd government to refer this to the Productivity Commission to assess whether it meets the nation’s economic and environmental objectives.

The coalition senators believe the legislation should be deferred until we know what other countries will be doing. We believe our major regional trading partners, such as China, Japan, Korea, Indonesia and India, will not establish emissions trading schemes and that it is unwise for Australia to rush into establishing a scheme until the outcome of the Copenhagen conference is known.

Ian Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern Australia) Share this | Link to this | Hansard source

I also repeat the thanks of other people on the climate change committee to the secretariat and the secretariat staff, who did an enormous amount of work often in very rushed periods to get the report done and to get the material out. I also want to pay tribute to my colleague Senator Richard Colbeck, who was chairman of a committee comprising equal numbers of Labor and coalition members, a Green and an Independent. He did a marvellous job of getting the committee through its work. He also had the difficult job of trying to get together recommendations which were supported by the majority, and I congratulate him on achieving that. I support, in general terms, the recommendations of the committee. I think there are, in many instances, areas where the committee recommendations could have been stronger, but in the attempt to get a consensus we have gone along with a number of recommendations.

As a member of two Senate committees dealing with climate change, I was disappointed in the Treasury modelling. I do not blame Treasury themselves—they only do what their political masters tell them to do—but the Treasury modelling was clearly deficient in many instances which I do not have time to go into now. Suffice it to say, however, Treasury did not model the impact of the Carbon Pollution Reduction Scheme on rural and regional Australia. I think all of the Labor Party members on both the committees I served on came from capital cities and did not seem to have much interest in what happens in regional Australia at all. The evidence clearly showed that agricultural industries would be, in many instances, devastated by the imposition of this Carbon Pollution Reduction Scheme. The impact of this scheme on jobs in areas such as where I live up in the Bowen Basin coalfields—Gladstone, Rockhampton, Mackay, Townsville and Mount Isa—will be catastrophic. I was disappointed that the union movement rolled over to Labor in the evidence they gave in not fully pointing out the impact that this scheme will have on their members.

All of this action, which will decimate many job-creating Australian industries, is being taken for what everyone accepts will have no appreciable impact on the changing climate of the world. I think we all accept that the climate is changing but, with Australia’s less than 1.4 per cent contribution to greenhouse gas emissions, if we shut Australia down completely it would have no appreciable effect whatsoever on the changing climate of the world. I was delighted to hear Mr Keith De Lacy, the long-serving Labor Treasurer of Queensland for many years, say exactly the same thing just the other day.

What this inquiry and the inquiry of the energy and fuel committee that I appeared on clearly showed is that not enough effort has been made to protect Australian jobs. We will not be making any appreciable difference to the changing climate of the world. What we will be doing is putting Australia at an uncompetitive disadvantage in so many fields. For those, like the climate change minister, who say, ‘Australia has to lead the way and if we go to Copenhagen with a legislated outcome that is going to convince everyone else in the world to follow us,’ I say, ‘What absolute poppycock.’ We were very fortunate in this committee to have two witnesses who had actually been at the Kyoto climate change conference. They are proud Australians and they like to think we are important, but they gave evidence that Australia is a very small player. Unfortunately time does not allow me to repeat the words of people who really know what an international conference is about, but the suggestion that having a legislative response before Copenhagen is going to make one iota of difference is just poppycock and should be ignored. We will all have a greater opportunity later to discuss this. I commend this report to the Senate. It is clear that it should not be passed at this stage and that the government should go back to the drawing board.

Ron Boswell (Queensland, National Party) Share this | Link to this | Hansard source

The Economics Legislation Committee investigated climate change with absolute thoroughness. It held hearings from Western Australia to Tasmania, Melbourne, Sydney and Queensland. Overwhelming evidence was given by just about every industry that came before it—from the abattoirs to the cheese industry, the dairy industry, the paper industry, the mining industry, the coal industry and so on. You could just about write your own ticket that two things were certain from every industry that came before the Senate committee: firstly, that their profit was going to go down; and, secondly, that they would have to lay off many, many people. But we were told by Sharan Burrow not to worry because there are going to be plenty of green jobs—they will be sprouting out of the woodwork.

It may interest Senator Macdonald to learn that I actually went up into the coalfields last week. Senator Macdonald would know, because he lives there, that these workers work exceedingly hard and are exceedingly well paid. But they earn their money; they work 12 hours a day and up to 14 days and then they have time off to go back to their properties—many at the seaside. I put it to them that a green job was probably worth $40,000 or $50,000 if they were lucky. If they were very lucky, they would be getting $40,000 or $50,000. But I did have to warn them that there was no money allocated to go into Central Queensland and not one green job. I find it very interesting that that the CFMEU are acting as cheerleaders for this emissions trading scheme. The only thing I can conclude is that there has been a deal done with the union movement and a deal done with the more progressive element of the Labor Party—the doctor’s wives in green leafy suburbs. And the deal was, ‘Well, we’ll give you Work Choices but you roll over when we introduce an ETS.’ That is the only possible way that I can see any union supporting this.

