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]
Consideration resumed from 27 November.
I am very keen to get on with this debate after a one-and-a-quarter-hour delay on some procedural motions that should have taken five minutes. Because the government chose to filibuster with their speeches we have been denied one hour and 15 minutes to deal with this legislation that we have been told time and time again is superurgent and has to be dealt with. We had the spectacle of the Leader of the Government in the Senate wasting 15 minutes of our time in one instance and others from his side wasting more time. We have now lost one and a quarter hours which we could have used to proceed with the issues before us and which are of vital interest to the people of Australia.
I refer the Minister for Climate Change and Water to the domestic offsets program, which is the amendments currently before the chair. I ask that the minister correct me if my understanding is not correct, but I understand that we have to develop offset methodologies for the domestic offsets program. My question to the minister is: what internationally accepted principles will the government use to develop those offset methodologies? I particularly emphasise that I am interested in internationally accepted principles. The minister might indicate to me in what way these principles are ‘internationally accepted’. I would appreciate the minister addressing that query.
These were outlined in the offer document which went to the good senator’s party room last week. We have said that those offsets that can be counted towards Australia’s international climate change obligation will be able to have abatement credited, subject obviously to proper methodologies being put in place. That is necessary because we are talking about a market. If we are serious, as the government is, about wanting farmers and other landholders to have access to the carbon market then the market will need to have confidence in whatever abatement is achieved by these mechanisms. I refer the senator to page 6 of the offer document which went to his party room last week, which refers to the establishment of an independent expert committee. The internationally accepted principles outlined in that offer document are the principles of permanence, additionality, measurability, avoidance of leakage, independent audit and registration.
Thank you, Mr Chairman. The minister should be cautious in attributing intentions to anyone, particularly to other senators in this chamber. I suspect it is probably against standing orders that she so do, but again I thought my question was very reasonable. I am sorry it has upset the minister in her haste to have this urgent bill—which does not start for 19 months, I might add—dealt with before Christmas. So I am sorry if I have upset you, Minister, but my point is that when you say ‘permanence’ and the other words which you mentioned in what way are they internationally accepted? I know they are in a document you referred to, which many other people in Australia do not have access to, and I appreciate the answer as far as it goes, but what has caused those criteria to be internationally accepted? Are they what they have adopted in the European Union? Are they what they have adopted in the United States? They would not have adopted them in the United States, because I do not think the United States has a legislated position. Perhaps the minister could just indicate in what way those principles are internationally accepted.
What I propose to do is provide a copy of this to the senator. This copy, however, has markings on it, so I will do that later. I would refer the senator to section 259K of the amendments before the chamber, which outline the answer to his question.
I would like some clarification on the offsets. What sorts of activities would the minister imagine to be eligible under the domestic offsets program? Could she give some practical examples? Does the minister envisage that activities under the GGAS and NGAS programs, which cease with the CPRS, would be covered and would this program cover landfill gas capture activities? Finally, would this program cover activities currently covered under statewide certificate schemes? I am happy to break those questions up if that would be useful.
In relation to landfill and legacy wastes, we have indicated that CPRS permits would be provided for abatement from sources that are counted towards Australia’s international commitments, subject to the development of robust methodologies. That includes legacy wastes and emissions from closed landfill facilities.
I would like to follow up on Senator Macdonald’s question. On the methodology principles, the minister referred to proposed section 259K(1)(a) to (f). While I do appreciate the minister pointing us in that direction, it is still not all that clear. This is one of the things that certainly farmers are very keen to know, given that some of these offsets have been attributed to counteracting, if you like, some of the inputs that still exist within the ETS that they are going to have to face—things like fuel, transport, electricity, fertiliser and chemicals. It would be quite useful if perhaps, given the vague nature of proposed section 259K, the minister were to outline for the chamber exactly what types of activities are going to be undertaken. From reading through all of this, there is nothing that I can see that is all that specific to be able to take back to farmers. It seems to be a more general sort of view of how it will all work. So perhaps the minister, if she is able, could advise the Senate of some of the more specific components of that.
Could she also, perhaps, give a bit more specific detail around the Domestic Offsets Integrity Committee, which is going to be constituted to assess offset methodologies. Again, that is quite vague. I would be very interested to know how that integrity committee is actually going to determine what those offset methodologies are going to be and the criteria that that is going to use. Perhaps the minister could respond to the Senate around those two issues, bearing in mind the very important issue for farmers of having to bear the embedded costs that still exist within the ETS. Even though, of course, agriculture in terms of the animal emissions is excluded, all of those input costs are still going to land right in the lap of the farmers. We have been told that these offsets will be available to counteract some of that. Perhaps the minister could just give us a bit more detail around those issues.
I propose to table the offer document which was provided to the coalition party rooms—I think we provided 100 copies—and which sets out in detail quite a number of the answers to the questions which are now being asked. I table that, and I would invite the senators asking questions to look at the document which was provided to the Leader of the Opposition, Mr Turnbull, and, as I understand it, to the joint party room—but certainly the Liberal party room—prior to the party room endorsing the amendments, because many of the questions that Senator Nash and Senator Macdonald are proposing go straight to that issue.
In relation to the committee, I would refer the senator to page 15 of the amendments before the chamber, which outlines the Domestic Offsets Integrity Committee. I think it is quite clear from—
I thank the minister for that, and I have read that page, but again it does not clearly outline for us the specifics around how that integrity committee will work. Obviously it is to advise the secretary in advising the minister assessing the costs and benefits. That particular section still does not necessarily, I think, provide the specifics either to the Senate or to those listening. In response to the minister’s comment about the information provided to the joint party room, of course, that has not necessarily been provided to all those people out there who are very keen to listen to the activities in the chamber this morning. So perhaps the minister, for the benefit of those listening, might like to refer to my previous question and, indeed, answer it. I am sure they will be able to access the bill itself, not necessarily information that is provided to the joint party room, and I think that for the benefit of people listening to the process in the chamber they would like an answer to my previous question. Again, part 25A really does not give us a great deal of detail regarding how the committee will utilise a certain series of criteria to do it.
I am attempting to be helpful, but I would suggest to Senator Nash that there are quite a number of pages about how the committee would operate. I am not sure how much more I can add than the legislation itself, which sets out the establishment of the committee, the functions of the committee, the membership of the committee, the consultation by the committee, the procedures for the committee, disclosure of interests and a whole range of other procedural matters. So I am a little at a loss to know what further information I could possibly put to Senator Nash to explain the committee to her.
In relation to the document, I certainly understand that not everyone in Australia would have a copy of this document. It would be unusual if everyone in Australia did have a copy of such a document but, for the senator’s information, we have ensured that the document which outlines the government’s offer to the opposition has been on the government’s website—I believe my portfolio’s website—since Tuesday of last week.
I apologise to the Minister for Climate Change and Water if I was not clear. I do appreciate that all that information about the make-up of the committee is contained within the amendments, but my question went more to the criteria around the determination of those offset methodologies. If the minister feels she cannot provide that information at this stage, perhaps she might like to provide it to the chamber at a later time. I certainly do understand the processes.
Perhaps Senator Nash was not in the chamber when I referred Senator Macdonald to proposed section 259K which appears on page 9 of the amendments. It goes through the methodology principles. Essentially, the issue is that we want to ensure we maximise the possibility of Australian landholders being able to be part of the solution on climate change. We have to ensure that in doing so we do not expose taxpayers to fiscal risk by including abatement in our scheme that is not recognised internationally or that does not have sound principles associated with it. We need to ensure that this is abatement in which everyone can have confidence. The proposal we have is for a process which ensures that both farmers and people seeking to invest in sequestration or abatement activities will have confidence in the value of that activity and its environmental integrity.
Before I call Senator Nash once more, I have noticed that there are a number of senators who want to ask questions. I will give senators a chance to have at least a couple of follow-up questions, but I will call senators who have not particularly had an opportunity to ask questions up to now.
Thank you, Senator Macdonald—I am happy to yield to my colleagues on this issue. Minister, has there been any modelling or accounting work done, given that there has been an intimation to farmers that this new inclusion around these offsets will in some way go, as I said before, to counteracting the embedded costs that remain in the ETS? Has the government done any work at this stage on accounting modelling on, say, average size farms, measuring what the current input costs will be and potentially the amount of funding that may be forthcoming from these offsets? That may sound like a very simplistic question, given the complex nature of the detail of the bill, but I think the people out there listening, and certainly farmers, would be very keen to know whether, for a certain cost that will land on them and will be inescapable under this emissions trading scheme, the government has determined how much of that will be offset by some of the measures being proposed by the government and could be utilised by the farming community.
Senator Nash, on Wednesday, Thursday or Friday last week you asked me a question about farm input costs and I have already put that on the Senate Hansard, so I refer you to my answers on that occasion. In relation to how much farmers could earn now, that would be very difficult to model. As you know, there are very different types of opportunities on different types of land and for different types of practices. No modelling exercise on what an average farm could or could not earn by virtue of a certain number of offsets being available has been done. It would be rather difficult for it to be done.
I respect her right to vote against this, but she ought not to come into this chamber and pretend that if the government did any more modelling it would change her view. She is like Senator Joyce in that they will oppose this bill.
Mr Chairman, I rise on a point of order. I have every right to come into this chamber and ask a question under the process of the Senate regardless of what my decision is going to be on a piece of legislation. For the minister to suggest that senators should not come into this chamber and ask questions on legislation because she has a predetermined view about how we are going to vote is entirely inappropriate.
With respect, I think the senator is being a little sensitive. I do not think I have resiled from answering questions for 3½ days now. I will certainly continue to answer her questions. I am simply making the point that she calls for modelling and everybody knows that any modelling will not change her view. If it would, Senator, I would appreciate you indicating that on Hansard but you—
Correct, it will not change your view. That is the only point I am making. I would also refer the senator to page 38 onwards of the supplementary explanatory memorandum, which goes through more detail in relation to offsets. I will respond now to Senator Xenophon. He asked me about GGAS. I am advised that any project that meets eligibility requirements can be brought forward under the offset program and eligibility there refers to being counted towards Australia’s international obligations. Existing activities under GGAS will need to meet additionality requirements. We obviously cannot pre-empt the methodologies which need to be developed by the committee, which is being proposed in the legislation before the Senate, and decisions would obviously need to be made about individual projects by the regulatory authority. I should also note that part 10 of the bill on reforestation will allow GGAS forestry projects to transition into the CPRS.
I am grateful to the minister for that. That relates to the whole issue of additionality, which I will raise at a later stage with some further amendments. In relation to the document provided to the coalition, which has been tabled, pages 6 to 9 deal with the whole question of offsets. In terms of the independent expert committee that will be established to vet offset methodologies and to recommend robust methodologies to the minister for approval, the document indicates clearly that the minister would accept or reject methodologies but would not be able to modify the committee’s recommendations. In terms of the methodologies that are recommended, to what extent is that a public process? Are they documents that will be tabled? To what extent will there be transparency in that process with respect to the whole issue of methodologies?
In the EM which was tabled there is, at page 42, an indication of the public consultation process. It says:
Before advising the Minister to make or amend a determination, the Committee will be required to publish a draft of the determination on its website and invite public submissions …
We are proposing 60 days for the public to make submissions. This will obviously provide the public with an opportunity to review and comment on draft determinations which provides additional assurance regarding the environmental integrity of any offset methodology determinations. That is at page 42 of the supplementary EM.
I would like to go back if I can in relation to the whole issue of offsets. In the government’s original legislation, there was no provision for domestic offsets other than for reforestation projects. Now we have provision for a program of domestic offsets in addition to those reforestation offsets. When the government argued this case originally it said, as I understand it, that the reason that a decision could not be made about agriculture and these kinds of offset projects until 2013—and then if a decision was made to proceed with the inclusion it would not happen until 2015—is that we do not have the accounting methodologies worked out sufficiently to be able to guarantee that we had the carbon outcomes that were being claimed as a result of the projects. Can the minister confirm that that was in fact why the government was delaying until 2013 to make a decision in relation to this matter?
I may not have understood the senator’s question, but I think her question was about why we had a particular position on offsets pre the negotiation with the opposition. Obviously, there was a negotiation, but this is also connected to our decision to exclude agriculture indefinitely. There is a difference between creating offsets when you are subsequently going to review whether a sector will come in and creating offsets when the policy position is that that sector is excluded indefinitely. We are in the second world now, and we do believe this is a sensible process. It is one which ensures environmental integrity and certainty for farmers. There is no point having an offset agreed for soil carbon, for example, that does not have integrity and is not regarded by the public, the community and the market as being additional, as having cogency. If we are serious about generating economic opportunities through this for farmers then it will have to have market credibility. We are seeking to put in place a regime which enables that, but it is a different position to the position prior to the negotiations being agreed with the opposition—absolutely.
Yes, and it is precisely because of that difference of position that I am asking the question. My understanding is that the reason it was not in there before is that we did not have the methodologies. We do not have the accounting mechanisms right now. If somebody applied tomorrow for a biochar project for an offset credit, would we have the accounting methodology to be able to say, ‘Yes, I can say that that biochar has sequestered X amount of carbon; therefore, so many credits are available’? My understanding is that that does not exist. I notice, in the agreement with the government, that it will introduce voluntary emissions reporting trials in 2011 to allow the sector to better understand and manage its emissions. Can you explain to me what these voluntary emissions trials in 2011 will be and when do you expect we will have the methodologies and accounting rules in place to start issuing these permits?
Some of these might be issues that the committee would resolve—in terms of methodologies and so forth. I would also like to make a point about biochar. Under the agreement and because of the current status of the international accounting rules, biochar is only a voluntary market offset. It would not be an offset within the CPRS itself, for the reason that inclusion of a non-recognised source, as the senator knows, would expose the budget to fiscal risk.
This is precisely the point I am getting to. When the government went to the Australian people, they acknowledged we do not have the accounting in place to make robust claims about offsets. The reason reforestation and afforestation went in there is that there is methodology for that and you could apply it. For all these other things, there is no methodology.
Whether they are counted under Australia’s existing emissions reporting requirements or they go into the government’s national carbon offsets standards, which are outside our current requirements, you still have to have a robust methodology, which does not exist. The government’s previous claim was that by 2013 we would have a better idea and we could make a decision about agriculture. My understanding was that the reason for the delay to 2013 was these methodologies. I am concerned that the coalition has been sold a pup here by thinking that farmers are going to be able to benefit immediately from offset projects, when what we are seeing here in the documentation is that there would be voluntary emissions reporting trials in 2011 to allow the sector to better understand and manage its emissions. Presumably this work is going to go on through the next two or three years, which would take it out to about 2013, which is when the government previously said it would be ready to make a decision.
To follow through on that: I notice that you say that, first of all, you will be setting up the Domestic Offsets Integrity Committee. Then there will be regulations struck which provide for an authority to approve an application form. I notice that applications for Australian emission units must be accompanied by a report on the project in respect of the relevant reporting period. Then a report on an offset project must be accompanied by a prescribed audit report, and the audit report, therefore, must be in line with a set of robust methodologies. It is envisaged that the audit report will be prepared by a registered greenhouse and energy auditor as defined under the National Greenhouse and Energy Reporting Act. I ask the minister specifically: how many registered greenhouse and energy auditors do we have at the moment with expertise in agriculture, land use and emission offsets?
I will take on notice, if I may, how many auditors there are who are identified under the NGERS. I am not sure we would track that data. The NGERS—the National Greenhouse and Energy Reporting Scheme—of course, was Mr Turnbull’s legislation when environment minister, and it is a very useful piece of legislation in terms of providing the reporting base for some of the work we are doing now. I will check that. As I said, I am not sure that the government would, in fact, be the registrar for all such expertise.
I am not sure what the policy proposition or question is. The point that Senator Milne seems to be making is that nothing is going to happen. That is not what this says. What this says is that we want to explore how we can bring more sources of abatement either into the scheme or through the voluntary market. Some of this work will be difficult, but we believe it is important and we have been very clear in this agreement about the specified areas in which we think work needs to be focused. We think that the NFF are correct when they say that farmers want to be part of the climate change solution, and we want to provide those opportunities.
Possibly. If I may suggest, that is probably an interjection to the NFF, not to me. I will leave that particular fight to the two of you. What we have said is that we have to ensure the environmental integrity remains, and this is a set of mechanisms within this legislation that enables that to occur.
I could not agree more. The area of land use, land use change and forestry is absolutely critical. I really want to see rural Australia being given opportunities to reduce the carbon footprint and, in fact, assist all of us in protecting carbon stores and reducing emissions. I am emphatically in favour of that. I have had lots of talks with the National Farmers Federation and other farmers groups in relation to this. It is the Greens view that the whole of the land use, land use change and forestry sector should be taken out of the CPRS, not included in it, and that it should be run as a parallel scheme. You need to look at several factors together: water sustainability, biodiversity, food security and resilience in country communities. The concern I have is that picking and choosing offsets in the way that is happening will lead to perverse outcomes, just like the managed investment schemes did. Unless you look at food security, water and biodiversity all at once, you end up favouring one and destroying another.
That is the perspective that I come from here. It is not that I do not think we ought to be doing everything we can to maximise carbon stored in the landscape; it is about the manner in which this is done. It is not clear to me that it has really been well thought through. It is very ad hoc, and with adhockery you get those perverse outcomes. I assume the government said it would not make a decision until 2013 about whether it would include agriculture because it had to think through a lot of these methodologies. Now that it has been brought forward there will be a rush to get something done, and when you do that you inevitably end up, as with the managed investment schemes, with adverse outcomes for water, food security, land prices and all sorts of things.
The point that I was getting at with the registered greenhouse and energy auditors is that, whilst there are clearly people registered as auditors, I cannot see that they would have expertise in an area that we have not developed yet. In fact, they could not have expertise in this area. Minister, you were saying that units will only be provided for abatement that has already occurred and not for abatement that is expected to occur in the future, so there is going to be a whole lot of uncertainty in the next few years as to what you may or may not do on land in relation to this.
I would like to ask a specific question in relation to avoided deforestation. Can the minister explain to me what is intended here? Is it intended that you will provide credit to people who already have a permit to log or to clear and that, therefore, avoided deforestation is a decision not to proceed with a land clearance or logging permit? Can you just explain to me how this will work? What is your baseline? If that is what is intended, you will give credit to people who said they were going to clear and now are not going to. What sort of hectarage across Australia would people in theory have permission to log or clear?
I will take advice on that last issue. In relation to the first issues you raised, you made the point about whether or not other environmental objectives would be delivered through this, such as biodiversity and so forth. This is a difference of views between your party and the government which manifested in the debate over the carbon sinks tax legislation—that is, whether you ensure all environmental objectives through one piece of legislation or you make sure that the broader environmental framework which applies through Commonwealth and state or territory legislation deals with the issues that you raised, such as biodiversity and other objectives.
We do not believe that it is sensible to require every aspect of those environmental considerations in this section of the legislation. For example, there are planning legislative frameworks which apply in states and territories in relation to land use, and it is not sensible for the Commonwealth to second-guess all of those. What we have said is that, in relation to forests, we would include conditions for forests earning forest credits to have adequate water entitlements. That is consistent with the National Water Initiative, and we think that is sensible. We have also referenced planning approvals, which I think arose out of a discussion between your party and the government in the context of the previous debate in this chamber on the taxation measures.
In relation to your comments about whether or not auditors have expertise in a particular area, can I say, Senator, that there is a lot that we have to develop expertise in very quickly. If this country had started acting on climate change much earlier we would have far more expertise in many areas than we currently have. We have come a long way in two years, but we have to go much further. I for one am not of the view that you hold back reform on the basis that you are not sure if you can develop the expertise. I think when reform is in the national interest you have to simply ensure that you develop it. The government will work—as we are currently—with agricultural stakeholders. We were previously working through a technical options group which included a range of representatives from farming organisations. We will continue to consult with the sector. We may have to prioritise. I do not want to second-guess that consultation process. It may be that there is a decision made in consultation with the sector about which of the things we would prioritise first. I do not know; that will be a matter for the consultation process. But we are serious about delivering a more comprehensive approach when it comes to land use. We know it will take work and it certainly will take dialogue with the sector.
With regard to the CPRS permits and those listed, I think I have good news and bad news. With regard to the burning of savannas, I think we can be satisfied that those methodologies are in place. I refer to the West Arnhem Land Fire Abatement Project. In contrast, referring to livestock—livestock contribute some 75 per cent of the greenhouse gas emissions, or at least they are ascribed to from agriculture, from activities of ruminants—I fear for our capacity to be able to develop robust methodologies in that area, given the diversity of management of ruminants in Australia from pastoral to agricultural, from extensive to intensive. I question the minister following the policy commitment to exclude agriculture indefinitely from the CPRS and the statement:
Minister, firstly, what will that process be and, secondly, could that actually lead to a withdrawal of the exclusion of agriculture from the emissions trading scheme? I cannot see anything in the documentation that helps me understand the details proposed with regard to the Productivity Commission review.
Regarding the 2015 reference to the Productivity Commission, I am not sure I can provide further details, because some of the questions the senator asked are for the Productivity Commission. It is the government’s view that we have made a very clear policy decision as a result of the discussions with the senator’s party about exclusion indefinitely. That remains our view. The senator is asking me to second guess what a future government, or a future parliament, might do. As he knows, nobody binds a future parliament. Obviously, I can only indicate what the government’s position is.
It goes to the concern upon the parameters under which the Productivity Commission may undertake that review, its process, its inclusion or exclusion of the participants and whether it may lead to a recommendation that the exclusion of agriculture be withdrawn.
I take issue with Senator Back’s suggestion about the exclusion of the participants. He may have a particular view about the Labor Party and farmers, but we have actually spent quite a lot of time ensuring the sector was engaged with this. Both Minister Burke and I have met with various peak bodies. We have an officials-level process that has worked through some of these issues with various peak representatives and we will continue that process. This only works if there is good consultation with the people who would actually benefit from these mechanisms—we agree with that.
You mentioned livestock. That is one of the things that was driving the argument for exclusion. I do not want to get into much of the debate I got into with Senator Joyce about this—and much of it probably was not appropriate for the Senate chamber—but the reality is that the inclusion of agriculture would have had a lot of problems and that was one of them.
Minister, I want to go back to the domestic offsets that I was talking about before. I refer you to paragraph 4.68 on page 37 of the explanatory memorandum. It says:
The Minister must not make or amend a determination unless advised to do so by the Domestic Offsets Integrity Committee …
I then refer you to the next paragraph, 4.69:
The Minister may revoke a determination at any time, without obtaining advice from the Committee …
So, in repeating that, paragraph 4.68 says the minister must not make or amend a determination unless advised by the committee and, in the next clause, the minister may revoke a determination without obtaining the advice of the committee. They seem to be directly contradictory. Am I misreading that? I would appreciate the minister’s guidance.
I am sure that when the senator was an outer ministry minister in the Howard government he would have come across the difference between ‘make amendment’ and ‘revocation’. I have not taken advice of this—I will check—but I assume the words mean precisely what they appear to mean. To avoid a situation where a technical issue is the subject of political lobbying, the minister cannot make a determination or change a determination unless advised to do so. The minister does have the power to revoke. They are quite different things. I will check to see if this is correct, but making and amending are different functions to revoking.
Thank you, Minister. So you are saying that the making and amending can only be done on the advice of the integrity committee but, if you are making another decision in relation to the determination, you can do that without seeking the advice of the committee. If the minister’s interpretation is correct—and I appreciate that she says she is going to get some further advice on that; it does seem contradictory—could she explain the principles behind paragraph 4.68 of the explanatory memorandum, which says that you cannot deal with a determination unless you get some advice, and the next clause, which says you can do something else with a determination but, in that case, you do not need advice?
What is the domestic offsets integrity committee all about? Is it to give the minister advice on what she should or should not be doing? Let me not ascribe motives to the committee but it seems to me that, while you recognise that making, amending and dealing with a determination requires advice from what is apparently going to be an expert committee, if you are going to make some other decision in relation to the determination, there is not the same urgency, apparently, to get that advice from the expert committee. I appreciate that the minister was checking her interpretation but, if it is confirmed her interpretation is correct, what is the principle behind it when you are dealing with a determination and making a decision? Is it that in some cases you need the advice of this expert committee but on other occasions, if you are dealing with a determination, you do not need the advice of that expert committee?
I am advised that my reading of the words was correct. An example for why you might want the minister to have the power to revoke would be if there were a change in the international accounting rules such that continuation of the particular methodology without changing it would potentially expose the taxpayer to financial risk. Obviously, once we sign up to a target under Kyoto or any subsequent arrangements we have to ensure that what we do in Australia is capable of beating that target. In addition, we can do things voluntarily. If there were a change in that boundary you would want to alter the situation domestically pretty quickly; otherwise, you might be exposing taxpayers to risk. You would then want to enable the committee to go back and say, ‘Now the international framework has changed’—possibly for the better; that may well be the case—‘and we will propose a different determination for the minister.’
Another issue where you might want the minister to be able to revoke may be if there were an ecological or biodiversity issue which had not been considered. Obviously, these are public decisions and I am sure they would be the subject of a significant amount of scrutiny. The architecture of what is being put before the Committee of the Whole does seek and build in a very substantial amount of consultation and transparency. It is a reasonably strict provision that says a minister can only change or amend a determination on the advice of the expert committee. That is intended to give farmers and others who are able to participate in the land use sector opportunities and the certainty that this is not going to be under the vagaries of some political process. That is the intention.
Thank you for that. But, if it is good for the goose, it is good for the gander. If you need the advice of this expert committee—and I think it is a good idea—in one instance, why do you not if you are going to revoke it? The same considerations might apply. In a circumstance which I cannot quite think of at the moment, revocation might be attributed to what you referred to as a ‘politically influenced decision’. Were that the case, the same would apply.
We should bear in mind that this legislation does not come in for another 19 months—that is, until 1 July 2011, as I understand it. I acknowledge that this is not going to determine my decision on how I vote, and I am sure that it will not in the end determine Australian support for or opposition to the legislation, but it might just support the Australian majority view that we are perhaps rushing into this. I know that the minister will say that we have been talking about this for 10 years, two years or 18 months—I think that she said since March this year—but these quite substantial and on the whole very beneficial amendments that the government has, kicking and screaming, agreed to need some scrutiny, not scrutiny on the overall impact but scrutiny on the things that I am raising with the chamber at the moment. It seems contradictory. Therefore, I wonder why we are being asked to sit night and day to rush this through, bearing in mind that it will not take effect until 19 months from today.
Minister, I would appreciate your response to the technical question but also your comment on why it is essential to do this now when there are these little things to work through—and this is one that I happened to come across. I am only looking at the explanatory memorandum. I followed it through in the legislation, but that did not give me much help. It takes time to clarify these things. I hope that are able to work these things out. Perhaps if I sit down the minister can answer (a) the technical question that I raised and then (b) why it would not be appropriate for us to spend a bit more time going through these relatively minor issues. But they are things that relate to the operation of the scheme—which, once it is introduced in 19 months time, we need to have schmick and down pat. We do not want complaints in 19 months time with those affected saying: ‘Hey, the minister has revoked this determination without getting the advice of the domestic offsets integrity committee. Why did she do that? She had to get advice from this expert committee when she introduced it and when she amended it. We might be happy with it the way it is, but now she is going to revoke it and she is not getting the advice of this committee.’ It seems an inconsistency. Perhaps it is not. Perhaps the minister will be able to wave it away. But it causes me to worry that the actual implementation by the government of the day needs to be as good and smooth as it can be. This sort of inconsistency, from my experience, would make that difficult.
I have answered the question. It is just being asked in a different way. If the senator wants to have a discussion about delay, he and I have traversed that in this chamber many times. We believe that it is important to get this legislation through. This country has been talking about action on climate change for some 10 years. It has been 10 years since his government, the former Howard government, received its first report on the benefits of emissions trading. It has been over two years since then Prime Minister John Howard received advice from Dr Peter Shergold as Secretary of the Department of the Prime Minister and Cabinet saying that emissions trading was the way to go and that Australia should not wait for the rest of the world. The advice was, ‘Go soon.’ We have had the International Energy Agency say that the longer we wait, the higher the costs. They have estimated that, just for the energy sector transformation that the world is required to engage in, the cost of each year of delay is around about $500 billion a year.
The senator talks about when the scheme comes in. He knows that equally important is the signal to investors. The Business Council of Australia, the Australian Industry Group, Origin Energy and others have called for this legislation to be passed because we do need that signal to investors. We know that business certainty is a key issue in ensuring we can transform our economy. I think I have answered the senator’s question. He may not like the answer but it has been addressed.
Going to your issue, Senator Milne, I do not have any advice. I think your question was about the amount of land under licence able to be harvested. The officials in the chamber do not have that. Whilst we could take it on notice, my advice is that the Commonwealth would be unlikely to keep it because, as you would know, timber harvesting—and I appreciate your party’s position on this—for better or for worse is in large part regulated by state governments. It may be that you could reference the RFAs but I am doubtful that the Commonwealth would keep a comprehensive register of active licenses or authorisations to clear and I do not have officials here—or certainly not in this department—who would be able to give you advice about that.
I think the best way of understanding how we would approach the avoided deforestation issues is to come back to the primary principles of integrity. The conditions which would need to be met are measurable and verifiable or capable of being verified, additional and permanent. Obviously these are also matters which would need to be worked through by the offsets committee but some of the work that is being done internationally currently may be of assistance to us domestically in considering these matters.
Following your ruling, I know there are other senators wanting to speak and I have some urgent things to do in my office, so I will leave for short while although I do have other questions on offsets that I want to come back to. Minister Wong, it is not that I do not like the answer you gave; it just does not make sense. One of the reasons you gave for having the domestic offsets integrity committee giving advice in making or amending was so that those involved might not think there is some political reason for doing it. I think you acknowledge that most farmers do not like your party, Minister Wong, but that is quite beside the point of the debate. I think in that instance you are very right and very correct. I think perhaps that is the only thing I have ever agreed with you on. That was your reason for having the domestic offsets integrity committee advise you on making or amending, and my question, which I think is quite reasonable, is: why then doesn’t the same reason apply when you revoke it? Perhaps other people might think there is a particular political motivation behind the doing.
What I am saying to you is: wouldn’t the legislation be better with the benefit of the advice of the independent and expert domestic offsets integrity committee in both cases? Perhaps that might have been the better way to do it, and I seek your further advice—if you are prepared to; you may just say you have already answered that question, in which case I will take it that you cannot or, for some reason, do not want to answer it.
I think that is seeking to box me in, and I am not going to be, Senator Macdonald. I have answered it. You do not agree with the government’s policy on this or on other issues. That is fine. You will vote against the bill, but I have answered that question. I have given you an indication of the sort of factual scenarios that would ground the reason for that.
Senator Milne, before you ask me the next question I will come back to you on the auditor issue. You asked how many auditors are likely to have expertise in this area, and I am advised that the GEDO, the Greenhouse and Energy Data Officer—I am not sure where we came up with that particular title, but anyway—will commence registration of auditors in early 2010. Applicants for registration will be able to indicate whether they have expertise in specific industry sectors, such as agriculture. I am also advised that the government expects that a number of individuals with expertise in carbon sequestration, including forestry, will register under NGERS.
I thank the minister for her answer, which was that the people who could register as auditors have expertise in agriculture or whatever. Just being an agricultural scientist—which I might say is an excellent profession, and we do not have enough of them and need more—does not mean that they would have expertise in carbon sequestration. This is an entirely new field and a very specialised one. So, whilst it would be more likely to have people in the forestry sector, as the minister is well aware it is a hugely contentious area in terms of developing methodologies for estimating the amount of carbon in a standing forest or in a regrowth forest et cetera, let alone a new field, which is that of estimating it in agriculture, soils and the whole range of things.
My concern here is that in order to get this show on the road you are going to have to have your methodologies in place first and then your people trained in those methodologies, in spite of their being experts in their field. And those people are actually going to have to help in developing the project, which they are then going to audit, essentially, because we will not have enough people who have expertise in the field. This is what has happened to us in a whole range of these new areas. As tragic as it is, this is what happened with our attempt at insulation, where we just did not have enough people trained in installing insulation and now we have two people electrocuted and one person dead from heat stress as a result of people not being adequately trained, I would suggest, to do this work. That was just in one field and this—assessing agricultural sequestration through these various methods—is a much more technically demanding field than that.
I want to come back to follow that up. You have said in the arrangement that you made with the coalition that there will be approval of projects and crediting of abatement from commencement of the CPRS on 1 July 2011. Approval of projects and crediting of abatements cannot both happen on 1 July 2011, according to what you are saying, because you are saying that units will be provided only for abatement that has already occurred and not for abatement that is expected to occur in the future. I assume that that means that you can apply for your project to be credited on 1 July 2011 and then there will be the process by which you will actually do the abatement. Then you will apply to have the abatement credited and, as it says here, you have to have an audit report by a registered auditor to actually then qualify for that. So I should imagine that if this starts on 1 July 2011 it is very unlikely there will be any abatement credits issued in a reasonable length of time—it is hard to say how much time.
I want to particularly go to the issue of permits being provided for abatement from the sources counted towards Australia’s international commitments, subject to the development of robust methodologies. So, presumably, if there are no methodologies there will be no permits for abatements from these various sources. I want to go through a couple of them—actually, all of them—for a start in a general question. What is the baseline year for all of these things? Taking fertiliser use as an example, obviously we are talking here about nitrous oxide and about changing farming methods to go organic and get off petrochemical fertilisers and all the additives that are generating the nitrous oxide emissions. If you as an individual farmer decided you wanted to get abatement for this over the next few years, are we saying that 2009, with the passage of this legislation, is the baseline year? So, you would say that I used X for my property in 2009 and I am therefore measuring it against that? The same goes for all of these things—for manure management, livestock and all the rest of it. You are going to have to have a baseline year. You especially need it for avoided deforestation; otherwise, in theory, people who have forests on their land that they have no intention of clearing could go out now and apply for a forest practices plan in order to demonstrate, 12 months down the track, that they had intended to clear it and can therefore now claim something that they never intended to do in the first place. That goes to the issue of additionality.
Then there is the issue of leakage. You might give abatement to someone for not clearing something they said they were going to clear, then over on the other property they start clearing and so you have got leakage. As you know, Minister, and as we all know, these are the issues that have vexed the international community for a long time. How do you measure it? How do you make sure that you have genuine additionality? How do you stop leakage driving the practice from one thing to another?
My first question relates to livestock, manure management, fertiliser use, the burning of savannahs and agricultural residues, rice cultivation, avoided deforestation, legacy waste and emissions from closed landfill activities. How are you going to calculate the baseline year from which you would measure the abatement activities? You cannot wait for the methodology if you are a farmer, for example, because you might want to start now to maximise your abatement in three year’s time.
I have a couple of points. First, I would just like to remind the Senate and Senator Milne that the reforestation provisions in part 10 start a year earlier. Some of the discussion appears to have proceeded on the basis that all offsets would occur later.
I think I can go to the next part of your question. Your question, Senator Milne, essentially proceeds on the basis that the only way to determine additionality is by taking a temporal snapshot. One of the key reasons why we have an integrity committee with a general principle which is set out—and I will come back to it—in 259K(2)(c) is so that we do not have a situation where you get the sort of perverse outcomes that you just postulated. You need to ensure there is genuine additionality. How you achieve that and how the baseline is constructed may differ from sector to sector. For example, if we had put in this legislation, ‘The baseline will be what you were going to do as at 1 July 2010,’ some of the difficulties you raised may well have arisen—what if someone then went and got a permit to clear land et cetera? The general proposition is at 259K(2)(c), which sets out the test:
… the project would not have been proposed or carried out in the absence of the issue of free Australian emissions units in accordance with the domestic offsets program …
It will be a matter for the committee to determine how best that test is met by particular activities.
I thank the minister for that but I am afraid I am a bit at a loss. I just want to take it back to where the farming community is now: hearing on the radio that the agreement between the government and the coalition is that offset permits will be available for abatement activities around fertiliser use, avoided deforestation et cetera. They are now sitting at home thinking: ‘What do I have to do on my farm and when do I have to start? Who do I register it with? How am I going to do this in order to take advantage of it?’ I think the minister and everybody in this parliament is quite right in assuming that people in rural Australia want to be able to do things. There is no question about that. They want to be able to do things to reduce their emissions. Anyway, it makes infinite sense to reduce their marginal input costs by getting rid of a lot of the inputs that cost them a great deal of money, and fertiliser is one of those. But how, on fertiliser use—
Sitting suspended from 12.30 pm to 1.30 pm
Just before the lunch break I was asking some questions about those activities which are counted towards Australia’s international commitments and for which CPRS permits will be provided subject to the development of methodologies. In particular, I was asking about issues around measurability, additionality and leakage and asking how, if you were a person engaged in any of these activities, you would know when this would apply, what the baseline years would be and so on. I was particularly asking, in relation to fertiliser use, how that would apply, because if you are on a farm and you decide that you are going to go organic, reduce your fertiliser use or something then you are going to need to know how that is going to be calculated in order that you can start making very clear what hectarage you have covered, what volume of fertiliser you have used over a period of time and that sort of stuff. It seems to me that there is no detail about how that will happen.
The issue I will come back to is avoided deforestation. This is an issue which still is not sorted out. I know the minister referred to REDD and the ongoing negotiations, but we still do not have a clear view of how avoided deforestation is going to be accounted for. I want to know: in the CPRS permits that might be provided, is that going to include properties or activities whereby a farmer in Queensland, for example, had let native vegetation grow back and then might have been going to bulldoze that for ongoing utilisation and then decides not to? Would that be counted as avoided deforestation?
I also note, while I am on my feet, that the minister said she could not give an idea of what sort of hectarage across Australia might be counted as avoided deforestation, because that is something that the states have carriage of. The problem we have here, which makes this grossly unfair, is that every state seems to have different policies with regard to the clearance of native vegetation. In Tasmania, for example, because Tasmania has virtually no laws against land clearance, clearing native veg and so on, there would be an argument that anyone with any vegetation or forest on their land could be credited with avoided deforestation by virtue of being able to log it if it is not covered by existing legislation. So I am rather keen to get a much better sense of some reality in the debate about what sorts of time frames we are talking about before you would get robust methodologies, especially since they will need to be consistent with international best practice and what is agreed in international negotiations.
Perhaps one of the difficulties is that Senator Milne has a particular policy view about Tasmanian forests—to which she is entitled—but is really seeking to assert a range of policy propositions through this legislation which are about that issue. I again refer you to my answer before the break, Senator. It is the case that the detail on all of these offsets has not been finalised. That is why what the amendments do is to set out the regime which enables them to be finalised. That is why the legislation talks about the objectives. I have referred you to those objectives, including in relation to additionality.
I have explained that, if this legislation is passed with these amendments, we will put in place a committee to consider the factual circumstances of the range of offsets which are set out in the legislation for the purposes of considering that additionality. I do not propose to go to hypotheticals such as some of the ones Senator Milne proposes, because those hypotheticals assume certain facts which would be the subject of consideration by the committee in the context of a very clear legislative requirement around additionality, around integrity and around clarity.
In terms of the point about needing to make sure people know what is required of them, I agree with that, but that work needs to be done. Obviously, some of that work has been commenced. There has been work progressed through our current consultation processes with the agricultural sector, but I absolutely concede and agree that this work is there to be done, and so it should be. This legislation is putting forward the framework which enables that to occur and a process which will enable that to be resolved. It is prescriptive as to the need to be measurable and capable of being verified. The subclause I read out before reads:
… the project would not have been proposed or carried out in the absence of the issue of free Australian emissions units in accordance with the domestic offsets program …
So that is the additionality objective. What the committee determines is required as the methodology to ensure these policy objectives are met in relation to each particular section of this, or each particular type of offset, will be a matter for the committee and it will involve technical work—quite highly technical work—and that is as it should be.
I ask the minister why, in addition to avoided deforestation, she has not included forest protection. There are many people who have proactively chosen to covenant forests or who want to protect forests, and there is no current regime which would reward them for that. In order to prove avoided deforestation, they are going to have to show that they would have logged it and now will not because of this scheme. It seems to me unfair that those people who have chosen to protect their forests, or will choose to protect their forests, are not included. If you are going to respond by saying, ‘Well, that’s not additional,’ then you cannot prove additionality for people saying: ‘We’ve got a standing forest. We weren’t going to protect it. We would have logged it and now we want the credits for not logging it.’ That is why I find this whole issue of avoided deforestation quite difficult. I do not see how you are going to get any robustness in the methodologies.
You have said that the permits are subject to the development of robust methodologies, and it is clear that the methodologies do not exist now and will not exist for some time, depending on the degree of difficulty of proving this with each different category. Is the minister concerned that we could have a vast number of CPRS permits issued as a result of these abatement permits, and is she concerned that we could end up with, effectively, a lot of hot air permits?
The very regime that we are discussing is designed to ensure that this aspect of the scheme—as with all the others—has integrity. So the hot air issue arises if the senator does not believe that the regime and the integrity of the offsets committee and the statutory test are sufficient. My submission to the Committee of the Whole is that this sets out in the regime a very clear statutory requirement around additionality and a committee which we have taken care to try and construct so as to avoid the politicisation of these processes in order to ensure that this is about real abatement.
Thank you. I would ask the minister to tell me then, given the time frame to establish the committee and to develop the robust methodologies and the trials et cetera, when it is her expectation that CPRS permits for abatement might come on line?
In relation to reforestation, because that part 10 commences on 1 July 2010, you would anticipate that permits could be credited 12 months thereafter. Therefore, consistent with the regime set out here, given that you issue permits in relation to the preceding 12 months, then the earliest for these other sectors that credits or permits could be issued, subject to appropriate methodologies, would be 1 July 2012.
I am concerned, Senator Wong, about a similar issue to the one raised by Senator Milne. I want to know how the government intends to prevent an encroachment, which we are already seeing now, where prime agricultural land is sold for, or taken over by, carbon sinks. Is there some method to stop this? We are already experiencing it now up in North Queensland. We are seeing land being purchased for forests and encroaching on sugarcane and banana land, which is prime agricultural land.
I know that the particular farmers up there who are trying to buy the adjoining property for their son or their son-in-law, or who are just trying to expand their own property, are not within a bull’s roar of being able to raise the purchase price. With a carbon price coming in with the CPRS, this is going to put the price of land beyond the reach of any farmer. This has implications. Already the sugar mill in Tully is suffering from a lack or a loss of land—I do not have the figures in front of me, but I think it is around 12,000 hectares of land—and now this is threatening the viability of the mill because it will not have the necessary throughput to keep open.
With a carbon price we are going to experience a huge amount of this—people taking over agricultural land for carbon sinks. This has not been discussed much in prior speeches, but I know that Senator Milne, although for a different reason, is as concerned as I am about this. Senator Nash, too, has raised this issue. Is there anything in the bill—because I cannot find it—and anything in the amendments—because I cannot see it in them—which would prevent a gross takeover of agricultural land for people putting in carbon sinks? The price of carbon will go up and the price of bananas will go down.
The other costs that affect bananas such as transport, fertiliser and electricity will take the price of bananas down, and the agricultural land will be taken over by carbon sinks as a tax dodge. Senator Milne, Senator Joyce and I are convinced that this is a tax break for land—though we do not want to get into that argument; we have been in that argument before. Senator Milne has advice from a solicitor that the land will able to be purchased through a tax break. But leaving that aside for the moment, the real problem we have now is how we are going to prevent this from happening. It is going to happen and it is happening as we speak. It is going to happen at an accelerated rate if this CPRS legislation comes in.
There is one point I neglected to make in response to Senator Milne, who I think was suggesting there would be quite a lot of delay on this. If this bill is defeated, and the Greens have continued to oppose this bill, obviously there will continue to be delay on all action contemplated under the bill, including the development of the offsets regime under the bill.
In relation to the points made by Senator Boswell, these are arguments which were traversed in this chamber at great length when the relevant tax measure was previously introduced, from memory, by the previous government at the behest of Mr Turnbull—I could be wrong on that, but I think that was the process. A national Greens alliance opposed that measure. From memory, the opposition, other than the National Party, voted with the government on this. Those policy issues have been traversed. The government do not agree that the policy issues involved in trying to provide landholders with the opportunity to sequester carbon are outweighed by some of the risks that Senator Boswell puts forward. Many of the proponents of these types of activities do not envisage that you would utilise prime agricultural land for these types of activities. In fact, I would have thought there was an economic difficulty with some of what Senator Boswell is suggesting. He is suggesting that the carbon price, which starts off at only $10 a tonne in the first year of the scheme, could somehow displace agricultural production for what one would have thought would be much higher value products than that.
Firstly, there is the economic issue; what the real-life examples are and what people in this sector say. Secondly, as part of our agreement with the opposition in relation to forests earning forest credits, we said that we would require conditions for these to have adequate water entitlements. As I have previously indicated to one of your colleagues earlier today—or perhaps late Friday or Thursday night, or even late Wednesday night, I cannot recall—it would be our expectation that those conditions would be consistent with the National Water Initiative requirements. We have also indicated that we would include conditions for planning approvals.
The policy question is this: I accept that the National Party have a view that they do not believe that this opportunity should be made available because of the risks. We believe the risks have been overstated by those opposite. We think farmers should have this opportunity to make that economic decision, and we do believe that putting in place requirements around planning approval and water entitlements deal with some of the risks which are being put forward.
Minister, I refer to the Domestic Offset Integrity Committee, which you have been kind enough to provide the papers for. The first function of the Domestic Offset Integrity Committee is to advise the minister. Could you advise which ministerial portfolio it is?
In the event that advice was given to the minister by the committee, is there an obligation on the minister to accept the advice of the committee? What is the process by which the minister would advise the committee, and therefore the community, on the reasons why they might not accept the advice of the committee?
Senator Back, you might not have been in the chamber when your colleague was asking me questions about this. We had quite a detailed exchange about the committee. The committee set out a division 2 of the amendments which are being discussed by the chamber. Proposed section 259J(2) says:
The Minister must not make or amend a domestic offsets project methodology determination unless the Minister does so in accordance with advice given to the Minister by the Domestic Offsets Integrity Committee.
Proposed section 259J(3) says:
To avoid doubt, the Minister may revoke a domestic offsets project methodology determination without obtaining advice from the Domestic Offsets Integrity Committee
I traversed this in some detail with Senator Macdonald.
I did not have that information. It does mention in the documents that the minister appoints the committee. Is there advice on the process for appointment? Is it just a personal appointment by the minister? Is an advertisement process undertaken in considering applicants for committee membership?
I have read those. My question is: what is the process by which the minister actually identifies those people? The documentation speaks of the membership, the chair, the numbers et cetera, but the mechanism or the process by which the minister would identify from the community those who might want to express interest in membership of the committee is not clear to me.
Proposed section 373E makes it clear that the minister must appoint by written instrument and subsequent subsections of proposed section 373E set out the criteria. I assume, Senator—and these are not usually matters in legislation—that the normal government processes around appointments to statutory committees would apply.
Finally—and it is my last question on this—there is an obligation on the committee annually to report, through the website, the draft work program and priorities and the invitation for the public to make a submission with a time delay of no longer than 60 days. Can the minister advise on the obligation, if any, of the committee to respond to public submissions that they may have received.
Obviously that would be good practice. There is not a statutory requirement, but the committee would need to determine how its procedures should operate. It is quite clear that invitation of public consultation is a requirement under the legislation.
I would like to return to the carbon sink forest issue that my colleague Senator Boswell raised. I note with some irony, Minister, that last time we had an exchange on carbon sink forests I was sitting somewhere rather different in the chamber. You mentioned the entitlements that would be attached to the establishment of a carbon sink forest. Can you clarify for the Senate that you mean that the landholder would have to have a water licence to put those carbon sink forests in? I imagine that would only apply to areas where there is not enough rainfall to sustain them anyway. There are two parts to the question. If my understanding of what you said earlier is correct, where do you see those entitlements actually being required if a carbon sink were to go in? And, if the carbon sink forests are going to be encouraged for the purposes of reducing the greenhouse gases, what work has the government done in terms of interception, particularly across the Murray-Darling Basin, to determine what impact the establishment of those carbon sink forests is going to have?
As I advised one of your colleagues earlier today, page 8 of the 18 pages of the offer document, which I have now tabled, indicates the government’s commitment to include conditions for forests earning forest credits to have adequate water entitlements and planning approvals. The detail of those is not in the legislation. That is a policy commitment which we would develop in consultation with the various sectors and stakeholders. I referenced in relation to the adequate water entitlement issues that this was consistent with the National Water Initiative commitments that states made in 2004.
While I am on my feet I will respond to a question I was asked about ongoing consultation in relation to the inclusion of the land sector. My advice is that to date consultation, particularly in relation to agriculture, has occurred through the Technical Options Development Group. I am advised that current members of that group are the NFF, AgForce, Dairy Australia, Meat and Livestock Australia, the Australian Meat Industry Council, the Grain Growers Association, the New South Wales Farmers Federation, the WA Farmers Federation, the Grains Research and Development Corporation and the South Australian Farmers Federation. It also includes the CSIRO, Queensland University of Technology, Australian Dairy Farmers, the Australian Farm Institute, Soil Carbon (Australia) Pty Ltd, BRI Research, the Cattle Council of Australia and the University of Melbourne.
Apologies, Minister—I do not think I was clear in my question. I understand that all of that information exists. I am trying to determine whether, regardless of the rainfall in an area where a carbon sink forest is going, you will require an entitlement even if there is not a need to irrigate. I imagine that in some areas where there is a high enough rainfall it would be quite possible for a landholder to put in a carbon sink that would not actually require irrigation or the need for an entitlement. I am trying to ascertain what the arrangements would be where the rainfall itself is appropriate to deliver the water necessary for the establishment of that carbon sink forest.