One of the elements that came up in the Senate select committee was the Treasury modelling. I just could not understand it. In fact I said to one of the Treasury witnesses, ‘Just tell me what will happen if no-one else goes into this and we are out on our Pat Malone.’ She said: ‘Oh, that would be terrific. That would be great. The people who do not go into it, their economies will be booming and they will be able to buy product off us.’ I thought I had misheard her. I asked the question again and I got the same answer. With modelling like that I am not sure that it does anyone any good. There was a closure rule imposed on the modelling, and it was forced to show no change in unemployment. It went like this: no-one will be unemployed because wages will fall and when wages fall then someone will employ the person whose wages have fallen. I thought to myself, ‘That would not be too well received up in the Bowen Basin.’ So I actually told the miners this. I said, ‘Don’t worry, you will be employed; but it will be at a much lower rate of pay.’

Then we were told that the modelling was done on the assumption that all countries were going to go into this and we would not be left on our own. I said, ‘Russia is not going into it. It has said so quite clearly.’ China, South Africa and India are other countries that have said they have other priorities. And what about getting Algeria into this—and Angola, Ecuador, Iraq, Iran, Kuwait, Libya and Nigeria. They are all modelled to come in in 2015. The whole thing is a total nonsense that is designed to cost a huge number of jobs. Jobs will be just obliterated, and the people who are going to pay for this are the blue-collar workers. (Time expired)

Michaelia Cash (WA, Liberal Party) Share this | Link to this | Hansard source

With the current unemployment statistics confirming an increase in unemployment in Australia, the fact that in excess of 200,000 Australians have lost their jobs since August of last year and the continued predictions by the government that unemployment in Australia will rise, it is imperative that every single aspect of government policy be focused on effective measures to ensure that employment in Australia remains high—not policies that will cost Australians their jobs. The evidence given to the inquiry that I participated in confirmed that the CPRS in its current form is both a badly-designed scheme and seriously flawed. It should not be supported. The evidence is clear that, as the government’s central policy to reduce Australia’s carbon emissions, the CPRS fails to reduce carbon pollution at the lowest economic cost, fails to put in place long-term incentives for investment in clean energy and low-emissions technology, and fails to contribute to a global solution to climate change.

There is a considerably wide diversity of views on the subject of climate science, in particular the cause and extent of climate change and the extent to which climate change is a consequence of human behaviour. The diversity of views was reflected in the evidence that was presented to the inquiry. I have disagreed with the conclusion expressed on behalf of the committee at paragraph 2.36. I do not believe that that conclusion properly reflects the evidence that was presented to the committee and I have qualified my views in the report. However, I affirm my view that the planet should be given the benefit of the doubt, but in that respect the only action that should be taken by government to reduce Australia’s carbon emissions is responsible action. Action that is taken at the expense or to the detriment of the Australian people should not be taken. The CPRS in its current form is action that is going to result in Australians losing their jobs. This is not responsible action. It should not be supported.

As a senator for Western Australia, I am particularly concerned about the continued claims made not only to the committee I participated in but to other committees about the potentially disastrous impact of the CPRS on the Western Australian economy. An Access Economics report commissioned by the state premiers and published in June 2009 confirms that the government’s emissions trading scheme would cost 13,000 jobs in WA alone. I will stand up for Western Australia, even if those on the other side of this chamber will sell it out.

I am also concerned at the continual claims that the Treasury modelling in respect of the assessment of the need for the Electricity Sector Adjustment Scheme assistance uses the same competitive spot market assumptions made for the eastern states electricity market in its assessment of this need in Western Australia. In other words, Treasury have failed yet again to recognise the difference in the Western Australian electricity market. This failure to distinguish between the respective models results in a detrimental impact on WA. The failure of Treasury to distinguish between the respective models needs to be rectified in any future modelling.

The evidence given to the inquiry was clear. It is apparent to all serious policymakers on this issue—and unfortunately those on the other side are not in that box—that there is no unilateral Australian solution to climate change, only a global solution. The government’s current Carbon Pollution Reduction Scheme, if agreed to in its present form, will result in action being taken at the expense of the Australian people—but, worse than that, its implementation is likely to achieve the perverse outcome of Australia actually increasing its global emissions.

Gavin Marshall (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

Senator Cash, unfortunately your time has expired. I am sure you are seeking leave to continue your remarks.

Michaelia Cash (WA, Liberal Party) Share this | Link to this | Hansard source

I seek leave to continue my remarks.

Leave granted; debate adjourned.