Second to that, we are often asked very common-sense questions by farmers. I had one the other day from a farmer who runs a 1,500-acre farm near where I live, between Young and Cowra. This follows on from Senator Milne talking earlier about the fact that these very sensible questions are coming from farmers on the ground. This farmer put to me: ‘In terms of my farm, with all of the increased costs which are going to arise because of the increased inputs for me’—which you have outlined, Minister, so I understand you have a rough idea per acre of how that would work—‘how many acres of trees would I have to plant to offset the increase in my costs from the inputs?’
I have answered the question about water. The policy commitment is to have adequate water entitlements. You ask essentially about what ‘adequate’ means. The detail of that is obviously something that the government will consult with stakeholders about—that is a policy commitment—and we will do so. In relation to the increased costs issue, I assume that you told your constituent that you were going to vote against the scheme, so it was irrelevant for the purposes of lobbying you. However, on your question to me, I note that it was the same question you asked earlier today—
It actually is, Senator. It is the same question. You asked me how much people would have to do to offset. That would depend on what their input costs are and on what opportunities—
My earlier question was specifically about the domestic offsets. This one relates to the arrangements that already existed before the amendments. My question this morning was to do with the amendments. My question now relates to the provisions that were already in the bill with regard to forestry.
Again, you are asking me to give a hypothetical costing for a hypothetical landowner with an assumed set of costs when I do not have any knowledge of what those costs are, what the landowner’s opportunities to reduce costs are and what their opportunities would be to put in place a carbon sink forest or other offset mechanisms. We are not forcing landholders to engage in planting forests. We are enabling the choice, so people can choose to access the carbon market just as they choose to access other markets as farmers. We are providing an opportunity. It is not obligatory; it is a voluntary opt-in.
I think the lack of clarity is as a result of the actions of the opposition in this chamber. Those actions have added to uncertainty over a number of years—most recently since June, from which time you have delayed this debate for months. You delayed it in June. You engaged in procedural games so you did not have to vote on it. You then voted it down in August. What you have been engaging in since it came back into the chamber is the same delay. I do not think anybody is under any illusions. That is fine; you will be held accountable for that political strategy. I disagree with it. I think it is an abrogation of responsibility, but that is your strategy—you can defend it. If there is uncertainty about this policy area, it is not because the government has not been trying to provide certainty. It is because the opposition—which believed it was in the national interest to act on this issue and believed it was in the national interest to pass this bill—is currently engaging in a round of internal division because they do not want to take action on climate change.
This follows on from the line of questioning of Senators Milne, Nash and Boswell about the whole issue of water and the credit for forests. I note that the Minister for Climate Change and Water has made it clear that she is not forcing landholders to grow forests. She has made it clear that the conditions are that the forests are to have adequate water entitlements and planning approvals. My question is: given the concern from the Wentworth Group of Concerned Scientists—Professor Mike Young and others have expressed concern about the whole issue of interception referred to, I think, by Senator Nash and alluded to by Senator Milne—how will this work in the scheme of things and how will it impact on the water market? We know that managed investment schemes—not something that Senator Wong and her government were responsible for—got out of control. They have impacted on the water market. We now have the issue of the potential impacts of this on the water market and also the whole issue of interception. How will any assessment look holistically at the whole Murray-Darling Basin, for instance, and the water market and its impact on the pricing of water?
This really goes to the issue I was discussing with Senator Milne and Senator Nash. That is precisely why we have said we have a policy commitment that would include conditions for forests to have adequate water entitlements and planning approvals. I reference that, in response to Senator Milne and also to Senator Nash earlier today, I said that we see this as being consistent with the National Water Initiative, which, as you will know, included a discussion about the need to license other interceptions—for example, plantations. The states have not moved as far on these issues as many people would have liked. We hope that the states will continue to move forward on complying with their obligations under the National Water Initiative. What we have said here is that we are making a policy commitment to such a regime. Obviously the detail of that is something we do need to work through with the stakeholders.
I thank the minister for her answer. Just to follow that through, I think she reinforced my point that the Commonwealth should take over the management of water. It just shows you how much confidence I have in the minister that I would rather she take over water than let a number of states run it. At least she is smiling!
Isn’t the problem then that, because it is subject to the National Water Initiative, if the states do not come on board we could potentially have a situation where the requirement to give adequate water for these forest plants could impact on interception and water pricing?
I know you want us to take over water but I think I have enough on, so I might leave that for a moment. If I may say so, Senator Xenophon, I think the policy problem to which you are referring is precisely why we are saying that, as a condition under this regime, these forests will need to have adequate water entitlements. There will be a question of what ‘adequacy’ means. Senator Nash raises the question: ‘If you are in an area which is non-irrigated and not regulated, why would you need to have a water entitlement?’ That will be an issue that the government will have to work through. But I think the point you are making is precisely why we wanted to include this, which is that we need to progress water reform but recognise that some parts of that will progress more quickly than others. We can make the requirement to have an adequate water entitlement a condition of credits under this scheme for forests.
My final question on this line of questioning is: will any conditions take into account the whole issue of interception and water and the impact on agricultural land as well? In other words, will they have to consider holistically what the impact will be, for instance, on the Murray-Darling Basin?
I just wanted to follow up on this. I recognise it goes to the line in this document which says:
- include conditions for forests earning forest credits to have adequate water entitlements and planning approvals …
One of the issues which accounted for the failure of managed investment schemes was that people got a 100 per cent tax deduction for planting trees in areas where they would never grow. They never, ever had sufficient water to be able to grow a forest, but it did not matter to them because it was not for the investors in the end. So the way this is written can actually be read two ways. One way is that in order to get abatement you have to demonstrate that you already have a water entitlement. The other way it could be read is that it is including conditions so that, if you plant a forest, you get adequate water entitlements. But I also want to know if you are going to revisit the issue that you cannot get it unless you are in a rainfall zone or else have water entitlements such that the trees will actually grow. I also want to know if you will be ground-truthing this, however many years down the track, to ensure that the abatement is there. Can you just tell me how, in two, three, five or 10 years down the track, you will get a forest credit for planting a forest? Are they the same provisions as the reforestation provisions in terms of accounting for it?
The second thing I want to ask about is planning approvals. Again, this is something that the Commonwealth does not have control over. It is local government that controls planning, and most local governments do not have in their planning schemes anything pertaining to plantation forests, carbon sink forests or any other kind of forest. If you get the ability to declare an area a carbon sink forest or whatever, in the Tasmanian case you just have to get it approved as a forest and local planning laws do not cover it. I want to know what this planning approval is. How is the Commonwealth going to guarantee that the planning approval will be at the local level and not at the state or the Commonwealth level in terms of giving planning approval for these forests?
I do not think I can make such a commitment. If the senator is asking the minister with carriage of the bill for a commitment that we are only going to allow local planning approval and not any state or Commonwealth planning process to be relevant, I do not think I can give that commitment. The senator may want us to do that, but that is not the case and that is not what the policy commitment is.
In relation to the first section of your question, Senator, I am not sure if there is a particular part of part 10 that you are referring to in relation to the certificate of reforestation—this is in section 194, which is at page 247 of the substantive bill. I have to say that I had some difficulty just discerning what you were asking in relation to the first part. In relation to the second, we have made a policy commitment. Yes, we will have to work through the detail on that; I accept that, but part of what was agreed with the opposition was that we would include these additional conditions.
Since I was not part of the coalition negotiating team, I have no idea what they agreed to when they talked about planning approvals. The point that I was making was that the Commonwealth has no power over local government. How are you going to guarantee anything about planning approvals unless you are going to have Commonwealth or state planning override local planning? I simply do not know how you are going to guarantee that when it is not your area of jurisdiction. In terms of the first, the simple point—
If I could respond to that first part, Senator, you are correct. I am not an expert on what planning jurisdiction that the Commonwealth has, but what we do have power over under this bill is the issuing of credits, so this goes to what conditions apply to the issuing of those credits under that division.
I accept that, but you will give the permits if the conditions you apply regarding water entitlements and planning have been fulfilled and yet we do not have a clue what the planning requirements are going to be that you might require in order that the permits be issued. That is my point. Putting planning approvals in is completely meaningless because we do not know at any level what it is you are intending. So I am asking you: what sorts of planning approvals are we talking about that would need to apply before a person was eligible for a Commonwealth credit?
Secondly, in terms of water entitlements, the point I was particularly making was that managed investment schemes allowed for people to get a 100 per cent tax deduction for planting a forest in a place where they knew it would never grow, and it did not matter, because the people who were making the investment and the people who were setting up the investment were making mega profits out of it, and they did not have to worry whether the trees ever grew or not because it was never their intention to be bothered about that end of process.
When you talk here about including conditions that forest credits have water entitlements, I want to be sure that it is not just having a water entitlement in terms of purchasing an entitlement but that there will be some kind of restriction which says, ‘You can’t be included in this unless you are growing these trees in an area above a certain level of rainfall,’ or whatever will guarantee that they actually grow there. I also asked you about assessing the carbon in these. I have not read the provision you just quoted on page 243 or whatever it is. What is the review process for determining the volume of carbon in these carbon sink forests and at what interval is that assessment going to be made?
In relation to the third issue, I will just get some advice. As to your reference to the MIS, the managed investment scheme, I am advised that the test in relation to achieving that taxation treatment was that the person seeking the treatment planted. However, under the CPRS, the credits are based on sequestration. So that is a distinction. Sequestration, I am advised, will be measured by the national carbon accounting model, which will take into account actual rainfall and the implications for actual sequestration.
In relation to the water issues, I thought it would be useful to remind the Senate of what the National Water Initiative references in relation to interception. The parties to that, the states and the Commonwealth, agreed in relation to water interception that ‘in water systems that are overallocated, fully allocated, or approaching full allocation,’ any proposals for additional interception activities above an agreed threshold size will require a water access entitlement. So the intention was that we would be seeking to require conditions under this regime that were consistent with the National Water Initiative.
Does that mean, Minister, that you will only be able to get permits in catchments which have been assessed in terms of the sustainability of water? There are an awful lot of catchments that have not yet been assessed under the National Water Initiative. Does that mean you cannot get a permit if you are living in a catchment where that has not already been determined?
As I previously said, the commitment is to adequate water entitlements. The question of what is adequate will include consideration of some of those issues. But that level of detail is not in the legislation, Senator, and it would not be normal for it to be. I appreciate your proposition about clarity, but these are requirements and conditions which we have given a policy commitment to, and we will work through with stakeholders as to what specifically constitutes adequate water entitlements because, as you quite rightly point out, that will differ depending on where the forest earning forest credit is located.
Minister, with carbon offsets under forestry, would it not make sense if all that carbon—if you allowed the forest to be harvested—were stored in such places as buildings, as carbon and timber in buildings, and then let the forest grow again and then harvest it and store it another lot of buildings and let the forest go again and then harvest it and store it in another lot of buildings? Wouldn’t this give a great capacity for a renewable form of carbon stored in cities and buildings all around the nation and all around the world?
Under the scheme as it currently is, there are voluntary opt-in provisions in relation to forestry. These are in the primary legislation. It is a voluntary opt in, which means that you can gain a permit but then, if you choose to harvest, you would have to remit a permit for the equivalent amount—for however much carbon is deemed to be no longer sequestered as a result of harvesting.
You do refer to an issue with current international accounting rules which do not recognise the sequestering of carbon in wood products. That is an issue; it is something Australia has said should reflect better the reality of what occurs in terms of wood products. I make the point, though, that you would also then have to account, for example, for—and this is one of the reasons it has been problematic—what happens when the wood rots and who that is allocated to. The current international accounting rules draw a line. You raised an issue that Australia, under both governments I think, has been discussing in the international context for some time, but the bill before the chamber reflects the current international rules.
It seems that there is a discussion about noticing that, when a forest is harvested, someone has to remit a permit, but if the equivalent of a permit for carbon is identified and timber is used to construct a house—and we know there are houses using timber that are hundreds and hundreds of years old—discussions are taking place at the moment in which Australia is moving in the direction of trying to encourage carbon being recognised as sequestrated in building products in a range of houses.
Perhaps the best way of clarifying this is in Australia’s submission in March this year to the international negotiations on land use, land use change and forestry, which specifically talks about harvest of wood products. We made reference to the New Zealand proposal—and this is what we were saying as at March, so I am not sure whether there has been any shift in the New Zealand position—which they described as emissions to atmosphere which provides a practical approach to account for emissions when they occur. We said the proposal had potential as a viable accounting treatment for harvest of wood products post 2012. In the submission we supported New Zealand’s proposal that the approach be applied to wood products harvested from 1 January 2013. I read from the international submission that Australia made:
Using an approach such as ‘Emissions to Atmosphere’ is likely to create an incentive to produce longer lived wood products. It will be necessary to ensure that this does not at the same time create leakage for production of short lived wood products to countries not subject to emissions limitations.
Where is Australia at this stage of the current negotiations in which Australia is pursuing the change in the carbon accounting rules so as to recognise carbon sequestrated—I do not know whether this is the proper term but let us call it that for the time being—or carbon stored in buildings and other long-term uses of timber? Are we still pursuing that course of action? Where is it on the agenda? What is the next stage of negotiations in that process? How do you see your chances in going with it?
Australia will continue to argue for carbon accounting rules, including in relation to the harvest of wood products, which more accurately reflect the scientific reality. What I read to you was the submission earlier in the year in which we did so.
Thank you very much for that. In recognition of the scientific reality of carbon sink forests—that, in many cases, they are an inferior storage of carbon to summer grasses—are we now going to go back to that piece of legislation and review it in such a way that it recognises the scientific reality that summer grasses store more carbon than dry sclerophyll forests?
We had a very long discussion on summer grasses, which I suppose is a rather odd thing for Senator Joyce and I to be discussing. But we did so for quite a long time on Wednesday or Thursday night, I think, Senator. I would refer you to my answers on those occasions.
I recognise the discussion because I was party to it. But I did not get the answer then. Work by those such as Dr Christine Jones clearly identifies that summer grasses sequestrate more carbon than dry sclerophyll forests do. Minister, we would have to go back, using your words, to the scientific reality that carbon sink forests as prescribed in the legislation are an inferior storage of carbon to summer grasses; therefore, we will have to go back to that legislation to bring it into a form that deals with the reality of the carbon it sequestrates. Is the government going to review that legislation to bring it into line with the carbon reality or isn’t it?
Senator, we did go through this, including the reference, I think, to that scientist. I referred you to the relevant provisions of both the offset provisions and the voluntary market provisions.
With due respect, what was discussed in that answer, Minister, was what happens from this point forward. You referred to the offsets that you are now discussing but you did not give a clear answer as to whether you are going to review the legislation pertaining to carbon sink forests, brought in by the current government and currently in place, which quite clearly and evidently brings about an inferior sequestration of carbon to what was there prior to that. It is a clear question I am asking. We have a piece of legislation in place now dealing with carbon sink forests which is completely oxymoronic, because we are actually storing less carbon than was originally there. You are going to have to amend the legislation to go back to what it was so that if you really want to store carbon you are going to store it in the form of summer grasses as opposed to dry sclerophyll forests. The question is: are you going to review that piece of legislation? The answer you gave the other night was in relation to what happens from this point forward with regard to carbon offsets for farmers. You said that people can apply for carbon offsets but you did not address the issue of what happens with the current piece of legislation pertaining to carbon sink forests.
First, I just want to note the assertion of inferior sequestration because I do not want the senator to believe that, if I do not note it, I agree with it. That is his view. That is a view subject to some dispute. Second, what I went through explaining on Wednesday or Thursday night was that, under the agreement with the opposition, we have said that we will include in the CPRS, subject to appropriate methodologies, sources which we know will count towards Australia’s international commitment.
Let us step back a bit. The current belief in terms of developing an international agreement says nations such as Australia, the US and others come forward and we make a commitment to the international community that we will reduce our emissions. That is our contribution to the global agreement. Similarly, actions are committed to. We are seeking actions from developing nations; they would be of a different type. Obviously developed countries have already achieved a certain level of development; what we have to do is to have a net reduction. That is what Europe has committed to, what New Zealand has committed to, what Japan has committed to, and what the US has committed to provisionally, subject to its congress passing the legislation.
Once you make a commitment, you are signed up to it. Therefore, if the CPRS is, as the government wants it to be, the scheme that gets us reducing those emissions and reducing our target then obviously we only want included in it the things that help us meet that target. Otherwise, we sign up to a target as the government and, if we include things in our scheme that do not count towards that target, the government is going to have to make up the difference somehow. That would be a risk to taxpayers, so we do not want to go down that path.
What we have retained here is this: whilst the international carbon accounting rules remain as they are we will include the things that count towards our target. For the things that do not count towards our target but which are valuable anyway—because we know they may be of benefit, we know they can sequester carbon or we know that we want to learn about them by doing—we will create a voluntary market. The non-forestry-vegetation vegetation management currently does not count towards the international commitments. What we are saying is: let’s create a voluntary market where people can buy a green credit that is not in the CPRS if they wish. In the voluntary market they can purchase it for whatever reason. We learn by doing. Then, if and when the international accounting rules enable us to count that, we have a solid base of action and evidence which enables us to bring it into the scheme.
What the senator is asking about is a type of vegetation which as I understand it is not currently in the international accounting rules, so we are saying that that and other forms can be part of the voluntary market. That enables us to work with the sector and with landholders to develop methodologies for the voluntary market, which places us in a much better position when the international community decides that this is a sufficiently proven method that it should be included internationally. Remember: this is also about proving up sequestration opportunities. We cannot just pretend something sequesters carbon; we have to be able to demonstrate it and prove it, and proving it up is an important part of what we are doing.
I should clarify one thing. As I understand, currently, the grasses would not count towards Australia’s target, because we have not elected, for a range of other reasons, to include cropland management in our national inventory.
Honourable senators interjecting—
I do not know about sequestering carbon, but I am going to lose a few pounds here getting up and down! One brief thing in closing: I understand what you have said about a voluntary green market. That makes abundant sense if that is the process. One thing you did say was that there was an issue of summer grasses sequestering more carbon than a dry sclerophyll forest, if not rainforest timber. It has been suggested that rainforests sequester more, but for that you need in excess of 1,500 millimetres of rain. Dr Christine Jones’s paper is widely circulated, widely discussed and widely published and peer reviewed. When you say it is ‘in dispute’, in dispute by whom?
It was your rather bald assertion that summer grasses provided better sequestration than forests. I simply wanted to say I am not sure everybody would agree with that and it is certainly not agreed upon by all. That was my only point. I do not particularly want to get into a discussion about Dr Jones and summer grasses again. We can if you really wish to, but we have previously traversed this for quite some time.
It is not all forests; it is dry sclerophyll forests and lesser forms of forest. This is very important. The intertwining of this tapestry is that if summer grasses sequestrate less carbon than dry sclerophyll forests, then you would have to have a form of forest that is not dry sclerophyll forest but rainforest. That means you would have to go to a form of land that can sustain a rainforest, which means you are heading towards prime agricultural land, at the expense of cane lands, and there are a whole range of issues. I have not seen where the dispute has been raised about dry sclerophyll forests and lesser forests sequestrating less carbon than summer grasses. You keep mentioning that that is a disputed item. I am just curious as to where you get that evidence of a dispute because, for the life of me, I have never seen it.
Hemp does. Hemp sequestrates more, but then you have got the problem of what happens in winter. The minister may have anticipated this, but the Green carbon report, from Professor Mackey at the Australian National University, shows that the tall eucalypt forests of the central highlands of Victoria have an uptake of some 20 times the figure used by the Australian Greenhouse Office. They contain massive amounts of carbon and they are holding that back against greenhouse gas emission into the atmosphere. But under federal government authority they are being logged and burnt at a prodigious rate. It is the same for tall forests in Tasmania and southern New South Wales.
The minister just mentioned voluntary action being accredited. I ask: what is the government’s proposal where the destruction of these forests ceases? What is the accreditation that is going to be given to the state or private authorities that protect such massive carbon banks—the biggest in the Southern Hemisphere—from being turned into massive tonnes of greenhouse gases in the atmosphere? And what price does the minister think will be in play in protecting those great carbon banks?
I think when you made reference to the Commonwealth authority for logging, what you were referring to was the regional forest agreements. That is a policy position of the government. I know it is one with which you disagree, but it is a policy position of the government to respect the RFAs. Some of what you have raised is essentially asking that the government not implement its regional forest agreements. That was, as you know, a bipartisan position—but you never know what is bipartisan these days. I am just going to get some advice about the accounting that you referenced, Senator, but we have made clear that we continue to observe the RFAs and we do not intend to resile from that policy position.
Yes, and nor has the minister, nor the Rudd government nor the Prime Minister himself, allowed there at any time to be entertainment of the Howard government policy—now taken on 100 per cent by the Rudd government—of not just allowing but certifying the destruction of the biggest living carbon banks on land in Australia primarily for export woodchips to be sent to Japan where, primarily, they are used as an energy source for heating and electricity and a by-product is making paper.
We are in this extraordinary position where climate change is agreed by government to be—and the Prime Minister said this just last week—a menace that is hanging over the country, its children and its grandchildren. It is an existential crisis that we face, but the government is authorising the destruction of the biggest hedge against climate change that nature gives us in Australia. It is not just an absurdity but it is an irreconcilable piece of irresponsibility by this government. The minister volunteered that there will be voluntary consideration of projects which have this effect. She was responding to Senator Joyce talking about summer grasses, but I am talking about an already in place hedge against climate change which is massive—the biggest natural one that we know of on land in Australia—and I just want to know if the minister has done the arithmetic on the research which shows what the carbon would be worth if landowners—let us go to private landowners outside the regional forest agreement—want to protect their tall eucalypt forests or rainforests from the option of logging? What is the carbon market going to offer those landholders, and what incentive is the government going to give to landholders in private forests—if governments cannot do it themselves in state owned forests—to forbear logging and burning and converting into massive greenhouse gas emissions the natural forests of Australia?
In relation to private landholders, obviously the forest mechanism that we have already been discussing provides an incentive for reforestation. The senator may not be aware that in relation to the state of forests, the 2008 State of the forest report shows that 1.5 million hectares of forest have been added to the reserve systems since 2003, and that 23 million hectares of native forests are now in formal reserves.
The minister has just said that you will get incentives if you knock your forest down and grow something in its place, which is going to be a net loss of carbon forever in terms of the future horizon that we are looking at. What is the incentive if you do a far better thing for climate change and do not knock the forest down in the first place and, by the way, add another gift to the nation by protecting biodiversity, because nearly always these forests are the habitat of rare and endangered plants or animal species? So, I just ask the minister: can she see an absurdity in a projected gift to people who log forests and then replace them with some form of regrowth rather than there being a direct assistance from government or the market to protect forests that are already standing, have been accreting carbon for centuries and are doing the best possible job we could want in an age of greenhouse gas emissions and dangerous climate change?
I do not think what you said was quite correct in terms of suggesting we are giving an incentive to knock forests down and then replant. Part 10 in the original bill—it is in the definition section, section 5—requires that as at 31 December 1989 the land stand was clear of trees. This is what is known as a Kyoto forest, I think. That deals with the incentive issue that you raised.
In addition, as a result of the amendments put forward by the government and policy commitments made by the government, we are providing an incentive for credit for regrowth again on land that has already been legally cleared between 1990 and 31 December 2008. There is not a suggestion that people could knock down trees now and then put in place a forest and get a credit. That is a separate policy issue to the policy issue you are putting, which is your party’s policy of opposition to forest management or forestry. I understand that, but that is not the government’s position. The government’s position is to maintain the regional forest agreements and to seek to strike that balance between productive use and conservation use.
We are not opposed to forest management. We are opposed to the gross dereliction of custodianship in the mismanagement we see in those logged forests, particularly those spurred by the woodchip industry at the moment. The minister has effectively answered the question: if you protect your forests you do not have a look-in. Is it not right that under the Kyoto arrangements people who logged forests after 31 December 1989 were not to get any reward for it because they were actually converting carbon resources into something less, forever? Under this proposal, are you not allowing offset credits for regrowth on land that was logged after that date right up until the same date last year? For example, if Gunns Ltd or Forestry Tasmania has logged forest areas since 1989, are they now going to be recognised and accredited for what is growing on that land? That replaced the richest carbon banks in Australia under government authority, with somewhere between $500 million and $1 billion of public money to foster it under various Labor and Liberal governments since 1988.
This is not about Gunns. I know why you want to use that example, but this is about the measures we can put in place to encourage the reduction in Australia’s emissions as our contribution to fighting climate change. I know the philosophical position that some of the Greens have—which says we should not reward people for past behaviour—but we also need to think about how we give people an incentive to sequester carbon now. We are not putting in an incentive for people to knock down trees. We have made it clear that it is only land which has already been cleared. You cannot now say, ‘We are going to include it up until the end of this year and, therefore, if the Senate passes the scheme I will knock my forest down, replant it and get a credit.’ That is not what this provision says; it says if you have already legally cleared it. Whatever you might say about that, Senator Brown, the fact is that it was cleared. You may say that it should not have been cleared, it was wrong, it was political et cetera, but whatever the reason for it we are saying there is a net benefit to the environment if we enable credit for people allowing forests to grow on that land. That is a net benefit to the environment. That is why we have allowed credit for regrowth on forested land to be part of this agreement.
When the minister waves her hand and dismisses something as serious as this as ‘political’, that there is no substantial argument to it, she is creating a gross misrepresentation of her own intelligence. She knows full well that this is an egregious dereliction of duty by serial governments, with the Rudd government now at the helm.
I asked whether it was right that the Kyoto process—and the minister has said this herself, so she knows it is right—said that as of 31 December 1989 people who logged forests were not going to be accredited with what grew on the places they logged, because that is absurd. It is absurd to give them credit for the plantation that is growing there, which will never get back the carbon and methane that has been lost out of the original, natural forest. Now suddenly in this legislation all those people who were told, ‘You cannot do that because it would be wrong; it would be an immoral accounting trick,’ are being told, ‘We’re going to reward you.’ The coalition may have come in and convinced the government that is a good thing. One should not be surprised, because the logging lobby, the National Association of Forest Industries, with its headquarters just across the road from this parliament has a huge influence on government and the coalition through the CFMEU, which has led to this absurd outcome.
The question I am asking is: what on earth is going to prevent a future government saying, 20 years down the line, ‘This legislation says you can’t get credited for destruction of forests and woodlands that occurred after 31 December 2008.’ What on earth is going to prevent a future Labor or coalition government saying, ‘We’ll ignore that and we’ll count that destruction of forests as being a good thing; we’ll ignore the greenhouse gases going into the atmosphere from that destruction of forests but reward the forest destroyers for the much smaller amount of carbon created through the plantation forests,’ never taking account of the permanent loss of biodiversity that has occurred? I have two direct questions here which the minister might answer. Is the government allowing avoided deforestation credits in this program? Is it allowing offset credits for regrowth on deforested land? I think the minister has already said yes to the second question.
The second question is: is the government allowing offset credits for regrowth on deforested land—that is, the forest land cleared since 31 December 1989 that the minister referred to? The answer to that one is clearly yes.
The answer to the second question, I think, is yes. I had a rather long discussion with Senator Milne about the first question, and we do say we are prepared to include avoided deforestation. Senator Milne and I—you may not have been in the chamber, Senator Brown—had a discussion about the fact that we would require robust methodology for that. I acknowledge that is a complex issue, but we are saying it could be included subject to that methodology being created.
I will take one step back and talk about your concerns regarding regrowth forest on deforested land, and this is an issue I have had positive comments about from some NGOs. It depends where one starts from. If you start from the proposition, ‘This clearing was bad so we should just make sure that no-one who now owns land that was cleared can do anything about it,’ then your proposition flows. The government does not think that is a sensible way forward. Regardless of what one thinks about the reasons for past clearing, surely there is environmental and policy merit in giving landholders an incentive to sequester carbon through regrowth forests. Whether or not they should have been cleared is a separate policy argument, and obviously one’s answer to that will depend on the factual circumstances because they would not be the same on every occasion. But, if this land is already cleared and we can give landholders an incentive to contribute to the solution on climate change, may I suggest that is a pretty sensible approach?
It would be, if the government was giving equal reward, per ton of emissions, to those people who do not clear their forests, because they are the best of the lot. The woodchip and logging industry has got this government, against the public interest, to fail to reward those people because it involves large areas of publicly owned forest. It is the public, the average person in Australia, who is losing out massively in this whole deal, whichever way you look at it. We know about the $6 billion being transferred out of households across to big industry under the coalition’s pressure, on top of the $16 billion already going to the big polluters. This program is another case where good-hearted Australians, even on private land, who want to protect old-growth forests get nothing and those who log forests and start growing seedlings of some sort get rewarded. That is plainly absurd and it is culpable. It is illogical and unforgivable behaviour from the government in an age of climate change.
Nevertheless, I would like to ask the minister: what is the potential cost in monetary terms of the reward that will go to people who cleared forest over 20 years post-1989, who were told they would never be rewarded but are now going to be credited under this program? Can the minister give an estimate of the potential reward, in a carbon-trading era, that will go to those forest managers? I am sorry I mentioned Gunns before. They are going to be the recipient of a huge windfall before this is through, but mentioning them has upset the minister’s sensibilities so I will just ask a general question. What is the value of this amendment—which the government has accepted from the opposition—going to be in windfall gains to those people who did the wrong thing and cut down standing forests in the last 20 years, knowing full well that that would pour massive amounts of greenhouse gas emissions into the atmosphere?
I have to respond to the senator’s political observations about the Australian people losing out. I respectfully suggest that the Australian people who wanted action on climate change were not well served when this bill was voted down. The senator is concerned about greenhouse gas emissions. He knows that without this legislation Australia’s contribution to climate change will continue to worsen and our emissions will continue to rise. It is a matter of note that the Greens voted with Senator Fielding against this legislation—against the first time, whatever your view about the merits of the scheme, we would have had a scheme which put a limit on and then reduced Australia’s contribution to climate change. Without this bill our contribution to climate change will continue to worsen.
On the next point, I will give the senator the benefit of the doubt—maybe he did not understand me the first time. He suggested again that this bill gives people an incentive to knock trees down—it does not.
It does not, Senator, and you would be misleading the chamber if you continued to assert that, because the land already has to be cleared. This is land already cleared; it is not land subsequently cleared. It is land legally cleared between 1990 and 31 December—
I am reading from the government’s position. If the senator is asserting that somehow I am misleading the chamber, he should just get up and say it. It is land legally cleared—that is, already cleared—
The position is, as I have articulated on a number of occasions, that the credits for regrowth on deforested lands are in relation to land legally cleared between 1990 and 31 December 2008. That is not an incentive for clearance now. I think that covers the issues you raised.
I think I answered Senator Milne on this in relation to one of the differences between the taxation measure that we were previously discussing and the CPRS, where there is an estimate of the sequestered carbon, but it obviously depends on whether the landholder has opted in. The landowner has to opt in—that is, they have to want to participate in this scheme. If they do not wish to participate, they are not required to.
So the landholder opts in. Say they have some small suckers on the place—Eucalyptus populnea or something like that—and they have opted in. When those small trees become big trees and then extremely big trees, do they get a carbon credit?
The definition of forest stand in section 5, page 15 of the primary bill has some requirements. First it says:
… the stand is taken to have been established by means of direct human induced methods.
… the stand occupies an area of land of 0.2 hectares or more.
… the stand consists of trees that:
… have attained, or have the potential to attain, a crown cover of at least 20% of the area occupied by the stand, and
… have reached, or have the potential to reach, a height of at least two metres.
Then there is the previous land clearance requirement, to which I referred Senator Brown. It is not just one tree in the corner of your property.
I did not think it would be. Thank you very much for that. As you know—or maybe people are not aware of this—if you just leave country alone it will naturally revegetate by itself, quite quickly in some areas. In fact, if you do not control brigalow and gidgee, it will literally take the country over. The classic one is white box or Eucalyptus populnea. Does that mean that, if I go out and plant Eucalyptus populnea, I will get a credit for it but, if it just grows naturally, I will not?
I understand exactly what you are saying. The query I have revolves around the statement that you made when you were reading out the prerequisites, that it has to be human induced. ‘Human induced’ could mean that I just spell the country. If I do not put cattle or sheep on there, that is a human induced outcome. Am I going to get a credit if I opt in for those trees under the premise of ‘human induced’? Or is that not human induced, meaning I have to put up with the trees there? Or do I actually clear the country, stick rake it and keep it clean because if I get naturally induced trees I will not get a credit? I can go out and plant exactly the same trees in seed pots. This is an interesting thing. If I just leave the country alone and the Eucalyptus populnea suckers back up and revegetates a section greater than 0.2 hectares, with a height greater than two metres and with a crown cover greater than 20 per cent, I do not get a credit for it, but, if I get a dozer in there, use all the diesel I can to clear the land, and then go and plant exactly the same trees as were going to grow naturally, I do get a credit for it.
You talked about getting a bulldozer, Senator. The land must already be cleared. In relation to the part 10 forests, it must be pre 31 December 1989. In relation to regrowth forests, it must have been previously cleared between 1990 and December 2008. I again say that the definition in the legislation is that the forest stand:
… is taken to have been established by means of direct, human-induced methods …
Okay. So what? 1989, 1990 or 2008—it really does not matter. If you leave country vacant, it will revegetate. It is the natural occurrence in Australia. It does that all the time in Australia. There are vast amounts of country in Australia. If you do not keep vegetation control in play, the country revegetates. It is just the way eucalyptus country works. I can show you an abundance of country that was cleared about 1920 or 1930, and when that country is left alone it revegetates with trees. So are we saying that you have to have made a decision to keep the stock off it or to keep off mechanisms of human induced timber control? That is what it is: human induced timber control. You go out there and Velpar it or, before that was available, Graslan it. If you want to completely clear it, you run a chain across it to keep the country clear—because if you do not then it just turns into a forest and therefore you lose all the value of your land because you cannot run stock on it—or you pack it up with sheep. You might pack it up with wethers, for instance, that flog the country out and keep the timber down.
If you stop that vegetation management practice, the country will go back under timber. If it goes back under timber by that process, it appears—I am trying to get to where you are—that that is not human induced. I read into it that you have to actually plant the trees. If I go into that country that has been cleared since 1920, 1930 or 1880 and plant exactly the same tree as would grow naturally then when I plant the tree I get a credit for it, but if I have just let nature take its course and revegetate it then I will not get a credit for it.
Before the minister responds, I would like to follow up with Senator Joyce, because this is precisely the point I was making this morning on avoided deforestation. What you have been talking about is afforestation or reforestation, and clearly the circumstance which Senator Joyce has outlined would not qualify as reforestation under the rules. But the question I asked this morning on avoided deforestation was precisely this question that Senator Joyce has just asked, and I was asking it in terms of the baseline. You would have to assume that, if a farmer did as Senator Joyce was just saying and made a decision this year not to go and reclear land—or to take the stock off or whatever—in order that it regrow, you would have to know that in making that decision you would qualify for avoided deforestation, because five or 10 years down the track you will have your forest growing there and you would want the credits for that. Otherwise you would keep on clearing it, grazing it or doing what you were doing to it.
So that is why I asked the question about baselines and avoided deforestation. This is a critical issue for people to know about, because it is going to influence their land use decisions from here on in. That is why I would like to know whether the scenario that Senator Joyce has just outlined would qualify for avoided deforestation. I am going to come back to the accounting in a minute, but I just wanted to follow up, because that is precisely what Senator Joyce is asking. I just wanted to follow it up in the context of avoided deforestation.
Senator Joyce, I do not know if I can assist you any further. I have indicated to you what the legislation says. It also refers to regulations. Other than that, you are really asking me to tell you what a court would say ‘direct, human induced methods’ means. The legislation says:
Under the regulations, the stand is taken to have been established by means of direct, human-induced methods …
Second, in relation to Senator Milne’s question, we traversed that in detail this morning. I explained to the senator that the offset integrity committee would be charged with the methodologies for the offsets, including avoided deforestation. Those methodologies would be established in accordance with the act, if passed, and the proposed act does refer to additionality at 259K(2)(c), which I referred the senator to this morning. I again read it:
… the project would not have been proposed or carried out in the absence of the issue of free Australian emissions units in accordance with the domestic offsets program …
I am not sure that I can add anything to that, Senator Milne. What you are asking me to do is to second-guess how the committee, if this legislation were passed, would approach its job in determining what methodology should apply to give effect to that statutory commitment.
It seems that on this issue both Senator Milne and I are unable to be answered. We prefer not to wait. The whole idea of waiting for a court interpretation shows the litigious nature of what can happen if things are not clearly spelt out. The farmers listening to this do not want to have, if this goes through, to wander off to court to get their credits. What they want to do is to know that the process that they believe that they are following to get a credit is applicable. They do not want to then find that their land is all revegetated and they cannot touch it—they cannot take it back to grazing land—yet they cannot get the credits for what is there. That leaves them in a real quandary. Obviously, therefore, the safest way for farmers to go about it—seeing that, as you state, the interpretation would be that of the courts—is to not let it revegetate.
Mr Temporary Chairman, I rise on a point of order. The senator is not accurately reflecting what I said to the chamber. If he would like me to explain it again so that he understands it, I will do so.
I again say that you can only opt in if you establish the forest by direct human induced methods. In order to ensure that people understand it, Senator, we propose to establish regulations. That is referred to in the legislation as well. My reference to a court was not because I want people to go to court; I was making the point that you are asking me to provide an interpretation now. We want to be absolutely clear with landholders about what their rights and obligations would be if they chose. And I again say that people only do this if they wish to—you might roll your eyes, Senator, but that is true; they do not have to do this. The regulations will be consistent with what I have read out from the legislation.
We have some confusion here. You do not have to state the point that it is opt in; we understand that. We have that part well and truly booked out. What we are querying here is the issues for the people who do opt in. We want to know what human induced means are. The only answer that I have gotten so far that seems to go towards the issue is that you have got regulations to come that we at this point in time have not seen.
I have got country. To be honest, it is far cheaper for me to leave the land alone, and it has been cleared for years, it will revegetate. The answer that I want to know is: is that a human induced means of revegetation or is that natural? If it is natural then I will not do it. If you are saying that the regulations are yet to come then the whole point of this legislation becomes opaque and implausible, because we do not know what we are talking about. We will have to send it to a committee—especially when the regulations turn up. If the regulations are not right, we will have to disallow the regulations and, if we disallow the regulations, the whole legislation falls over. So it is really important for you, the minister, to be able to clarify this at this point in time. If you are going to answer the question, give me a nod and I will sit down. If you are not going to answer it, I will go to the next question.
That would be difficult to see, I would have thought. In terms of the quip about regulations, it is quite normal practice—and the senator knows this—for delegated or subordinate legislation to come after the primary legislation. That is not an unusual situation. In terms of the senator saying to me, ‘Well, we had better tell him now; otherwise, when the regs come along, the whole scheme will follow.’ But the senator has made it clear that he is going to vote for this no matter what. So, I appreciate his concern, but he has already decided that, no matter what I say in this chamber, he is not going to vote for it, because he does not believe that Australia should take action on climate change. He can come in and ask questions all he likes and I will continue to answer them as best I can, but everybody knows he is not going to support it.
We have been some 20 hours in committee and have progressed, I think, eight sets of amendments. Has the committee got any time frame in mind for bringing the discussion of this set of amendments, which has occupied much time, to a conclusion, or is it proposed that this simply go on ad infinitum—that is, forever?
To correct you, Minister, if you looked back in Hansard, you said in one sentence that I was going to vote for it and at the end you said I was not going to vote for it. So you seem to have been on both sides of the debate in one phrase.
That does not preclude me from asking questions. I have every intention in the world to vote for amendments, and have done so already. If you think that you can somehow emasculate my capacity to ask questions on behalf of other people in this chamber, sorry, but that is not how it works at all.
You have said that human induced methods would not pertain to leaving country alone for it to naturally revegetate. I will draw a simile there. That is like saying that you are not starving a child if you choose not to feed it, but quite obviously you are. You are making a conscious decision that brings about an outcome. If a farmer makes a conscious decision not to maintain their vegetation management program there is then human induced reasoning behind its revegetation. What you are saying is that that is not the case. That means that, obviously, the only way to get a credit is for farmers not to let nature do it by itself. They have to actually go out and plant exactly the same trees that would grow there naturally in any case and incur the cost. For the life of me that is nonsensical; it is illogical.
You have your advisers there so do you have before you calibrations for which trees have the most effective tonne of carbon to tonne of timber? For instance, does English oak, Quercus robur, have a greater capacity for storage of carbon than brigalow, Acacia harpophylla? Do you have the tables before you so that we can see which tree is the most effective to plant? Since we cannot let nature do its job and we have to plant it, we had better have calibrations on which is the most effective tree. Also, if it is going to be scientifically relevant I suppose we had better start planting imported trees, and if we do that let’s not worry about the biological nexus between native animals and the environment—we will just plant the most carbon effective tree. It might be the sequoia—the California redwood. Do we have a range of these? Are there certain types of trees we can plant? Are they all the same? Is there a differentiation between trees? Do we have that scientific evidence before us?
I was going to assist you and give you a definition of ‘emasculate’ but I am not sure I can do that and actually comply with the standing orders. In relation to the assessment of sequestration, I am advised that the landholders who are interested in opting into this process will be able to estimate, through utilising the National Carbon Accounting Toolbox, the likely sequestration opportunities on their land for different species and for the type of land.
I just wanted it on the record that you did not think I was ignorant of what ‘emasculate’ means. It is also a metaphor that is used all the time in literary concepts to show that you are precluding the propensity of a subject arising, and that subject arising also has all sorts of forms of metaphor incurred.
With your assessment of all these 1989, 1990 and 2008 forests, how is that going to be done? I imagine that is going to be done by satellite mapping. Is that correct?
On the aside that you referred to, I just wanted to make the point that you were accusing me of doing that to you. People might think lots of things about me, but I am a long way from you and physical violence is not my preferred option.
Generally not! The answer is that in relation to the Kyoto forests—which is the pre-1990 forests—and the regrowth on deforested land where there is a requirement for legal clearing between 1990 and December 2008, I am advised that it is by satellite data.
I want to follow up on the particular model for measurement. Senator Joyce just raised the national carbon accounting system. I presume that you are proposing to use NCAS as the tool and, if so, how are you going to deal with the situation where the model is clearly flawed, as it is with old-growth forests? Also, how are you going to deal with future improvements in the modelling? Does everyone get the benefit—or ‘disbenefit’—of model upgrades, or is the government going to take all the residual risk?
I am not sure it is necessarily helpful to get distracted into a discussion about NCAS. You said this is the national carbon accounting system but you made reference to old-growth forests. Obviously for this discussion—that is, land legally cleared previously—old-growth forests were not relevant. So I am not sure what your point is on that.
I am using the example of why the model is currently flawed and the Kyoto accounting system is currently flawed. As everybody would be aware, under the current accounting you do not have to account for the emissions from logging the forests and that is the problem we have had all along: you can get the benefit of afforestation but you do not pay the penalty for logging a forest if there is no change of land use. That has been our big issue and that is something we have argued for years and years. I understood from our discussion the other night that the government intends to argue for full carbon accounting. Can the minister clarify whether or not the government is going to start asking, campaigning or negotiating for full carbon accounting in the international negotiations? How is that going to change the methodology as it pertains to this CPRS permit system that is currently being talked about? Who will pick up the ‘disbenefit’ if all this is included in the future under a full carbon accounting regime?
I will take advice on that issue because I thought we actually traversed this on Thursday morning. The issue that gave rise to the discussion about NCAS was for the purposes of determining what was on land that was previously cleared. That was the context of the discussion. For that purpose, some of the issues Senator Milne raises are not relevant to the proposition before the chamber. We do not accept Senator Milne’s suggestion that the model is flawed and I do not want people to believe that my silence on that is acquiescence.
I want to answer the minister’s question from a while ago about whether we intend to vote on these amendments. Yes, we certainly do intend to vote on them. They are very important amendments which will substantially improve the scheme that the minister originally brought forward to this chamber. If these amendments are not passed today, is the minister suggesting that the government would vote against them if they were brought up at a later time? I find it a strange proposition that, if the scheme came back, the government would vote against them. We certainly do want to vote on these very important amendments. When are we going to do that? When senators have had their questions answered and are confident that the amendments are appropriate and in accord with what their constituents are seeking.
I do not want to take the Senate away from its particular focus at the moment, but I refer the minister to the domestic offsets program. Could the minister elaborate on what she called ‘windfall gains’ under the domestic offsets program?
First of all, the minister asked about a time frame. When I started talking about these amendments on land use and land use change, I made the point that I thought the whole thing should be outside the CPRS and that it is a hugely complex area. The government, with the coalition, chose to bring it all in at the last minute. This whole area of offsets was not in there before. The only thing that was in there before was reforestation and afforestation. Now the whole shebang is in there. Because it is so hugely complex, it requires a lot more discussion and none of it is settled because it is all part of the international negotiations anyway in terms of what is going to happen with REDD into the future.
I ask about these particular permits that the minister is talking about in the abatement. In the case of avoided deforestation and also in the case of the national carbon offset standards, I want to know whether the calculations are going to be based on a model. If so, will it be the National Carbon Accounting System or will it be based on a measurement? I would like an answer to that. If it is based on the model, how are you going to calculate the disbenefits over time as the model is recalculated or reframed? The minister would be well aware that for the last several months I have been trying to get the maps which demonstrate the Kyoto forests. The government have indicated time and time again that they will provide those maps but that they just need more time and so on. We still do not have them. These are the maps which are supposed to be the basis that enables your calculations of what was standing in 1990, what the progress has been, where forests have been lost et cetera. We still do not have them. Mr Temporary Chairman Bernardi, I know you will be shocked to learn that that is the case.
How can you have confidence in what the government says is going to be achieved in measuring carbon in situ if you cannot have confidence that the methodology is accurate in the first place? Since Australia has made so much globally of meeting its Kyoto target because of avoided land clearance, there should be the maps and a proper accounting system to demonstrate the claims that Australia is making. I want to know whether we are going to go with a model or a measurement. I would like to know when we can expect to get the maps that we are continually promised and have not got. It will be critical for anyone who imagines they are going to get permits under this system that there be proper, verified carbon on the ground and that there be a calculation over time.
The other specific question that I have is about interannual variation in sequestration or in emissions caused by factors such as weather, fire, insect attack and so on. If somebody gets a CPRS permit or a national carbon offset under the scheme that is proposed and there are emissions as opposed to sequestration, is the landowner going to pay for those emissions or is the government going to absorb that? How is that going to work? As we all know, that variation from year to year will be huge. Will people be issued with credits one year and have to pay a liability the next? Will it be averaged over five years? Who will pay the liability if you have a credit for establishing something and then it disappears?
I will ask the advisers to provide me some advice to give to the chamber on the last five or six questions. In relation to your first point about needing a lot of time on this, I accept that. I was just asking if it was envisaged we would get to any resolution after some 20 hours of debate—whether we would actually be able to vote on it. In relation to the National Carbon Accounting System, I reject one implication, which is that the National Carbon Accounting System does not include measurement. My advice is that it does. It is also a model. We think it is a very sound accounting system, particularly given the size of this country. If we want to properly measure these things, we need to have methods which enable us to look at the broad scale of the Australian landscape. In relation to the maps, I understand we have tabled an answer on that and given you an indication as to our view about that. Finally, again, your question really goes to the methodology for whether it is avoided deforestation. That goes back to the need to develop a test for the methodology around additionality, and that would be a matter for the committee.
The minister keeps tabling answers, but we still do not have the high-resolution maps that state governments are using, supposedly, to substantiate what is being said. To date, I do not think there is anywhere anyone can go. There are so many people who have been asking to see this information, this data, and it is simply not there. No state government, landholder or parliamentarian can actually interrogate this information that the government claims is there in relation to the maps and where the carbon is on the ground, where the Kyoto forests are and where the deforestation is.
I think it is about time that we had some verification and got hold of some information that makes sense and that we know is true. If we are going to a scheme that expands what we already have—that starts to give credits for avoided deforestation and establishes a national carbon offset standard for enhanced forest management and credits for regrowth forest on deforested land—we want to be able to see the maps of the deforested land right now so we know what we are dealing with. At the moment we cannot get the high-resolution maps to look at it. We keep getting told one thing or another, but I think it is only a matter of time before the international community say to Australia: ‘Let us look at the maps. Let’s actually have a look and see where these Kyoto forests are and where your avoided deforestation claims are going to come from.’ There is a long way to go before we get the ‘robust methodologies’ that the minister is talking about.
We have been told about national carbon offset standards. Presumably, if we are going to provide credits for regrowth forests on deforested land as of 31 December 2008 we have to have maps across Australia for what was forested or not forested at the end of December last year, and in a resolution sufficiently high for people to be able to look at them and say, ‘Yes, that’s right,’ or ‘No, that’s not right.’ Minister, when are we going to get the maps, even for 31 December last year as the baseline, that you were telling Senator Brown and the whole country about in terms of being able to sit down and say, ‘That’s where the forests are now’?
I have already tabled an answer in relation to that issue. In relation to the natural disturbance issue, I am advised as follows: permits are issued for net sequestration. Permits are issued up to a limit that takes account of the risk of reversal as a result of natural disturbances such as pests and fires. The regime contemplates a buffer essentially being withheld by government, which essentially can be best understood as an insurance against the sorts of scenarios that you have outlined.
Thank you. Now we are getting somewhere on that. It says that if a landholder applies for CPRS permits for an area of regrowth forest, or whatever, that was on deforested land, the permits will only be issued after the abatement is demonstrated. How many years after you plant is abatement to be demonstrated?
Secondly, there will be an insurance buffer in case it burns down, dies or is under insect attack, which will be withheld by the government. You said that the amount that will be paid takes into account the possible loss. Does that mean that there is a calculation of the total amount and then a percentage of that is withheld over time? Is that basically what you are saying?
This actually has been the government’s position on the public record since December 2008. I refer you to chapter 6, page 56, of the white paper where, at item 6.10, we talk about a ‘risk of reversal buffer’. It says:
The risk of reversal buffer would create a reserve to help protect forest entities against the exposure posed by emissions from natural events such as fire, insect attack, storm or severe drought. The risk of reversal buffer would be in the form of a small deduction each time permits are issued.
We have not yet determined what that proportion will be.
A delay in applying the risk of reversal buffer would mean that the forest entity would receive the full allocation of permits—
I am sorry; I just want to check something. I am advised that there is a five-year delay from forest establishment for the application of that buffer.
A delay in applying the risk of reversal buffer would mean that the forest entity would receive the full allocation of permits during forest establishment when costs are greatest. In addition, during the early years of forest growth the amount of total carbon storage and therefore potential carbon that could be lost due to natural disturbance is relatively low.
In determining each entity’s risk of reversal buffer, the Scheme regulator would seek to take account of project-level risk factors, such as the number of permits issued, the location of the forest and the entity’s management record. Buffers could be amended over time to reflect changed circumstances.
Senator, that is the same set of questions as previously asked. The methodology around avoided deforestation will be a matter for the committee, in accordance with the answers I gave earlier.
Minister, in the explanatory memorandum under ‘Domestic offsets project methodology determinations’, 4.71 lists the emissions sources that are currently counted and for which permits will be provided—obviously subject to the development of the robust methodologies. I would like in particular to go to ‘manure management’—a phrase I am finding rather ironic at this point. Minister, could you inform the Senate—and I have tried to find some more detail and I do apologise if it is somewhere and I have not found it yet—of what the exact process will be for manure management? All of these areas are quite a concern to farmers with respect to how they are actually going to access the assistance through these offsets. What are the processes? How will it actually work? If a farmer comes to me and says, ‘Senator Nash, what do I have to do as a farmer to get the permit for that manure management area?’ How will the process actually work?
Again, these are methods which would require the methodology to be determined by the committee. They have been included by virtue of the fact that they can count towards Australia’s international targets. However, whether it is this, fertiliser use, savanna burning, rice cultivation and so forth, we are establishing under this legislation a framework that sets out clear statutory requirements and a statutory committee which would then work with stakeholders—such as some of the ones I read out who are currently working with government on these and associated issues—in order to determine the methodology for what would be required to qualify as a credit.
Thanks, Minister. I do appreciate that. I do understand that the methodology process has not been got to yet, but I am simply trying to understand what has to be done with the manure to qualify. There must, obviously, have been some consideration by the government up to this point to even be including manure management in there. I understand the methodology has not been determined as yet, but I guess I am after a definition of what ‘manure management’ actually is.
Perhaps you could ask them not to interject, Chair, in the interests of being fair. Senator Nash, I am not sure I can assist you. Those methodologies would be determined by the committee. I will endeavour to find out if there are currently existing international methodologies for that and I will provide the information to you.
I thank the minister for her answer. I am sure farmers would be interested to know whether after a rainy day they are supposed to get out a harrow and run around the paddock and harrow in all the manure or whether they are supposed to rake it up somewhere and burn it or maybe put it in a big pile somewhere and do something else with it. It is a very genuine question because the minister obviously is not able to manage that. I appreciate that it is very complex legislation, but it is on the list. As a Nationals senator—even though, as the minister says, I have indicated very strongly my view that this tax should not go forward—it is entirely appropriate that I ask these questions on behalf of farmers. I think that they will be extremely disappointed, to say the least, that the minister is not able to give any clear indication of what that manure management is going to be.
If I could just return to 259C(4), which is about the domestic offsets program reporting and that there be a prescribed audit report prepared by an auditor. I think you referred to them before as ‘gibos’; I was not quite sure. I do apologise if you mentioned a number, but you indicated to the chamber that it had not yet been determined how many of those reporters would be in place. Just in terms of agriculture, could the minister perhaps indicate to the chamber very roughly how many of those persons would be in place to provide that reporting mechanism for the farmers?
Wouldn’t it have been perhaps wise to at least base it on some sort of figure or some sort of requirement at this point in time given that there are 137,969 farms that are solely dedicated to agricultural production? On each of those farms, under their farming practices, they may be able to identify an offset that they might have that they might want to claim. They would then have to go through the entire process that we have been discussing all morning. Given hypothetically we could have the situation where nearly 140,000 farms would be putting forward their claim for offset at the same time, it seems a little bit odd that the government has no idea at this stage how many of those audit reporters are going to be needed. One would imagine, having that quantum of farming practices in mind, there would be at least some indication from government that they have done some work in determining how many of those reporters would be needed.
The 140,000 farms will not have the opportunity if you vote against the legislation, which is what you are indicating you are going to do. But I did not say we had no idea; I said those registrations had not yet occurred.
I just want to come back to the National Carbon Accounting System and the maps. The minister said she had tabled an answer to my question about the maps, and the answer is always: ‘Give us more time. We need more time to produce these maps.’ Yet in the global negotiations on the reduced emissions from deforestation and degradation Australia is arguing strongly for NCAS. The government are spruiking NCAS all the time. Yet there are a lot of people in Australia who have real doubts about the accuracy of the National Carbon Accounting System. For example, the Queensland government says its maps show a larger level of deforestation than is reflected in the NCAS figures et cetera. I would like to know why we cannot have the maps before Copenhagen so that people in Australia who are very familiar with what is happening on the ground—state governments especially—can actually look at their maps and figures compared with the national map and figures and get some understanding of why there is a discrepancy between what state governments believe to be the case and what is reflected by the National Carbon Accounting System. That is why we want the high-resolution maps as soon as possible.
No. I am asking for the maps. If it is good enough to go to Copenhagen and tell the rest of the world they should have confidence in the National Carbon Accounting System, the very least that should happen is that the maps be on the table here in Australia. I do not think it is satisfactory for the minister not to produce the maps.
I have a question on a different topic but in relation to the same amendment. I do not know how long ago the minister asked what we were planning to do with this particular amendment. I have a series of questions to ask and if my colleagues have asked their questions I am keen to have a vote on it; otherwise this is a bit like The Neverending Story. I did indicate that I have got an amendment in relation to the issue of landfill waste gas capture, but in order to help facilitate this part of the committee stage I have provided to the minister’s office a series of questions to try to facilitate the answers to this.
I note in the briefing notes to the agreement of 24 November that has been tabled by the minister that the government is intending to introduce amendments to provide for sectors not covered by the CPRS to access offsets such as legacy waste. I have looked at the amendments before us and cannot find these changes. Maybe I have missed the obvious, Minister, and I will stand corrected on that. But I note that page 8 of the agreement of 24 November, under a box entitled ‘Implementation’, refers to other environmental enhancements to be included via amendments in 2010. Can the minister confirm that, in relation to legacy waste, that will be the subject of other amendments or is it covered under the amendments before us?
I was at a different place and then you asked the question about 2010. I will just get some advice; please wait a moment. Now I understand the confusion. That and other environmental enhancements to be included via amendments in 2010 relate to the water entitlement planning approval and other issues referenced in the paragraph above. Subsection (3) of the amendments before the chamber deals with landfill facilities. Is that the provision you were having trouble finding? It is at page 10. I just had trouble finding it too, but we have now found it.
I thank the minister; I am glad I was not the only one having trouble finding it. Further to that, what research or modelling has been done on the efficiency of abatement of landfill waste capture in comparison to the efficacy of other abatement measures included in the package? Is that a relevant policy consideration in the context of these amendments?
I now realise what you are reading from, Senator Xenophon, so this hopefully will go more smoothly. I go back to the first question. Clause 259K(3) provides for landfill emissions to be eligible for offsets. The references to clauses 20(6) and 20(8) of the bill are references to emissions from closed landfill facilities and legacy waste. In relation to your next question, we have not conducted modelling on that specific issue. The point of the CPRS is to enable the market to determine cost-effective abatement. Shall I keep going, Senator?
I am trying to be helpful, Minister. Isn’t the problem with what has just been said that the structure of the CPRS will determine the market, in a sense? The rules that are put in place will drive certain investments and certain forms of abatement. I am not suggesting there is a distortion here, but it could be distorted by virtue of the structure that has been put in place.
One of the reasons we have sought to bring forward a scheme that has as broad a coverage as is practicable is to deal with that issue. It is the case that we are setting up a new market scheme which will enable Australia to reduce its contribution to climate change for the first time. It is the case that, if you have a much narrower scheme, you do have the issue you have just raised. We have therefore sought to bring forward a scheme that has as broad a coverage as is practicable.
Further to that, will the minister concede, though, that the various free permits that are given and the various packages of assistance do make a difference to how the scheme will operate? Landfill gas may be impacted on by virtue of other decisions made. I will not pursue this any further, but I just wanted to get some elaboration from the minister on that.
Senator, if you are covered under the CPRS, you face the carbon price. There is some transitional assistance, some of it very important for particular industries. That is one set of policy issues. Due to a range of policy issues, legacy waste was excluded and that is why we have brought it into an offset regime.
Further to that, I think the minister knows that I made a representation to her office about having been contacted by representatives of the legacy waste gas industry. They have expressed concern that one of the stated conditions of accessing these offsets will be additionality and they are concerned that early movers, who have invested in power generation and abatement infrastructure under existing abatement schemes, are unlikely to meet the additionality requirements imposed under the rules. Does the minister concede that those early adopters could be prejudiced because they will not be able to deal with the whole issue of additionality? It has been put to me by one particular legacy waste gas industry member that they will be looking at shutting down existing plants because those plants do not comply with the additionality requirement—because the plant has already been set up. Is this an unintended consequence, or a perverse outcome, of what is being proposed on offsets?
Yes. We have provided some $130 million towards the transition from the New South Wales Greenhouse Gas Reduction Scheme, or GGAS, to the CPRS. Of that, $50 million is intended to be allocated to landfill gas generators and some other types of generators to provide assistance in respect of lost revenue under the scheme and a further $80 million is to be made available to holders of unused certificates created under GGAS. That is one set of assistance for the transition.
I would also make the point that landfill gas generators have market opportunities under the renewable energy target, because such generators are eligible to create Renewable Energy Certificates. As you would know, Senator, the renewable energy target has been expanded to provide further encouragement to the renewable energy industry, including for landfill gas generation. There are a range of companies in this space who will be able to benefit from increased demand for Renewable Energy Certificates over time.
I thank the minister for her answer. The advice I have had from one landfill gas operator is that there will be a number of projects that will not be built under these rules compared to the existing rules or the rules that have existed with GGAS. LMS has told me that projects that will not be built include those in Cessnock, Wyong, Maitland, Albury, Smithfield, Dublin, McLaren Vale, Townsville and Geelong, and that that is because of the way that the rules or the accounting takes place. So that is the concern. So my question is: does the minister consider that any site that has existing power generation or gas extraction infrastructure would not be considered additional under international rules? In other words, will infrastructure not be eligible unless it has been installed specifically in order to create offsets under this new scheme?
I am advised that the fact that a project already exists and was subsidised by GGAS does not of itself prevent that project from meeting an additionality requirement when the GGAS subsidy is removed. However, that project would need to demonstrate that additionality to the committee—that is, the offsets integrity committee.
I thank the minister for her answer. But is that not the problem, in the sense that they were early adopters? If they cannot demonstrate additionality, notwithstanding that they are taking greenhouse gases out of the atmosphere, by virtue of the additionality requirement they would have to either, in some cases, shut down or not be built because of the way that the accounting rules work with respect to offsets.
I am not sure what more I can add. I might ask my officials to provide me with an answer shortly. But again I say that the fact that a project already exists, of itself, does not mean that it cannot meet the additionality test. But it would need to meet the additionality test, and the public policy reason for that is clear: there is no point in giving people an incentive through an offset regime if they would have done it anyway. I am not talking about this particular company; I am talking about it as a general proposition. I will find out if I can provide any further detail.
I have a couple more questions in relation to that. Does that mean that existing landfill waste gas projects may have difficulty in selling permits in Australia? It has been put to me by those in the industry that, should they relocate offshore, they could definitely sell permits back to Australia, so that could lead to an outcome where there is a greater incentive for these plants to be set up in Malaysia, for instance, rather than here in Australia. Is that a potential consequence of the way that this amendment is structured in terms of a policy outcome?
I am not sure if we are at cross-purposes, Senator Xenophon. I think you are asking for a credit for early action. What we are saying is that, in relation to this issue, some of that is recognised by the transitional arrangements from GGAS to the CPRS, which I have outlined. I have also said to you that the fact that a project is already in existence and was subsidised under the GGAS does not of itself prevent that project from meeting an additionality requirement. But it would need to meet that additionality requirement. Again I say that that makes public policy sense; there is no point in providing a financial incentive for action that would have occurred anyway. It is a factual decision, based on what the Domestic Offsets Integrity Committee outlines, as to whether or not something would have occurred anyway.
I am not sure we are entirely at cross-purposes. The minister makes the point that additionality is required under this scheme even though it is for existing projects—I have not misunderstood that. The point that has been put to me by the industry is that if they cannot comply with additionality then it would be easier for them to go offshore and sell their permits back to Australia. That is what has been put to me in unequivocal terms—it would be easier for them to close down—or not build new plants here—and go overseas to do the same thing there and get credit for it that way.
The advice I have been given is that if a particular company closes down because they did not have the permit stream then that would be evidence that could be utilised for the purposes of proving additionality.
Can the minister elaborate on that? The nub of LMS and others’ argument is that with NGAS and GGAS ending with a CPRS start—and there is transitional assistance, I acknowledge that—they will lose that GGAS and NGAS income stream. This would undermine the viability of existing projects and would put at risk the power supply, in part, to a number of regional towns. The communities that have been put to me by LMS involve their sites in Ipswich, Redland shire, Tweed shire, Lake Macquarie, Newcastle, Darwin, Perth, Launceston, Bendigo, Ballarat and Shepparton. Obviously two of those are in capital cities, but it would put various communities at risk with the power that has been produced. I am happy to have further discussions with the minister and her office on this. I just want to put those concerns on record.
I thank Senator Xenophon for that. I do not want to make, by fiat, a decision in this chamber about what a company would or would not be entitled to. If the argument about additionality is that you would not have done this if you did not get the offsets, then I would have thought that was prima facie evidence that it would be an argument for additionality. You do not want people to gain this, Senator, and I am sure you would not be supportive of that. Leaving aside the factual scenario, because I do not know all the detail in relation to that particular company, in relation to an offset, if the argument is that this project would not be carried out in the absence of the issue of free units in accordance with this program then surely, if they are genuinely, credibly and demonstrably in a situation where that project would not be carried out in the absence of the units, then that would assist in meeting the additionality test.
I might take that up with the minister’s officials in the next day or so. It has been a bugbear for me and my office and I appreciate the minister’s answers. Her office has been quite helpful but I would be grateful if the minister could indicate that that would be satisfactory. Is it the case that there are a number of national waste landfill initiatives and complementary measures being considered by the Department of the Environment, Water, Heritage and the Arts and various state authorities that propose all landfills have mandatory gas extraction systems installed and/or that best practice standards include the mandatory installation of gas collection and combustion infrastructure? If that is the case, will these initiatives preclude any landfill site in Australia that does install gas collection infrastructure from being considered in terms of additionality?
Senator Xenophon is asking about the National Waste Policy. I am advised it would be premature to conclude that all major landfill sites would be excluded from offsets. We envisage the issue of additionality would be investigated by the committee on a case-by-case basis consistent with the tests I have outlined. I am also advised that the National Waste Policy adopted by the EPHC, the Environment Protection and Heritage Council, states that the Australian government in collaboration with state and territory governments will develop a strategy for measures to address emissions from disposal of waste in landfills and other waste activities, and these support the operation of a future CPRS. I am advised that environment ministers have not yet determined the detail of these measures and that these details are in part dependent on the final design of the CPRS.
I wish to place some questions on notice so we do not hold this up any further. I am not trying to exasperate the Minister for Climate Change and Water. The Wentworth Group wrote to me last month in relation to a paper ‘Optimising Terrestrial Carbon in the Australian Landscape’, which makes reference to, firstly, designing a carbon pollution reduction scheme that captures the full potential of terrestrial carbon in vegetation soils, providing land managers across Australia with the opportunity to optimise their contribution to the climate change situation; and, secondly, regulating the terrestrial carbon market so that multiple economic and environmental benefits can be realised whilst avoiding unintended consequences of freshwater resource biodiversity on agricultural land. It also makes reference to a climate change adaptation fund and international efforts to restore terrestrial carbon. Perhaps, in the context of these amendments, the minister can respond on notice to the extent to which the Wentworth Group’s concerns would be covered in these amendments. I do not want to take it any further than that at this stage.
I thank the minister for her cooperation. Could the minister indicate just how comprehensive that list on page 7 is? Are they representative or are they just a handful of the projects that might be eligible?
Those are sources which are counted towards Australia’s international commitments. The voluntary sources are listed at the bottom of the page plus the regrowth forests issue.
Question agreed to.
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.
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.
How many permits will be issued? I want to know because this is going to cost around $120 billion by 2010. There is another amount of money that Senator Milne, Senator Nash and I have been trying to extract from the Minister for Climate Change and Water without any success—the money that is going to be required to pay for the underdeveloped countries. I believe the Prime Minister said that we all should kick in $10 billion. I do not know what that is, but let us assume that it is another $4 billion, $5 billion or $10 billion—whatever. What frightens me about this proposition is how you get out of it. Once you have established that the permits have a value and the value becomes a property right, if this emissions trading scheme turns to custard, as it probably will, how do we as a nation extract ourselves from it? Do we have to go in and buy every permit that may be worth $50 or $60? These are considerable amounts of money. No-one has got a crystal ball and knows whether this will work. Many think it will not work and that it should not be done until after an agreement has been reached at Copenhagen. Most people do not see any point in doing it unless the other countries in the world do it.
We are saddling ourselves up as probably the second country in the world, if you take the EU as a collective, that signs up for this. With $120 billion or whatever it is, you have always got to have an escape route if this turns to custard, if it goes bad, if no other nation does it, if the Copenhagen agreement falls over and it is only the EU that have got an ETS. Last week—senators may be able to tell me—I think they ruled out 162 industries, so they have highly qualified their ETS and reduced it by 162 industries. But we are bravely galloping ahead with this. What happens if all these things fail? What happens if no-one else comes in and it is only the EU? They will then have an ETS when you do not have an ETS. What happens if America does not come in? How do we get out of this? How do we escape or do we just say: ‘Gee, wasn’t that a shocking decision; that was a costly one. We’ll let that $120 billion go through to the keeper’?
I and the rest of Australia want to know: if this thing fails, no-one else comes in and we are the only people to do it other than the EU, how do we get out of it? Do we go out and buy all those millions of permits back? Who pays for that? This is why the popularity of this scheme is going down like a brick. A week ago 54 per cent of people did not want it till after Copenhagen and 34 per cent did. This week it is 60 per cent that do not want it and 27 per cent that do. While we are talking, the popularity of this scheme is reducing and reducing. As people understand this more and more, they become more and more frightened. Senator Wong has not been able to sell this. I understand why she has not been able to sell it: it is a dog. You cannot sell it, so you want to get this scheme through as quickly as you can—saddle up the people with $120 billion worth of debt, with another $4 billion or $5 billion for the developing countries—and there is no escape route. Once you put it in there is nowhere to go that I can see. Up at Yabula last Thursday, I think, 1,200 people lost their jobs because of an ETS. Sixty-odd lost their jobs in Rockhampton in a cement factory. That is just, as I said, the canary in the mine. An ETS has not even hit yet, but just the threat of an ETS is costing a lot of people their jobs. Surely you are not going to saddle Australia up with this, with no way to get out of it. I would be very interested in the minister’s reply.
Senator Boswell has raised a number of legitimate questions. There were quite a few polemic debates surrounding some of the questions, but I will attempt to address at least two matters, one of which I have some first-hand knowledge. That goes to the issue of the arrangements for developing countries. This issue was in fact discussed at the recent IMF and World Bank meetings of Treasury and Finance ministers which were held approximately two months ago and at which I represented Australia. I took part in discussions about, firstly, the level of contribution to developing countries and, also, the governance parameters as to how that money would be administered and paid to those countries that would be eligible. I can provide an update from those discussions that were held at the World Bank and IMF meetings. I also understand these matters were considered by the Treasurer, Mr Swan, when he was at a meeting of G20 finance ministers and treasurers in Scotland about four weeks ago. The latest details that I can give you are comments from the Prime Minister himself at the Commonwealth Heads of Government Meeting of 28 November. The Prime Minister outlined Australia’s parameters and principles in our approach to the particular issue that you raised, Senator Boswell. I can refer you to his comments. The Prime Minister said:
One of the proposals which has been advanced by the British Government, and by others, has been for a fast-start fund to assist in overall climate change financing, underpinning an agreement at Copenhagen. Australia today has said that should such a fast-start fund come into being, then it should be governed by the following principles. Firstly, fast-start assistance should represent a substantial increase on existing climate change funding allocations, and use existing distribution channels to ensure fast-start finance is not delayed. Second, focus on the most vulnerable, least developed countries. A large number of these are small island states.
Third, ensure adaptation activities are adequately and transparently funded, separately from mitigation activities. Fourth, to focus mitigation finance on time-critical activities, including reducing deforestation and forest degradation, otherwise called REDD. And fifth, increase the capacity of developing countries to absorb significantly scaled-up climate finance in the post-2012 funding arrangements, including through leveraging private investment flows.
This is the set of five principles that was circulated at the Commonwealth Heads of Government Meeting which the Prime Minister spoke to on behalf of Australia. The Prime Minister further said:
Australia is of the view that such a fast-start fund can assist in bringing about a good outcome at Copenhagen, but most critically, assist those most vulnerable states dealing with adaptation challenges now.
I have already referred to the particular difficulties that small island states face. The Prime Minister further said:
The Association of Small Island States worldwide includes some forty plus States, twenty of whom are here represented at this Commonwealth Heads of Government meeting.
Small Island states in the Pacific and the Indian Ocean and of course here in the Caribbean as well. The particular vulnerabilities facing small island states from climate change is acute. In our own region in the South Pacific, we are particularly mindful of the challenges in Kiribati and Tuvalu …
Elsewhere coastal inundation is also an issue. In fact, for some of these island countries it is a threat to their very existence. The Prime Minister further said:
For these reasons, what Australia has proposed today is that if the United Nations agrees to establish a fast-start fund to assist with adaptation tasks for the most vulnerable states, then five to ten percent of that fast-start funding should be dedicated to small island states.
This is of particular relevance in our own region, where we have states already being directly affected by inundation and other consequences. It is also relevant in the Indian Ocean with states such as the Maldives …
Apparently at CHOGM, the head of government spoke very powerfully about the challenges which his country faces from inundation. I also know from my representative capacities with the Pacific Islands Forum Economic Ministers Meeting and the Pacific Islands treasury and finance ministers meeting that this is an issue of significant focus. Rising sea levels are a threat to the existence of a number of these island states. It was also a matter of discussion at the Pacific Islands finance ministers meeting, again, where I represent Australia.
They are the principles that Australia has outlined with respect to assistance for underdeveloped countries—as you term them, Senator Boswell. It is an important issue because, as I have said, there are many of these small island states who face absolute calamity. To come to your first question regarding the number of permits, at a five per cent cap in 2020, initial permits as at 2011 are estimated to be 450 million. The permits have to be acquitted under the scheme, which means you do not necessarily have to build up a large excess pool.
I pick up the point made by Senator Sherry, particularly as it relates to the meeting held on 7 and 8 November in Edinburgh, at which, as Senator Sherry quite correctly said, our Treasurer, Mr Swan, represented Australia. It was a meeting of the G20 finance ministers, who were pushing very hard for a decision to be made there and then in advance of Copenhagen. The decision they wanted agreement on I think was an expenditure of some US$150 billion annually by the developed countries. Treasurer Swan quite correctly said that there was no way that Australia could contribute prior to Copenhagen—there was no way that Australia could make that commitment prior to Copenhagen. He said that we should wait until after the meeting in Copenhagen before any commitment should be made by Australia. That is critically important, because any reasonable, rational person would agree with him.
It was interesting that the Europeans were pushing very hard, because they, of course, are low carbon emitters. The reason many of the European countries are low carbon emitters is due to their reliance on nuclear power for electricity generation. For example, 80 per cent of France’s electricity is generated by nuclear means. On the very same weekend as the meeting, 7-8 November, the Labour government in the UK announced that they were going to build 10 new nuclear power stations. So the Europeans were trying to wedge countries like Australia, making the observation that we should be committing. The figure that I have seen advertised that Australia should make as our contribution is some $7 billion annually. We could find ourselves in the ironic position that China, being one of the developing countries, could be the recipient of Australia’s $7 billion annually, and who would we look to to borrow the $7 billion from but China. Most of the borrowings that have taken place, certainly by the United States and probably by Australia in the purchase of our government bonds in recent months, have been from China. So we find ourselves in the unusual position of borrowing $7 billion a year from China to give it back to them on the basis of them being a developing country. This is untenable and unconscionable. The Treasurer was quite correct in his statement that we should wait until after Copenhagen. Of course, it simply emphasises and underpins that we should be waiting more generally until after Copenhagen.
The only comment I will otherwise make at this moment relates to China, because there has been so much mention of it in recent times. The minister has referred to the possibility of the Chinese indicating that they might show some interest in introducing some sort of a carbon-reducing plan sometime in the future. I do remind the Senate that it was only this time last year that the central government in China admitted that they have no idea how many illegal coal fired power stations are being commissioned each month.
We should all recall in this discussion—and I will bring it up at a time more relevant—that the central governments of countries like India, China and Indonesia do not command the sort of relationship with regional and state and territory governments as we in Australia do. A very simple example of that is the Stern Hu case, where the central government had to defer to a local mayoral government. We had the example recently in Indonesia with the Oceanic Viking, where an agreement was struck between our Prime Minister and the President of Indonesia only to result in the local regional government simply ignoring what had been struck. It is important that in this debate we understand that when a central government in those countries makes an indication or an expression or a commitment they simply do not have the capacity to be able to honour it in the same way that we have in our country. More on that later, but on the point that Senator Sherry raised—which was the engagement of our Treasurer, Mr Swan, on that occasion of 8 November—his statement at the conclusion was that we must not make a commitment until after Copenhagen.
Whilst you were out of the chamber and Senator Sherry was replacing you, Senator Wong, he gave us some advice on how the first five or 10 per cent of our fast start money had to go to the islands in the Pacific and elsewhere. It was very interesting, but it was not what I asked him. I asked him how much money it was. The Prime Minister was overseas just a couple of days ago and he made some comment about the undeveloped countries. He said that we have to put in something like $10 billion—I think that was the figure. He did, however, make a statement on how much money would have to be paid.
I have continually asked you what that money is. I have heard $4 billion. I have heard $7 billion. It is beyond belief that the Prime Minister should go over to a forum and make a statement about putting money on the table but that he does not tell us how much money it is. As far as Ron Boswell or anyone else is concerned it does not really matter, but you have to tell the people what that money is. They deserve to know. That money is public money and the amount should be made public. It is beyond belief that you tell us that the Prime Minister went over and made a statement about how much money—he did not actually specify what Australia had put in but he told people what he thought the money should be—but that that amount is not made public.
I made this statement too, Senator Wong, and I will make it again: last week there was polling done by the Australian Chamber of Commerce that said 54 per cent of the people did not want to progress down this path until after Copenhagen whilst 34 per cent said that they want to go immediately. One week later—and this is the same pollster with the same question—the 54 per cent has gone to 60 per cent and the 34 per cent has gone to 27 per cent. The reason this is happening, Senator Wong, is that you will just not come clean. You will not tell the people what is involved. So no wonder people are turning off this and the support for it is dropping like a brick. And next week it will be less. You cannot expect people just to take you on your word. You know what it is and the Prime Minister knows what it is but you will not tell them. I cannot go over there and beat it out of you but you should be able to tell the people what the cost of it is.
There was another aspect I raised, and I was told that 450 million certificates will be issued. The other issue I wanted to get some advice on is this: what happens if this emissions trading scheme turns to custard, if it does not do the job, if no-one else goes in? I suspect that will be the case. We will have the EU in, which is a collective of countries, but so far no-one else has made a move to join. Yes, you have a few press releases from China, Japan and a few other places that have made some sort of commitment, but in real terms the EU is the only one that has put an ETS together and it is highly qualified. A couple of weeks ago they removed 162 industries from it, so it is the ETS you have when you do not have an ETS.
But what I want to know, and what I think everyone wants to know, is: if this goes bad, if no-one joins, if Copenhagen is a wash-out and no-one turns up with a real commitment, how do we get out of it? We would have 450 million certificates valued at somewhere between $20 and $30 each. They have a price. They would be property rights. Once we push these into legislation, they will become property rights. If everything turns bad, what is our strategy to get out of this? What is our exit plan? Have we an exit plan or do we just write off something like $129 billion over 10 years and say: ‘Well, that was bad luck. We miscued on that one’? These are the things that people want to know. It is no good telling me that they have to be acquitted. I do not know what that means in real terms. I want to know how we recover our money. How do we extract ourselves from this mess if no-one else joins?
I think basically what people are saying in the polling is: ‘We’ll pay our fair share. If everyone in the world joins, we’ll pay our premium.’ That is how I am interpreting the polling that indicated that 60 per cent of people did not want to go down that track and 27 per cent did. The poll was taken by Galaxy over the weekend. The reason the popularity of this is falling is that you are not explaining it. You are not telling anyone. You are standing up there and giving glib replies but you are not answering any questions. When its popularity drops further next week, down to about 14 per cent, you are going to be officially labelled the worst saleswoman in the world because you have not been able to sell this to the public. You cannot even sell it in this parliament. Please tell me how we get the $129 billion out of this if the worst comes to the worst.
I am not sure how much of that was a question. Some of it seemed to focus on me, some of it focused on press releases and some of it focused on the debate we had for hours, I think, on Wednesday night. In terms of polling—I am not quite sure which poll the senator was reading from; I think there were a range of polls in the papers over the weekend—can I just say we do not do this because of polls. We do it because we think it is the right thing to do. I would also remind you that you also went to the last election committing to do this.
I would also make this point. I understood that there was bipartisan agreement in the parliament for the targets, so I am not sure if the senator is suggesting that he is now changing the coalition’s previous stated position of supporting the targets, including the unconditional target of five per cent. If that is his position, it might be useful to know that.
In relation to the issue about international financing, we did go through this in some detail last week. You are right, Senator Boswell, and I have said so. We will be accountable for what we propose internationally, but we have not made that announcement. If and when Australia does so, we will be accountable for that and we will explain to the Australian people why we have made the decision that we have made. But what you are asking for is for me to pre-empt that government announcement, and I am not going to do that.
One of the other things the senator said is, ‘You’ve only got press releases.’ A press release from the President of the United States is probably not a bad commitment. I do not believe that is a serious political—
If the Obama administration makes a public statement about what its commitment is, I think that is not a bad indication of what it intends to do. If the Prime Minister of Japan makes a public statement indicating what his commitment is on behalf of his nation, that is not a bad indication of what they are proposing to do. These are elected heads of government or heads of state and they are making commitments on behalf of their nation.
Let me say, the Howard government made a statement and it said something like this: we will put an ETS up but we will not let our exporters suffer—and I am paraphrasing it—and we will be doing it in sync with the rest of the world. That is the difference between your ETS and Howard’s commitment. Howard’s commitment was something like that. I do not have it in front of me, but it said we will not ruin our exporters and we will do it in sync with the rest of the world. You have gone well and truly beyond that. You are affecting our exporters and the rest of the world has not joined in, so do not come to me and say, ‘You went to the electorate with a similar ETS.’ We went to the election with an ETS that was highly qualified. We were not going to hurt our exporters and we were going to do it in sync with the rest of the world. You have not done that, so it was totally different to yours.
The whole idea of this scheme is to reduce global greenhouse gases. I have been doing some figures today. China have said that it will reduce some 45 per cent. Putting that in context, China produce about seven billion tonnes of greenhouse gases a year and they forecast that by 2020 that will grow to 14 billion—double. They said they were going to reduce that around 45 or 50 per cent and that it will grow from seven billion to 10 billion tonnes of greenhouse gases. We are going to see China increase their greenhouse gases by three billion tonnes from now to 2020.
Under the plan put forward by the Prime Minister and Minister Wong, Australia will reduce its greenhouse gas emissions from roughly 550 million tonnes to 520 million tonnes. The point I make is that with this whole Carbon Pollution Reduction Scheme, including the emissions trading scheme, Australia is going to go down 30 million tonnes at a cost of $114 billion-plus-plus-plus, depending on the world price of carbon and the strength of the Australian dollar. So when we go down 30 million tonnes, China is going to go up three billion tonnes. I found it frightening when I read an article titled ‘India says greenhouse gas pollution to jump’ which said:
NEW DELHI ... – India said it expects its greenhouse gas emissions to jump to between 4 billion tons and 7.3 billion tons in 2031, a report said on Wednesday.
Australia is rushing ahead to be the first cab off the rank to introduce an emissions trading scheme, when India will increase its emissions by four to seven billion tonnes by 2031 and China will increase its emissions by three billion tonnes by 2020. Australia will reduce its emissions by just 30 million tonnes.
Minister, going on those figures—and I believe I have got the figures right—what Senator Boswell is saying and what 60 per cent of Australians are saying is: ‘Please do not make a decision on this before the election.’ What are we actually going to achieve when these developing countries are going to increase their gases by billions and billions and we are going to reduce ours by 30 million? Surely, Minister, shouldn’t we reconsider this whole plan before these other countries sign up to doing something? Our forecast reductions are simply a drop in the ocean, while the forecast levels for these other countries just go up and up and up. What are we going to achieve?
I want to follow up in the same vein in terms of the targets. Minister, I have the explanatory memorandum in front of me. Page 6 says—and it is on the public record—that the medium-term national target is to reduce emissions by five per cent to 15 per cent of the 2000 levels by 2020. An article in today’s Examiner on page 11 talks about the various countries and their targets. Some have just been recently released and I think the US indicated a target last Thursday. What I would like to get is an update on the target for the various countries—like the US—compared to Australia at 2000 levels. We have five to 15 per cent of 2000 levels. That will be the cut by 2020. This report says the US, one of the world’s biggest emitters, has promised to cut emissions by 4.5 per cent by 2020 based on 1990 levels.
Could the government correlate that and put it into figures so that we can compare at 2000 levels? I saw a report on Friday which compared the cut to a 12 per cent cut and I saw another one on the weekend—I think it was in the Australian Financial Reviewthat talked about a 17 per cent cut. I would really appreciate that if the government could provide that information. I am sure the government would have done that research to compare apples with apples. We can then get the US target comparison. Likewise, Senator Williams referred to China. From what I read from this report, China is the biggest greenhouse polluter. It has promised to cut its carbon intensity emissions per unit of GDP by up to 45 per cent by 2020 compared to 2005 levels. Minister, can you help us by comparing apples with apples? Likewise, can you give us the figures for the European Union, Japan, Brazil, India, Russia, Africa and other relevant countries? I am happy for you to table a document to summarise that. That would be greatly appreciated.
We have previously discussed this quite a number of times. I say in response to the contributions made by Senator Williams and Senator Boswell—who has left the chamber—that we are not acting alone. I do not know why it is that the National Party and some Liberal senators continue to come into this chamber and assert something that is simply not true. Action is being taken in other countries. It may not be the action you wish to be taken.
Senator Nash, it is actually what Senator Williams said. I do not think it is reasonable for senators who oppose action on climate change to try to fudge the facts to assist their argument. They can argue it, if they wish, on the basis that they do not believe the science—which is some of them—or for whatever reason, but it is not correct to say that we are acting alone. The second point I would make is by way of a quote—and this is, I think, quite interesting, when you consider that this was the report commissioned by then Prime Minister Howard:
.... waiting until the truly global response emerges before imposing an emissions cap will place costs on Australia by increasing business uncertainty and delaying or losing investment.
… … …
After careful consideration, the Task Group has concluded that Australia should not wait until a genuinely global agreement has been negotiated. It believes that there are benefits, which outweigh the costs, in early adoption by Australia of an appropriate emissions constraint. Such action would enhance investment certainty and provide a long-term platform for responding to carbon constraints.
That was the advice to Prime Minister Howard. Perhaps the best way of describing that is the way in which Dr Peter Shergold described it on the Four Corners program, which was interesting viewing. He said the advice was ‘go soon’. That was the advice to you in government, and that was why the emissions trading scheme policy was adopted by the Howard government and taken to the last election. In relation to Senator Boswell’s polling questions, I suggest that action on climate change was something that was a significant aspect of the last election campaign.
In relation to Senator Williams’s questions, the proposition behind what Senator Williams seems to be suggesting is that we should not do anything because others are not doing enough, we should not do anything because others are bigger or we should not do anything because—I am not quite sure what the other reasons were. Senator Boswell made a comment last week in which he said, ‘I pay my share of the rent.’ This is our share of the rent. If we accept that this is a nation vulnerable to climate change—if we accept, therefore, that we need a global agreement—then we have to be prepared to do our bit. That is what we are proposing: to do our bit, to not stand back and say, ‘You go; you do it.’ That is for two reasons. First, it is not fair. Second, it is because we have an interest in acting and getting the world, as much as we can in pressing, to a global agreement, because if we do not get a global agreement it is our farmers, our land, our natural assets and our economy which will be hit hard. So we have a self-interest as well as a public interest in acting.
The figures I have given in this chamber perhaps a dozen times—I might be exaggerating; maybe half a dozen times—are that at 2020 a five per cent cut would yield about a 138-million-tonne reduction, a 15 per cent target around a 194-million-tonne reduction and at the 25 per cent target around a 249-million-tonne reduction.
Yes, Senator Williams, it is smaller than China. We are smaller than China. We also are part of an international agreement that recognises that we cannot simply ask people to stay poor, that what we have to do is have a framework which enables some growth in developing countries, then a peak and then a decline. That is what we signed up for. What we have to do is encourage the same thing in China as what we are encouraging here: a low-carbon growth path. We have to, for the first time in human history, really de-link emissions growth and economic growth. We have to stop making worsening climate change the price of economic growth, because if we do not we know it will cost us much more in the long term. That is why we have before the parliament a scheme that is about reducing our contribution to climate change as a nation.
Senator Barnett asked me for some comparators. I think this is the fourth time I have read this table out and I am happy to do it again. I will then also give you some figures in relation to 1990. You know our targets, which I think we have bipartisan agreements to; they are minus five, minus 15 or minus 25 per cent on 2000 levels. Canada has a target of 20 per cent below 2006 levels. The European Union has 20 to 30 per cent on 1990 levels. Japan has 25 per cent on 1990 levels. Mexico has agreed to reduce emissions by 50 million tonnes annually until 2012 against business as usual and then by 50 per cent below 2002 levels by mid-century. The Russian Federation has officially announced 10 to 15 per cent below 1990 levels. The Republic of Korea has committed to reducing emissions by 30 per cent below BAU by 2020. The United States has announced a 17 per cent reduction on 2005 levels by 2020. It has given subsequent targets for 2025, 2030 and 2050. Brazil has agreed—this is an announcement by President Lula—to reduce emissions by between 36.1 and 38.9 per cent relative to business as usual by 2020. Deforestation targets will equate to a more than 80 per cent reduction in the rate of deforestation between 2006 and 2020.
China has agreed to reduce carbon dioxide emissions per unit of GDP by 2020 from 2005. The margin that was announced was, I think, 40 to 44 per cent, but I will check that—the notes I am reading from predate the announcement. India has announced a national energy efficiency plan, including a cap and trade system, to save about five per cent of India’s annual energy consumption by 2015 and reduce annual carbon dioxide emissions by 100 million tonnes. It has a solar target of 20,000 megawatts by 2020. Indonesia has agreed to reduce emissions by 26 per cent below business as usual to 41 per cent with overseas support and agreed to seek to convert forestry from a net source to a net sink by 2030. The South African environment minister outlined a plan last year to peak emissions around 2020-25, stabilise for a decade and then decline.
I do not want to waste the time of the chamber but, Minister, it is of interest that you have read that into the Hansard two, three or more times, but what I asked was to compare apples with apples. I made my question very clear, and you have a department full of people who can answer that question and compare apples with apples. I will ask my question a final time—I am not going to ask it again. The chart you just read out again to this chamber was very hard to comprehend and made it hard to compare the figures. We know the Australian targets are set out in your explanatory memorandum, and we all know what they are. They are compared to 2000 levels. Would you please instruct your department to compare the target levels from the other countries that you have referred to with the 2000 levels, or at least provide something that will allow us to compare apples with apples and understand exactly what we are talking about? That was my question the first time; it is my question for the second and last time.
I thank the minister for her answer. It does concern me because I am probably one of the very few people in this parliament that has experienced Australia leading the way, in this case in trade. When the Hawke-Keating government agreed to allow the importing of pig meat into Australia it was very costly for Australian piggeries and it shut down a lot of them. My brother and I worked extremely hard in our piggery; it was a seven-day-a-week job. So I am very sceptical about Australia leading the world, and we are about to do it again. I do not know what we did wrong with our piggery. The other pig producer at the time was Prime Minister Paul Keating. He was obviously a much more successful pig farmer than me.
Senator Barnett’s point is very valid. China has committed to a 45 per cent reduction in GDP figures. Their emissions today, going on my figures, would be around seven billion tonnes a year. We should be looking at what China’s emissions will be come 2020. Of course, China’s economy is growing very rapidly, and hence they will be putting out a lot more emissions. Minister, how many of the countries on that list you read out, excluding the European Union—you mentioned Brazil, Japan, the Republic of Korea and so on—actually have an emissions trading scheme in place today?
I actually neglected, because it does not appear to be in my table, New Zealand, which, under a conservative government, has legislated its emissions trading scheme. The European Union obviously has legislated. The US is in a similar position to Australia in that legislation is before the Senate, and I think Japan is committed but has not yet legislated.
Senator Barnett’s request is very simple and deserves attention by the minister’s department. The figures the minister reads out are reductions of different base figures of different calculations. I hope that, before we progress too much further, we can have the answer to Senator Barnett’s question so that we can all consider it.
I have risen to ask the movers of the amendment, the Greens, some questions, but I cannot help but follow on Senator Williams’s comment. The minister mentions all of these other countries—this is the bit that I cannot quite understand—but none of them, with perhaps two exceptions, have a legislated scheme. I heard the minister talking about the United States and President Obama’s commitment and how his media releases were pretty good—and I guess they are—but in relation to Copenhagen why isn’t Prime Minister Rudd’s media release as good as President Obama’s media release? I do not particularly follow American politics and their systems, but you do not have to follow it terribly much to know that congress is not going to determine a position by next week, when the climate change conference starts. They will not be determining a position. President Obama may believe that that is what his country should do, but it is a democracy and the President does not rule by decree. He requires approval by congress—by two houses of parliament. I would be happy to be told I am wrong on this, but there is no way in the world, as I understand it, that the American congress is going to make a decision before Copenhagen.
Similarly, in Japan the Prime Minister has indicated an aspirational target, as have many of the other countries, including South Africa. I keep mentioning South Africa because it is a competitor of Australia in the supply of coal to the world, as is Indonesia. They are aspirational targets announced by their leaders. None of those countries is going to have a firm resolve because until we know what the world is doing it is a bit hard to say, ‘We’re going to do what Japan is doing and reduce emissions by 20 per cent,’—although I think Japan’s target is 25 per cent. But to what does this target apply—and to whom and for what industry? And how is it going to operate? There are so many imponderables. What I thought Copenhagen was all about, and what we have been told for month after month, is that Copenhagen was going to bring the world together and arrive at a fairly common scheme so that everyone could go back home and say: ‘Are we in this or are we out? Once we’re in it we can have this world scheme going with world trading of permits, and the bankers will be very happy with all this.’ That is fine, but clearly Copenhagen is not going to do that. So why wouldn’t we take the benefit of what happens at Copenhagen in finalising the design of our own scheme?
Sure, we have agreements in principle. The coalition had nine principles which we sought to have adopted. And I am pleased to see that the Labor government—after severely criticising them and saying they were a waste of time and money, that they could not work, that it would not happen and that they would be pointless—has changed its mind on that. That is good. What is the necessity in the next three days—the dying days of this year’s parliament—of making sure we vote on these things? I pointed out an obvious error in the legislation this morning. It was obvious to me when I had a look at it. It is an error that has occurred because we are trying to rush something through for no purpose.
I again ask the following question. Australia produces less than 1.4 per cent of global emissions of greenhouse gas, and we are being told in this debate that, unless we vote for this in the next two or three days, Tuvalu and a lot of other Pacific island countries are going to disappear under the sea, suggesting that if we pass the Rudd government’s legislation, which will reduce world carbon emissions by 0.2 per cent, then that is going to save Tuvalu and that if we do not then it is the fault of all of us that Tuvaluans will be swimming above what used to be their homes. It just defies logic. So why don’t we wait and learn from and take advantage of what the rest of the world is doing? We would then come back and say to the Greens and the other people involved in this: ‘Look, that’s what the rest of the world’s doing. On this point they have a better idea than we have; on that point they have a worse idea. We’ll try and convince them.’ Why wouldn’t you do that? Why is it essential that in the next couple of days we have this legislated? Mr Rudd has already done what President Obama has done: he has issued a press release to the world saying, ‘This is our target.’ I think the coalition says, ‘Yep, we agree with those targets, but let’s see what happens.’
I am sorry to delay that—for a couple of minutes only, I hasten to add—because I do want to get on to the amendment before the chair, which I understand is from the Greens and relates to effectively charging for credits that, under the scheme as originally proposed and as proposed to be amended, will be given out free to emissions-intensive trade-exposed industries.
In asking this question of the movers of the motion, I again point out something that I have raised in this chamber before. I was cleaning up my desk and I again came across the front page of the Townsville Bulletin of 26 November, with the headline ‘Yabulu closure threat: PM asked to intervene to save 1200 jobs’. The spokesman for that nickel-refining company in Townsville has said that, if this scheme goes through, 1,200 working families in the Townsville area, where I have my office and hang out, will no longer have a principal breadwinner. I invited the minister, on several occasions, to say this was wrong. All we got was that the Yabulu people, the Queensland Nickel people, were going to talk to her department in the next couple of weeks. That is pretty good. If the minister has her way, in the next couple of weeks this will be legislated, and then it will be goodbye to the jobs of 1,200 people in my community. I feel for those people; I really do. I get emotional about those people.
This refinery, I might just add by way of explanation, was about to shut six months ago. A clever businessman came in, bought it and kept it going. There was huge relief in Townsville, because there had been a pall over Townsville when we thought that one of our three refineries was going to close. We have the nickel refinery that I am talking about, the zinc refinery that has also been prominent in this debate over the years and the copper refinery. They are the sorts of things that, if we do not get this right, could be a problem.
In the case of nickel, we used to get nickel ore from up the back of Townsville at a place called Greenvale. The nickel ore ran out so, rather than shut down a valuable asset and all the jobs, including port jobs, in Townsville that are associated with it, the then owners used to bring the nickel ore from Noumea or the Philippines, ship it into Townsville, refine it in Townsville and then ship it out to the world, keeping lots of jobs and wealth in the country. Most of the nickel ore now comes from the Philippines, where there was a nickel refinery. It was not a terribly efficient nickel refinery. It was one that operated without any restrictions on the amount of its emissions to the world. It was a real greenhouse disaster, but it is still there. It was not shut down or pulled to pieces; it was just put in mothballs. If the nickel refinery in Townsville can no longer operate, I guess that one would be un-mothballed and put back into production to use the ore that that section of the Philippines is currently selling to an Australian company to refine in Townsville. These things really need to be addressed.
I always get very annoyed when the minister looks at anyone who happens to disagree with her and Mr Rudd and says things like: ‘Ah, you’re a climate change denier,’ ‘Ah, you don’t want this scheme to go through; you don’t want to do anything’. That is simply an untruthful explanation of my position. I accept the climate is changing. I do not know whether man is doing it, but then 20,000 of the top scientists in the world do not know either. Half of them think they know and the other half think they know as well but they have a different view, so what chance do I have? I go along with the principle of taking out some risk insurance. Even if it does not happen we should take out insurance, but do not do it before everybody else and put Australia’s economy and jobs at risk just to swan over to Copenhagen and say, ‘I’ve got my legislation passed’.
I believe we should do something and so do the Australian public. In fact, I believe I am in the substantial majority. Yes, we should do something even if it is not true. You might recall the Howard government did a lot of things which reduced greenhouse gas emissions—the Greenhouse Challenge Plus and MRET, the mandatory renewable energy target. I could go on for longer than I have.
The first greenhouse gas office in the world, Senator Barnett. We did a lot of things to reduce emissions, and so we should have. I agree with the minister on that: we should be reducing our carbon emissions—but not legislating in this way, and putting at risk 1,200 jobs in my home town, for a scheme that may or may not achieve agreement. What would it matter if we waited until parliament resumed and say: ‘Okay, we’ve seen what everyone is doing in Copenhagen; we’re convinced everybody is going to do something, or at least everybody who counts to Australia; and if everyone who has an impact on the Great Barrier Reef is doing something, the people whose emissions do affect the Great Barrier Reef, then so should we’. I am very firm on that.
I have distracted myself, for which I apologise to the chamber, but I was coming back to the movers of the motion. As I understand their amendment, this will mean a massive price rise across the board for Australian industries, putting jobs at risk, as I have just said. I ask the movers what modelling has been undertaken to look at the cost increases that might result from this amendment being carried. If there are no cost increases, I would like the mover to explain how that could possibly be.
I will briefly respond to some of the subject of Senator Macdonald’s contribution. He asked why we need to do this before Copenhagen, and I say two things to him. First, we want to go to Copenhagen with a plan to meet our targets. I would have thought one of the things we in this chamber all agree on is that this is a significant reform. We will be reducing emissions for the first time in our history whilst continuing to grow our economy. We have never before achieved that. We want a plan to meet our targets. We want to be able to do it at the lowest cost. We accept the advice that was put to your government. I was just reminding myself of your own election commitment, Senator Macdonald—with lovely pictures of Mr Vaile as well, with Senator Nash, and Mr Howard and Mr Costello on the front—which was to establish ‘an emissions trading system, the most comprehensive in the world, to enable the market to determine the most efficient means of lowering greenhouse gas emissions’.
The second question is: what is wrong with doing it by press release? Well, press releases do not fix the climate. We want a plan to meet our targets. The point about the press release issue is that there was a suggestion by Senator Boswell that somehow we ought not to rely on a public announcement by the President of the United States. The important point we keep asserting—and I have to wonder how it is that the party that used to pride itself on being the superior economic manager, according to its rhetoric, could advocate for a position of continued economic irresponsibility—is that we know that delay will increase the costs. We know that delays will increase the costs, so the people in this debate who say we should delay are actually arguing for Australia’s price tag for action on climate change to grow.
Finally, I will just make this point: we have in fact designed the scheme so that we can take account of what happens at Copenhagen. That is why we will not commit to our targets until we are clear about what has occurred. But, again, I pose this question—and Senator Macdonald may not be in this camp but I suspect he will be: does any one of you believe that those who have done what they have done over the last week will change their minds in February? Does anyone honestly believe that?
I will take that interjection. I think most Australians would ask that question. Most Australians would believe, from watching Senator Minchin’s behaviour and that of others, that you are not going to be for changing. No amount of fact, detail or evidence is going to change your minds. You do not believe that this is something that this nation needs to do, notwithstanding the fact that it was your policy. You are entitled to believe that. I disagree. But I think it would improve this debate if you could come in and be honest about it and say, ‘Actually, I do not believe we should act.’
The minister says Australia should do its bit. The problem in doing our bit is that what has been presented to this parliament is a very elaborate and complex emissions trading scheme. Doing our bit requires that we trade with other countries who have similar emissions trading schemes. There are other ways this could be done, but we—Australia—have elected to have, through the Rudd government, an emissions trading scheme. It is predicated on countries in our region, our major trading partners, all having emissions trading schemes so that we can trade carbon credits with them. But in reality I think it is very unlikely that our trading partners will have emissions trading schemes.
Our top five trading partners are China, Japan, South Korea, India and the United States. A month ago I was in Beijing and I went to a renewable energy forum at the National People’s Congress. I asked the delegates there from China, Japan and South Korea whether or not their countries planned to set up emissions trading schemes. They were all very keen on renewable energy, but I asked: would they have emissions trading schemes? The head of the Chinese delegation, who was the chair of the environment committee of the National People’s Congress, made it very clear that China regarded an emissions trading scheme as very difficult to set up for China. He saw immense difficulties in setting up an emissions trading scheme and said they would be unlikely to go down that pathway.
Similarly, the Japanese delegate, who was their former minister for the environment, said that it was highly unlikely that Japan would have an emissions trading scheme. Japan remains our second biggest trading partner. South Korea is our third biggest trading partner, and the delegates there from the Korean National Assembly also said that it would be highly unlikely—in fact, there was almost no chance—that Korea would have an emissions trading scheme.
India is our fourth-biggest trading partner, having displaced the United States from that position. Anybody who has been to India and seen the immensity of the emissions in India understands that an emissions trading scheme simply will not occur in India. The government simply cannot legislate to cover all the many and diverse emissions which occur in India. While, again, the Indians may be interested in renewable energy and many of these countries may also go down the nuclear pathway, an emissions trading scheme is highly unlikely.
It has been said here this afternoon that President Obama has come up with some brave aspirational targets for emissions reductions in the United States, but what we hear from the United States Senate is that the Waxman-Markey bill, which is the bill to establish an emissions trading scheme in the United States, is very unlikely to be considered until late next year and very unlikely to get through. So here we are, setting up this very elaborate scheme to ‘do our bit’, as the minister says, but there is not going to be anybody with whom we can trade these credits. That means that ‘doing our bit’ is going to result in an enormous extra cost burden for the Australian people. This scheme is a very costly scheme. It is a very complex scheme. It is going to adversely affect many Australian industries. It is going to cause an increase in the price of consumer goods because there will be a massive increase in the price of power. We are going to see loss of jobs and many other adverse effects from the scheme.
It seems to me that the idea of waiting a few weeks, until after the Copenhagen conference, to see what the rest of the world is doing is eminently sensible. It may be that, if we are going to ‘do our bit’, as the minister says, we could do it a different way, with some other form of action, but not this immensely complex emissions trading scheme which will require an enormous bureaucracy to administer and will cost a lot of money.
It is very interesting to look at the position of the industry groups. The Minerals Council of Australia has been opposed to this. Last week the Australian Chamber of Commerce and Industry sent out the results of a survey they had done, which showed that small- and medium-sized enterprises would be adversely affected by this emissions trading scheme. And it has to be remembered that SMEs—small- and medium-sized enterprises—are the biggest employers in Australia outside government. SMEs employ more people than any other sector of our economy and yet they, through their peak industry body, the Australian Chamber of Commerce and Industry, are opposed to this emissions trading scheme because of the adverse impact it will have on small- and medium-sized enterprises.
We know that the agricultural sector has been very concerned about this emissions trading scheme and the impact on farmers. In the agreement that has been reached, only the production side of the agriculture sector has been exempted. The processing side is still going to be subject to the additional costs of this emissions trading scheme. I would have thought that commonsense should prevail and we ought to think this through. We do not have to rush into this. The requirement to pass this scheme within the next few days is an artificial deadline that is being imposed on the Senate by the government. Why do we not just leave it and see what the rest of the world is doing? That is a commonsense approach.
I am getting literally hundreds and hundreds of emails from people all over Australia, but from Western Australia in particular, urging that we delay and that we just move forward cautiously. If this is a scheme that is going to have enormously adverse impacts on the Australian economy if there are not other countries to trade with, then let us just stop and wait and see what the rest of the world is doing. That is the message I am getting from those hundreds of emails that are coming into my office every day. I would agree with the point made by Senator Macdonald—that it seems to be sensible to delay further consideration of this bill until we know what the rest of the world is doing. I would urge the minister to think about that and come up with a process whereby we do defer this until after the Copenhagen conference.
There is no need whatsoever for the government to go to the Copenhagen conference with Australia alone in the world—except for New Zealand and the European Union, which has a small emissions trading scheme with lots of exemptions—triumphantly waving a bit of paper saying, ‘This is our ETS,’ and expecting the rest of the world to follow. The only reason we are doing that, it seems to me, is to satisfy the ego of the Prime Minister. He wants to trumpet to the rest of the world that Australia is doing its bit, but the price of the bit is going to be the loss of jobs and an extremely adverse impact on the Australian economy. We proceed with this legislation ahead of Copenhagen in defiance of common sense.
Before I go back to the subject of the amendment, which is to move for 100 per cent auctioning of permits, I would point out that Australia is the 15th largest emitter out of the more than 180 countries in the world. If the argument is that Australia should not do anything because we are, if you like, in relative terms a small emitter then what of all those other countries below us who emit even less than we do? Are you saying that we should not have to do anything even though all those countries emit even less than us? It is an illogical position.
I come back to the issue of 100 per cent auctioning. Senator Macdonald asked, ‘Wouldn’t 100 per cent auctioning put all these businesses out of business?’ I would draw his attention to the Garnaut report on emissions trading. I personally have not done the modelling, but the Garnaut review, in conjunction with Treasury, did do the modelling and the assessment. It was the Garnaut review’s conclusion that there are no identifiable circumstances that would justify the free allocation of permits. There is a whole section from page 331 onwards that explains why that is the case. He goes on to point out all of the problems which we now have because we did not go down that road—that is, essentially people coming along with no rationale and it being a political game as to who gets what free permits. Any sense of a principled approach has been lost. That is why we should go back to what Professor Garnaut recommended.
I ask the minister: what is the government’s rationale for free permits, since there was no justifiable case for them according to Professor Garnaut? I did ask this question first up but I did not get an answer other than that it was government policy, or a choice the government had made. I am interested to know what the government’s rationale is for going with a mix of free permits and auctioning. Why not 100 per cent auctioning? What is the rationale for free permits?
I did actually go to the policy rationale, Senator. I explained that we regarded this as a sensible way to provide the transitional support as the economy shifted and I also explained that, obviously, provision of assistance in the form of free permits is scaled to the carbon price.
I indicate that I will not be supporting these amendments. I agree broadly with the Greens as to the destination of much deeper carbon cuts but it is about the manner in which it ought to be achieved. My issue is not whether you give out free permits but how you give them out. My concern is on the issue of churn. We can have a debate about Frontier Economics and their model, which I think is vastly more efficient and produces a better outcome both in economic and in environmental terms. I cannot support these amendments for those reasons. I am grateful for Senator Milne’s amendments, because they do beg a number of very important questions as to the whole issue of how the permits are allocated. That is a very valid point.
I want to refer briefly to a column written by Julian Glover in the Guardian newspaper in the United Kingdom on 23 February 2009. It is an article that I referred to during the February estimates when I asked Senator Wong a number of questions relating to that. But the point that Julian Glover made was at a time when the price of the EU’s carbon permits had collapsed. Julian Glover’s contention was that a collapsing carbon market makes mega-pollution cheap. He said:
The theory sounded fine in the boom years, back when Nicholas Stern described climate change as ‘the biggest market failure in history’—a market failure to which carbon trading was meant to be a market solution.
Instead the contention of Mr Glover was that it actually bolstered the business case for fossil fuels because the price had collapsed. Mr Glover’s contention is that the lesson of the carbon slump:
… like the credit crunch, is that markets can be a conduit, but not a substitute, for political will.
He talks about the fundamental flaws in the European system. I understand that that has been dealt with substantially in recent months. Mr Glover’s column was written at a time when the exchanges were in meltdown and a tonne of carbon dropped to about €8 down from the previous summer’s peak in 2008 of €31 and far below the €30 to €45 range at which renewables can compete with fossil fuels. My question to the minister is: notwithstanding the differences I have with the minister in terms of the issue of churn, and the difference between the Frontier model and what the government is proposing, given Senator Milne’s amendments, to what extent has this approach learnt from Europe where the market price was so volatile that it did not give a clear price signal for renewables and for cleaner, greener alternatives? In other words, how can we be sure that what happened in Europe will not happen here in terms of the safeguards that have been put in place with this particular scheme?
There are a range of things that we have sought to put into the scheme learning from the European scheme. Can I make the point first—I should have made it before—that the approach that Australia is taking has, in fact, been perhaps not replicated but echoed in the US scheme in terms of the provision of permits as the way forward.
There are a number of issues in relation to the European scheme, and I can get more technical information shortly. One of the issues there was—and there are a range of views about the volatility of the carbon price—whether or not the market had some sense of where the longer term carbon price would be. One of the reasons we have said five years of caps and then the gateways is to try and give the market better information about where the carbon price in the longer term will be. Obviously, that is important in terms of business planning its investments and also working out what its carbon liability is likely to be and so forth.
I was just clarifying and I think my recollection is correct that under phase 1 of the EU scheme they gave an indication to the energy sector of their allocation for a three-year period. ESAS is a ten-year process but for the EITEIs it is linked to their production in each year. Finally, one of the policy mechanisms that is in the scheme before us is a banking mechanism, where you can bank your permit. That is a mechanism about trying to manage price volatility and one which has been put in after some discussion with a range of people in the business community.
Minister, I think Senator Xenophon makes a very good point about price volatility in the carbon market. It is one of the biggest issues which we have to face with emissions trading schemes. As he says, the volatility of prices can make the use of renewable energies quite uncompetitive. One way of avoiding the volatility of an emissions trading scheme would be to have a carbon tax. A carbon tax provides a very steady and known price for carbon, if you like, which is only varied by varying the tax. That tax can be set at a level that allows renewable energy systems to be competitive. So my question to the minister would be: what consideration was given to the introduction of a carbon tax in Australia instead of an emissions trading scheme, given that this huge issue of price volatility would have been avoided through the introduction of a carbon tax?
I am sorry—Senator Xenophon, I just had a quick chat. This is what I understand occurred in the European Union, and if there are people from the EU listening—I am sure there will not be—I apologise if I get this wrong. In phase 1 the allocation of permits was identified three years in advance and then in phase 2 it was identified five years in advance. Entities were not able to trade between one period and another, and I think most commentators would suggest that in fact what occurred was that they overallocated. They got the cap wrong. That resulted, of course—basic economics—in an excess of supply and therefore the price dropped. That is not the design of the Australian scheme. I had a question from Senator Eggleston, but I am happy to finish any question you have, Senator Xenophon.
I thank the minister. Is it the case that the EITEs in Europe are also dealt with on an intensity based model in terms of the level of emissions? Are the EITEs treated similarly to the way that the government is proposing to treat the emissions-intensive trade-exposed industries here?
I will give you the answer I believe is correct, Senator, and I will correct it after the dinner break if it is not. My recollection of the EU scheme is that the EITE allocation was not on the basis of output. So that differs from the Australian scheme. In other words, we link our assistance to how much you emit, because it is about transitional assistance. Everybody does their bit and everybody faces the carbon price, but how much of it you face is adjusted, given the need to support employment and various industries through the transition. In Europe, I understand that assistance was not allocated by reference to output.
I would also make the point that it is a bit hard to answer because I think we are probably comparing apples and oranges. The European scheme has a much narrower coverage than the Australian scheme and there were also more significant regulatory mechanisms put in place in relation to the uncovered sectors. For example, Europe has more stringent fuel efficiency measures. So there are a range of other mechanisms which were utilised instead of the market mechanism, which was much narrower than the scheme before the parliament.
While the minister was talking to the advisers, I said I agreed with Senator Xenophon about the issue of price volatility and I said that that could have been avoided through the introduction of a carbon tax, which provides a very steady price for carbon. I asked whether or not the government had considered a carbon tax. I just ask you to comment on the issues of a carbon tax and of price volatility. Why did the government not go down that pathway, since it seems to be a much simpler sort of scheme to implement and it does provide price stability?
I note that your party, before the last election, did not and I read from the coalition government’s election policy ‘to establish an emissions trading scheme, not put in place a carbon tax’. I think I have made it clear on numerous times in this place why we believe this is a more efficient mechanism than a tax. If you want a certain environmental outcome then a cap-and-trade system provides you with more certainty because you can identify the cap. If you put in place a carbon tax you have to try and estimate how much of a tax, and on what sectors you would need to impose that amount of tax, in order to achieve that environmental outcome. It may give price certainty but it does not give an environmental certainty.
I also make the point that if anybody in this chamber believes that just because you have a carbon tax that is going to avoid all the difficult policy decisions that are made on how you move to a lower carbon economy, it will not; it will just manifest in different arguments. One of the issues has been how we treat the emissions-intensive trade-exposed sector. They have said to the government and to the opposition, ‘We would be facing a carbon price’—put, insert or interpolate the words ‘carbon tax’ for the purposes of this discussion, Senator Eggleston—‘and we want assistance to meet that’. So there would still be the argument for assistance, exemption or some other form of relief from the same sectors of the economy with whom the government and opposition have been consulting about how you manage the introduction of such a tax.
The primary issue is that we believe that cap-and trade-systems, such as the one before the chamber and the one you committed to at the last election, are a more efficient mechanism because they encourage businesses to find their best way of reducing their emissions. It is not like the government is saying, ‘We in the government know best and we want you to do it this way’. We are saying: ‘We are going to put a price on carbon. That is a cost that reflects the cost of climate change but you can find a way of reducing that cost by becoming more efficient as you know best in your business’. We think a properly regulated and structured market mechanism is more efficient. If I may hazard a suggestion, that is also why major economies of the world, including the G8 economies, have said that these schemes have demonstrated their effectiveness and are a good way to implement the means to reduce emissions, particularly in developed economies.
With respect, though, there are very few emissions trading schemes working in the world; as we said, in the EU and New Zealand. The issue Senator Xenophon called attention to was the impact price volatility had, particularly for the sustainability or viability of renewable energy sources. I think that is a very important issue because we would like to go down the renewable pathway. While I agree that a carbon tax would have meant that emissions-intensive trade-exposed industries sought exemption, I just ask whether or not an implication of your rejection of the carbon tax option means that you are saying that renewable energy is not such an important issue.
That is a ridiculous proposition, Senator Eggleston. That does not flow from what I said; nor is it consistent with our policy, which has been to quadruple the amount of renewable energy in this country, including a $1.6 billion, I think it was, investment in solar flagships. I am happy to debate the issues but propositions such as that really have no merit.
I have a question related to these matters, and it relates to the total cost. I am advised that the CPRS will impose a $54 billion cost burden on Australian business in the first five years. In the first nine years the CPRS will raise at least $114 billion—a figure roughly equivalent to New Zealand’s GDP. On the government’s own MYEFO estimates, the CPRS will raise $5,422 for every single Australian in the period to 2020. It seems that that is a very high figure, on a per capita basis, compared with the EU and a very high figure compared with the US and most other countries that I am aware of. In fact, their costs on a per capita basis are a tiny fraction of that burden. It has been said that Australian firms will pay the highest carbon costs in the world. The tax take from the CPRS is much higher than those from other international schemes. So the question is: how is that justified? Could the minister please indicate the costs on a per capita basis in the EU and certainly in the US for clarity purposes so that we know exactly where we stand?
The point that Senator Eggleston has made, and I think others have also, is: why do we do this in advance of our major trading partners? Why are we burdening our economy in advance of Copenhagen, rather than acting in parallel? Why are we not doing this in parallel, consistent with an international agreement? The fact is that there is a very heavy burden, as I have indicated from those figures, and the consequences are obviously quite serious. Senator Macdonald indicated earlier the fact that Australian firms will start paying those billions of dollars from 1 July 2011—some 19 months away. What is wrong with waiting for Copenhagen and then having a few months to get our act together? I think that rushing Labor’s ETS is in fact the worst option not just for Australia but certainly for my home state of Tasmania.
These are the concerns that I have. Tasmanians will be paying a 16 per cent increase in power costs. The rest of the country will be paying more than 20 per cent, and there is a $1,100 cost per year per family. I have a range of questions around the impact on business and small business, but I wonder if the minister could address those two specific questions about the $5,428 for every Australian up to 2020 and comparing that to the costs in the US and the EU. Could those matters be addressed as a preliminary measure?
Senator McEwen said to me, ‘You’ve answered this question about 98 times,’ and she considered she might not have counted every time. Sorry if I verballed you, Senator McEwen. I am not sure I want to traverse again why we are going to act before Copenhagen. I do want to do the chamber the courtesy of responding, but I think I have answered that in response—
Senator Boswell has asked that question. Senator Nash, Senator Williams, Senator Joyce, Senator Macdonald and I think Senator Back may have; I might be wrong on that. Other Liberal senators have. You have, Senator Parry—
You haven’t? I am happy to have the discussion again, but I think I have placed on record very clearly in this chamber why the government’s view is that we should act and why we should pass this legislation. If senators do not agree with it, I do not think that me explaining the rationale over and over again is going to really assist the process.
The senator asked some questions about the impact of the scheme. I am not sure I can give per capita figures, because that is not really a sensible way of approaching it. Perhaps I can explain it this way. What the Treasury modelling showed with a scheme, frankly, that had less industry assistance than the scheme that is before the chamber—and this is excluding what climate change costs us; this is just what the effect of a carbon price would be—was that out to mid-century the effect would be this: we would grow by one-tenth of one per cent slower each year. So we would continue to grow jobs and the economy—I think 1.7 million additional jobs by 2020—but we would grow one-tenth of one per cent slower. In the context of the costs of climate change, most would agree one-tenth of one per cent slower is a reasonable contribution. That modelling did not include what the costs of climate change were to our economy, so it did not include the costs of inaction. That is the price. That is what we are asking the community to bear: growth one-tenth of one per cent slower.
In terms of the impact on CPI, I have put that on the public record before. It is about 1.1 per cent higher at the end of the second year of the scheme than it would have been before. That is the additional consumer price index increase. In relation to the assistance to families, the largest single share of the revenue will go to Australian families. Of Australia’s 8.8 million households 8.1 million will receive direct cash assistance to help adjust to the impact of a carbon price. That is about 90 per cent of all Australian households. Low-income Australians will be fully compensated for the overall cost increase they face. About 2.6 million Australian households within the low-income bracket will receive assistance equivalent to about 120 per cent of the overall cost increase they face. All pensioners, seniors, carers and people with disabilities will be fully compensated for the overall cost increase they face. About 3.6 million middle-income households will receive some form of direct cash assistance. About half of that number, about 1.7 million middle-income households, will be fully compensated for the overall cost increase flowing from the scheme.
I am happy to continue to provide this information. The chamber is in fact discussing Senator Milne’s amendments in relation to a different method of allocating EITE support. I have indicated the government’s position. We are not proposing to support that. I wonder if it would be possible for us to perhaps bring this discussion on Senator Milne’s amendments to a conclusion.
I appreciate the minister’s efforts to respond to that. I do not think she responded specifically to my questions in terms of the per capita basis. Minister, you indicated that you were not able to take that question on board, even on notice. I am disappointed about that. I know that Senator Milne has amendments before the chair—and she is being patient—but there are a lot of questions that need to be asked. You raised the impact of the CPRS on growth. In terms of the impact of the CPRS, do you agree with a report prepared by the Minerals Council of Australia that said the government’s ETS will reduce forecast employment in Australia’s minerals sector by an estimated 23,510 by 2020 and 66,400 by 2030? The Tasmanian minerals industry is projected to lose 1,050 jobs by 2020 and 2,500 jobs by 2030 under this scheme. Do you agree with that or not?
Secondly and finally, before referring back to Senator Milne—and I may have missed it earlier—I want to ask about the government’s release of its latest projections of Australia’s CO2 emissions and the impact of a CPRS. Have we got the latest figures for the CO2 emissions in terms of forward estimates and in terms of the forecasts between now and 2020 and now and 2050? That would be appreciated and would help inform us. In terms of Tasmania, what is important is that we have undergone a greater transition to renewable and low-carbon energy sources than any other state or territory in Australia over the last decade, certainly during the 1990s. I noticed that according to the TCCI chief economist, Richard Dowling, Tasmania is getting no reward for the advances it has already made on climate change. According to him—and I agree with him entirely:
Tasmania reduced its carbon emission levels by 30 per cent in the 1990s, but this is not acknowledged under the current ETS.
It is my view that that is correct. I would like the minister’s response to that. From a Tassie perspective, we are a renewable energy state, and I would like to know whether we are going to gain any benefit whatsoever under this scheme as a result of the hard work, the good innovative approach and the efforts towards building a renewable energy future. How, from Tasmania’s perspective, are we going to benefit? What we do know is that we will be paying a 16 per cent increase in power costs, while the rest of Australia is paying over 20 per cent—but that is cold comfort.
I am not sure what the senator would like me to do. I gave him figures, I think, on Friday—it might have been Thursday—on Tasmania. My recollection is that we indicated that because of the particular energy profile in Tasmania we would anticipate a lower price impact. In fact, I think you are using the figures from the answer I gave you, Senator. However, the household assistance will still flow to Tasmanian families and Tasmanian households at the same rate.
I am advised that we have publicly released some interim projections—they are on the website—and that the next time there will be a public release will be the national communication, which is due by 1 January.
I will be putting the second part of this group of amendments immediately after we have dealt with the first part. The question is that Australian Greens amendments (5), (9), (17) and (18), (21) and (22), (26) and (27), (31) and (32), (57) and (61) on sheet 5786 be agreed to.
That the amendments (Senator Brown’s) be agreed to.
I will now put the second part of that group of amendments, Australian Greens amendments (25), (33) and (54) on sheet 5786. The question is that the clauses stand as printed.
Question agreed to.
Sitting suspended from 6.30 pm to 7.30 pm
by leave—I move amendments (8), (35) and (36) on sheet 5786 together:
(8) Clause 5, page 16 (after line 19), after the definition of generation unit, insert:
Gold Standard certified has the meaning given by subsection 145A(3).
(35) Clause 144, page 190 (after line 7), after the first dot point, insert:
- There are restrictions on the registration of certain emissions units in the Registry.
(36) Page 191 (after line 18), after clause 145, insert;
145A Restrictions on registration of certain emissions units in the Registry
(1) The Authority must ensure that, of the total of all Australian emissions units, Kyoto units and non-Kyoto international emissions units registered in the Registry, no more than 20% cumulatively are:
(a) certified emission reductions (including temporary certified emission reductions and long-term certified emission reductions) generated by projects in countries classified as “least developed” by the United Nations; and
(b) emission reduction units; and
(c) any other type of eligible international emissions unit prescribed for the purpose of this section.
(2) The Authority must not register in the Registry any certified emission reductions (including temporary certified emission reductions and long-term certified emission reductions) and emission reduction units which are not Gold Standard certified.
(3) For the purposes of this Act, Gold Standard certified means certification by the Gold Standard Foundation in accordance with the Gold Standard methodology for carbon offset project development.
For the benefit of those who are unaware of the specifics, these amendments go to whether or not there should be a restriction on the number of overseas payments that can be bought and used in Australia. The government’s scheme as it stands allows for the unlimited purchase of overseas permits, and we seek to amend this to restrict the purchase of overseas permits to 20 per cent. I will go into it in a bit more detail. The Greens are saying that there are two things that the Carbon Pollution Reduction Scheme has to do: one is to reduce the amount of carbon going into the atmosphere—in other words, reduce emissions—and the other is to transform the Australian economy. The proposition is to transform the economy away from a high-carbon economy to a low-carbon, and then ultimately zero-carbon, economy. From the Greens’ perspective, for this scheme to be a success it has to do both of those things.
On the first proposition of reducing emissions it does not matter where in the world emissions are reduced so long as emissions are reduced, and so that is the proposition, I assume, that the government puts: that if you have a carbon pollution reduction permit worth a certain amount of carbon then it is transferable around the world and you are removing that much carbon from the atmosphere. That is a true proposition if all the carbon pollution reduction permits are actually valid and measurable and truly additional and so on. It is a little bit difficult to know where REDD is going to go and there is really quite a genuine concern that the permits are not all of the same validity, as it currently stands, in being able to be sure that they genuinely represent a reduction in carbon. That is my first point.
That is why the Greens amendments also make it very clear that the overseas permits we would allow for the Australian system should be of a gold standard. The gold standard means certification by the Gold Standard Foundation in accordance with the gold standard methodology for carbon offset project development. That gold standard is the world’s only independent standard for creating high-quality emission reduction projects in the Clean Development Mechanism and Joint Implementation and voluntary carbon market. It was designed to ensure that carbon credits are not only real and verifiable but that they make measurable contributions to sustainable development worldwide. The objective of the gold standard is to add a branding label to existing and new carbon credits generated by projects which can then be bought and traded by countries that have a binding legal commitment according to the Kyoto protocol. Our proposition is that the overseas permits that we would allow from the Clean Development Mechanism and JI would meet the gold standard.
The second proposition is in relation to the transformation of Australian industry, and that is one of the compelling reasons why we would want to restrict the number of imported permits. We have also said, however, that the permits that come from overseas ought to be coming from the least developed countries. So the only acceptable permits will be those generated by CDM projects in countries classified as least developed by the UN. In that way we make sure that those overseas permits we do buy come from the least developed countries and that therefore the transfer of income goes to those countries which need it the most. It is a happy coincidence that many of those least developed countries are in our region.
The second reason, in terms of the transformation of the Australian economy, is that we have to ensure that we transform our industries. We cannot just let them buy overseas permits and allow them to continue to do so. They need to transform themselves in the context of a low-carbon or zero-carbon economy, and there is a real risk that that will not occur unless we put a restriction on the amount of permits that can be purchased offshore.
We hope this explains to the chamber exactly what is being proposed here in terms of an amendment: that there is a 20 per cent restriction on permits from overseas; that those permits that are permitted in the 20 per cent are to be gold standard; that they come from the least developed countries; and that the rest of the effort has to be made within Australia.
As you anticipated, Senator Milne, the government is not supporting this amendment. Under the government’s scheme, there is a regulation-making power in proposed section 129(7) of the primary bill which enables a regulation-making power to be made outlining what can be surrendered—that is, what international permits can be used domestically. I think you and I have had this discussion before, Senator, but I make this point: we do absolutely believe that part of the plan that will enable the globe to meet this challenge of climate change is to have a properly functioning global carbon market. What does that mean? It means that we get the right market incentive for private sector firms to invest in abatement and we enable that to occur wherever that abatement can be found in the world, because this is a global problem.
If there is a concern about the international CERs—certified emissions reductions—then the international community should have to deal with that. That is an issue of quality, and we are absolutely of the view that these international units must be credible, measurable, reportable and verifiable. We are working closely with Indonesia, for example, on the reducing emissions from deforestation and forest degradation aspect of the Bali roadmap—known as REDD. We have made, I think, two joint submissions—I could be wrong, but my recollection is two—with Indonesia to the international negotiations. So we are serious about working with a developing country on our doorstep to put in place the mechanisms and the systems that ensure that emissions reductions from these activities are ones in which the world can have confidence.
The government disagrees with the Greens on asserting that once that threshold is met there should be some additional requirements placed on the trade in international permits. My view is very simple: if, through this policy, we can give Australian firms an incentive to reduce emissions in developing countries then I think that that is a good thing. We need to ensure that those investments are in relation to emission reductions which are real, transparent and verifiable. But I think that is a good thing because we have to change the market failure that has caused climate change—where people have had an incentive to pollute. Instead we need an incentive to reduce emissions. We are strongly of the view that this is a sensible way forward and we do not support the amendments.
As I indicated both to Senator Milne and, just before, to the minister, I have some general questions. That is why I thought it appropriate to try to bring them up at the beginning of a new, fresh amendment and not intervene in amendments that have been discussed at some length. The first in my series of questions relates to the government’s future planning in relation to the size of Australia’s population. Mr Rudd has this grand vision of 35 million people. Given that we have an emissions cap and we intend, in general terms, to increase our population by 50 per cent over the next couple of decades, that must surely come with a huge impact on the amount of emissions from our country. So I am just wondering whether the policy that was put to Treasury—as part of all the modelling that we had provided to us—was that we were dealing with a potential population of, as I understand it, 35 million people by the year 2050.
Just before you speak, Senator Wong, I am just going to advise Senator Abetz that it is my call as chair that, if he is not asking questions about the amendments Senator Milne has moved, we will move Senator Milne’s amendments and then I will go back to him for general questions about the bill. We might deal with these; I will get the minister to answer your question, Senator Abetz.
If I may briefly intervene, to me that makes eminent good sense, and that is why I was seeking the call before the amendment was moved. I am happy to vacate the space for the time being, allow this amendment to be dealt with and then come back into the debate before the next amendment is moved. I am more than happy to facilitate that. Officially, I indicate on behalf of the opposition that we will not be supporting this tranche of Greens amendments.
If I may answer Senator Abetz’s questions, it may make this a little easier to progress. Yes, we did assume population growth in the Treasury modelling and the advice I have is that the assumption was of some 33 million. So the Treasury modelling which shows the impact of the continued growth in the Australian economy and the continued growth in the number of jobs did assume that.
I will make a brief comment about population. I assume that the senator, from his previous comments, does support the previous government’s and the current government’s policies—for example, to help families and parents in terms of the assistance for mothers on the birth of a child and in relation to family tax laws. So I assume he is not making reference to those issues.
I am just trying to work through these. In terms of immigration issues, which I think were referenced, I would make the point that given that this is a global challenge, as Mr Turnbull said on Q&A, if people are elsewhere in the world they will also be contributing to greenhouse gas emissions. The fact that they are in Australia or not in Australia does not alter the fact that they will continue to have a carbon footprint no matter where they are in the world.
Well, if you pass this bill we may. I am asked if we will have a national cap. I think it is important when we discuss issues of sustainability to be very clear about this: we are one of the highest per capita emitters in the world, if not the highest; therefore, reducing our per capita emissions would enable us to continue to grow our economy and our population without necessarily growing our emissions or growing them along the same trajectory as they have been growing.
In relation to the Treasury modelling, again, I am advised that the modelling did project an increase in population out to mid-century.
Before asking a question of Senator Milne, I want to make a point about what the minister, Senator Wong, said about Australia being one of the highest emitters per capita. Of course we are. Remember our days at school in physics class, where we learned that V equals IR. Look at how far we transport electricity across Australia. It is a big country. If we transported electricity in Europe along power lines as long as power lines in Australia, we would go through six or seven countries. Because we have to transport electricity so far, including to places in the centre of Australia—whether it be White Cliffs, Wilcannia or elsewhere—we have strong generators.
The Greens amendments would restrict our purchase of foreign permits to 20 per cent. Everyone around here knows my opinion on this whole emissions trading scheme. I am very much against it. But what concerns me is, if the legislation goes through, if the emitters in Australia cannot reduce their emissions enough or cannot get enough credits here or overseas, how much of Australia will be planted down to trees. I raise that concern because we need agricultural land to produce food, especially with the proposed increase in population, which Senator Abetz referred to. If Australia’s population is going to go to 35 million, surely they cannot eat bark and branches for food.
I find it very concerning that, if the scheme goes ahead, more of Australia’s agricultural land will be planted down to trees. The Kyoto agreement does not recognise soil carbon, which is probably one of the best ways to store carbon. It is a win-win situation—the more carbon in the soil, the better the soil is and the more food produced. So my question to Senator Milne is: if Australia cannot reduce those emissions and we are limited in our permits, has she any idea how much of Australia’s agricultural land will be planted down to trees to, obviously, produce the credits required?
As the last speaker, Senator Williams, is very well aware, I have strenuously opposed carbon sink forests for a number of the reasons that the senator himself acknowledged. That is essentially because I think the issue of green carbon needs to be looked at holistically in the context of food security, water security, biodiversity and resilience in rural communities. I do not believe the way that it is being dealt with now is going to lead to a process that does not have perverse outcomes. We saw perverse outcomes from managed investment schemes, and I do not want to see them again.
In terms of the transformation which I spoke about, if you allow companies to buy unlimited permits from overseas—especially if they can get cheaper permits overseas than here in Australia—they will do that, and that removes any pressure on them to transform what they do here. That is my main focus here. In terms of carbon in the atmosphere, providing they are verifiable credits then in theory they are the same. So the atmosphere will not change as a result of this but the issue of transformation in Australia will, and this is where my great concern with this scheme lies—that it will not drive the transformation away from the heavy, fossil-fuel-intensive emissions to smarter, cleaner technologies or new jobs in manufacturing. We are talking about new technologies and new jobs, and that is why I want to make sure that we have that drive for investment here.
I will come to this when we talk about compensation for the coal fired sector shortly. We now have a system where the coal fired generators have an agreement with the government and the coalition that they will keep on producing the same amount of power out to 2020 and that in effect they can, if they want, buy overseas permits, bank them and do as they like until that time. There is no pressure on them to change. In fact, there is more pressure on them under the compensation agreements to keep going with old and antiquated plants, so ultimately it could lead to being completely uncompetitive in a global environment if other people make the transformation and we do not. The clever new technologies are where the money, the intellectual property, the jobs and the manufacturing are. It has been my experience in politics that giving more to industry to allow them to carry on with business as usual and not invest in upgrading ultimately means they close down and go elsewhere with complete dislocation. That has happened endlessly in the Tasmanian context, and I am sure it is the same if you look nationally. The best way to keep industries in Australia is to require them to innovate and upgrade—to invest in their plants—so that they cannot just walk away.
I indicate that I will not support the Greens amendment, because I think it is important that there be tradability in any scheme. If it is part of a global solution, we need to have international permits—although Senator Milne is absolutely right: they must be clearly verifiable. She is seeking a higher standard, although I note that the minister has indicated that part of any international agreement requires that verifiability.
My question to the minister arising out of this amendment is this. The minister stressed earlier the importance of certainty of emissions due to a domestic cap; however, does international trading of permits not mean that there can be no certainty over domestic emissions? I am not criticising that, but can the minister verify that? Can the minister confirm that the government will accept the global carbon price determined in international markets and that the domestic cap will not set prices and will not tightly constrain domestic emissions?
What the scheme will ensure is that Australia’s contribution to climate change lessens. Rather than the situation that occurs now, where Australia’s contribution is worsening, we will be reducing that contribution. It is the case—and we have been absolutely clear about this—that we want a scheme that is open and where we can trade on world markets. What I have indicated is that our modelling suggests that the majority of abatement effort will still occur domestically. I have previously indicated that the analysis by the department suggests that, if the scheme is passed, domestic emissions are most likely to peak around or before 2012-13 and then be stable or fall to 2020.
But let us remember the context: domestic emissions would rise—even with the renewable energy target—to 120 per cent of 2000 levels by 2020 in the absence of this scheme being passed. So we are on a trajectory that is going up. This scheme will ensure that we reduce our emissions domestically but also—and, as I said, we make no apology for this—that Australian firms contribute to reducing emissions worldwide. Given this is a global issue, we think that is a sensible way forward.
Maybe on a couple of things, Senator Xenophon. A similar problem occurs with a scheme you were advocating—in fact, to a greater level. From my recollection, a greater level of international importation is assumed under the Frontier model. I have given you my answer about our view about domestic emissions and the rationale for that. I failed to answer one aspect, which was the international carbon price. It is the case that, if you have a scheme where you are able to trade in the way that the Australian scheme has been designed to do, you are looking at a situation where the Australian carbon price is likely to be equivalent to the international carbon price. Again, I think that is quite reasonable. We want a situation where there is increasingly a global carbon price and an increasing number of global carbon markets, where the private sector can invest in abatement.
I made it clear that I do not have a problem with international tradability and I acknowledge that the Frontier model can and does involve buying more permits. It is a question of the robustness of those permits, and I think we are at one—including Senator Milne. Does that mean that, because Australia will accept the global carbon price for international markets, whatever we do in Australia will not necessarily have much of an impact on the international price of carbon in terms of that international trade—that it will be negligible in the scheme of things?
I think there are a whole range of things which would impact on the carbon price. The first and most obvious one is the extent of reductions that the world commits to. That will be the primary driver of the carbon price—how much and how deeply the world agrees to reduce its emissions and over what period of time. So, obviously, Australia’s engagement is relevant to that, which is probably the key determinant of price.
I do not take issue with that, but I want a confirmation that, whatever domestic cap we have—and it is desirable, obviously to reduce emissions domestically—that will not actually make an appreciable difference in the international price of carbon, given the nature of the global scheme.
I am not sure I can add to what I have said, Senator. The global price of carbon will respond to a whole range of decisions that the global community makes, including how much the world reduces by and how much private sector investment there is. There are a whole range of things which affect that carbon price. Obviously Australia’s involvement in an international agreement would be one of the things that affects the carbon price. But, no, we will not determine the global carbon price—just as we do not determine the price of a whole range of commodities traded on world markets.
Further to that point, I note the government’s opposition to restricting the import of permits, and I am interested to know why—and this goes to a later amendment, which I will not discuss later if we can talk about it now because it is more logical—the government is restricting the number of permits that can be sold overseas and opposing the export of permits if it is so keen to have 100 per cent import of permits, potentially?
That is intended as a short-term measure. It was first announced in the white paper, I think—possibly suggested in the green paper—that we would not allow exports in the initial years of the scheme. We do think that, over time, the ability to export emissions units is desirable, but, in the short term as a transitional measure at the commencement of the scheme, we believe that it is sensible not to allow exports. It would add complexity to the scheme in the early years.
I think I have said that it is a transitional measure. We believe that allowing exports could lead to upward pressure on the domestic price. It could add complexity to the scheme. We believe that, in the early years, it is desirable to have a simpler scheme and a scheme where price volatility, including upward pressure on price, is managed. That is the reason for these transitional measures.
Senator Wong and I had a very brief discussion earlier about the projected growth of Australia’s population, and I think she indicated to us that the Treasury modelling had suggested an Australian population of 33 million by 2050—was that it?
What I indicated was that the modelling released last year—that is, the Low Pollution Future modelling—had, as one of its assumptions, population growth to 33 million. I recall that subsequent numbers have been released, but these were the assumptions under which the modelling last year was undertaken.
Senator Milne, I have one correction to an answer I gave you that I thought I should put on the record. I made reference to section 29(7), which I said could allow certain units to come into Australia. It is actually phrased in the reverse—that is, it gives the discretion to prohibit. I thought I should clarify that.
I have a number of questions; they will be relatively brief. So the official modelling was done on a population of 33 million. I understand the official projection is now 35 million. I would have thought an increase of two million would be of some significance. I would be interested if the minister could advise us as to whether that figure has been revised up—and, if so, what impact that would have on the modelling.
Secondly, does the government then agree with the Labor MP from Victoria who argues that we need to stabilise Australia’s population at 26 million by 2050 to avoid ‘environmental disaster’?
In other words, Mr Thomson has been discarded. I accept that. But I then ask: what financial and other impacts will a projected increase in our population to 35 million as opposed to 33 million mean in relation to the modelling done and to the figures? In very rough terms that would be an eight-or-so per cent increase. Somebody might be able to do the maths for me, but two million extra people is a fairly significant figure. I would be interested in how the government intends to calculate for that in the scheme.
The modelling released in October last year—so that is over a year ago—which was the largest modelling exercise the Australian government has undertaken, had a whole range of assumptions driving it. Those assumptions included action around the rest of the world, technology—there were quite a number of assumptions. The key and central finding of that is that we can reduce our emissions and continue to grow our economy. The alteration in the order you refer to is of course a mid-century projection; we are not talking two million more people by next year. The question of how fast we grow and when we will hit a certain population figure—whether that is by 2050 or later—does not, in the government’s view, change that central proposition. The key issue in that modelling is that we can grow the Australian economy, we can continue to increase the number of jobs in Australia and we can still reduce emissions.
I will not labour the point, but I think it is another example of the government not being willing to engage on the specifics of this proposal. We are told that this is the most extensive modelling ever undertaken, and that we should rely on it, yet within a matter of 12 months the official figure for our population has blown out from 33 million to 35 million—and that is just to be discarded and ignored as being of no consequence. If the modelling was so good, how did they get it so wrong, by miscalculating Australia’s official population projection by a factor of two million people? That is, in anybody’s language, a pretty significant figure. But I accept that the folded arms and the look on the minister’s face indicate that we will not get a response to that, so we will move on.
I ask the minister, given that cooperative federalism has broken out, whether the New South Wales government has shared with the federal Labor government the results of its review in relation to electricity prices, which has found that about 50 per cent of the projected increase in power prices for the state of New South Wales will be directly related to the CPRS?
The government’s estimates of price increases have been traversed on a number of occasions in the chamber. We have said that for the first year of the scheme we estimate the increase in retail electricity prices would be around seven per cent and that at the end of 2012-13 there would be an additional 12 per cent increase. That is a total of about 19 per cent. By the end of 2012-13 our estimates are that the average household electricity increase would be about $4 per week. That is being dealt with by way of the assistance that we have also spoken about at great length in this chamber. Of 8.8 million Australian households some 90 per cent, or 8.1 million Australian households, will receive some direct cash assistance under the CPRS.
With great respect, Minister, I understand the modelling that was undertaken. But we have already heard from you that modelling was undertaken on the basis of an Australian population of 33 million, which has now blown out within 12 months to 35 million. I would have thought if you are confronted with a new and fresh study—as we have now received courtesy of the Daily Telegraph, suggesting that electricity prices in New South Wales will soar by a staggering 60 per cent over the next three years and that 50 per cent of that 60 per cent increase is in fact due to the CPRS—it is no good, with great respect, just saying what your original modelling told you. I want to know why this particular modelling, why this particular study, is wrong.
You have already admitted that the population figure is wrong. I would be very interested to know why this New South Wales Labor government report—let us be quite clear on this: a state Labor government report—has come to this finding. It would be great if their findings were wrong but I think the people of Australia, particularly in New South Wales, are entitled to know the rationale for why this is wrong. I do not think they will have much faith in just a glib answer, given that it is now on the record that the modelling in relation to Australia’s population within 12 months has already blown out by two million. If we were to model that error out until 2050, I daresay we would have a very big population by 2050. Let us not rely on modelling that was done in the past. Let us just deal with the study undertaken not by some coalition but by the New South Wales Labor government. Tell us why it is wrong.
Perhaps I was not clear with the senator that the error he seeks to hang his hat on in terms of this very interesting sequence of non sequiturs is simply a revision in Treasury forecasts about when we will reach a certain population. We are talking about projections of population some four decades away. The difference between reaching 35 million at 2050 or 35 million some years later is, in terms of demographic modelling, not the sort of issue he is trying to make it. But that is as he may wish to proceed. I cannot comment on a report about a draft report from Frontier Economics to an independent body that is not a statutory authority of the Commonwealth or on a report that is not provided to me. I cannot comment on the status of the report, other than to say that public reports are that it is a draft report to IPART. I have again reiterated what our view is as to the increase in electricity prices.
Thank you, Temporary Chairman, I think it adds to the convenience of all senators if one senator has a bracket of questions that they can deal with them and move on. Of course I accept that you are in the chair. Can I then ask if it is a matter of no consequence what made the Australian government change the parameter of the population growth from 33 million to 35 million in just 12 months? How can we be sure that that figure is going to be reliable and that in 12 months time the minister will not be back in this place saying ‘Oopsy, it’s now going to be 37 million or 39 million.’ This throws out all the figures, all the calculations and all the bases on which this ETS has been modelled and presented to the Australian people. I would be very interested if the minister could advise us as to the reason for that.
I will try and take that on notice because I do not have officials here. This is a Treasury modelling issue. We have done reasonably well in terms of answering questions about the October 2008 report. You are asking questions that are about a figure that has subsequently become public. I can take on notice how that figure was derived, but I do not have that information at this point.
In relation to the matters raised by Senator Abetz I think Senator Abetz owes an apology to IPART. The Independent Pricing and Regulatory Tribunal in New South Wales is a distinct authority. The tribunal members are Dr Michael Keating, Mr James Cox and Ms Sibylle Krieger. The process with IPART is to set prices for things such as electricity in New South Wales. As I understand the process in New South Wales given its regulatory role, IPART issued an electricity issues paper in July 2009 titled Review of regulated retail tariffs and charges for electricity 2010 -2013. The media reports in the Financial Review and also in the Daily Telegraph today indicate that power bills could go up in the region of 60 per cent but, to be absolutely fair, half of that price increase is attributed to network charges; the other 30 per cent is attributed according to this report to the CPRS.
Sorry. To clarify in terms of what the minister said my understanding of the way that IPART actually works is that it does not release a draft determination lightly although it has not been publicly released. The media reports relate to their draft determination, which is what the New South Wales government tried to shove to one side. My understanding is very clearly this: the draft determination and the final determinations rarely change apart from perhaps some minor amendments. The draft determination is not reached unless there has been extensive consultation with consumers, industry and all the key stakeholders. If these reports are correct, that is indeed very sobering.
As I understand it, media reports out of the Sydney news tonight indicate that the New South Wales government is saying that, if prices rise more than first anticipated, the Commonwealth will have to pick up the tab for that. That is something that concerns me. Minister, given that Senator Abetz has raised these issues, I am happy to ask these questions in the context of amendments I will be moving on an alternative intensity based scheme, but I will put them on notice now. Can the minister confirm that the government’s estimate was a seven to 12 per cent increase in electricity prices? This seems to be nearly three times, up to over four times, that amount. If IPART is correct and prices do rise to the extent indicated, will the level of compensation still cover consumers as planned? If IPART is correct, won’t that mean a very substantial blow-out in the budget outlook, given the level of compensation?
Perhaps I did not make it clear enough. I am giving the minister the option as to whether she wishes to answer it now or later. That may not be an option that Senator Abetz wishes to give the minister, but as a courtesy to the minister I am happy for it to be answered either now or later. But I want to make the point again that IPART does not make even draft determinations lightly, given the very extensive processes it goes into before a draft determination is made.
It does not worry me when the answers are provided, but one of the problems with the committee stage and with this whole process is you are given an answer that you then have to take at face value before moving on to a vote. That is why I am trying to explore this a bit earlier—to see what the responses are.
In relation to IPART, Senator Xenophon is right and I should have chosen my words more carefully. But there is no doubt it was an IPART report that was given to the state Labor government. Surprise, surprise—this secret report has found its way into the media. We have a choice: IPART leaked it or the New South Wales state government leaked it. That is basically the choice, and do you know who I am putting my money on? The state Labor government, because they are concerned about the higher prices, and that is why I made the reference that I did to the state Labor government. But technically Senator Xenophon is right. IPART commissioned it but it was then passed to state Labor and—surprise, surprise!—in that process somehow it got leaked. I do not know how that would have occurred, but I am going to give the benefit of the doubt to IPART that they did not. But now that it is out in the public arena, I would have thought the federal government would say: ‘This is a matter of interest. This is coming to a different conclusion to our original modelling’—
Totally different—you are right. And therefore it makes good sense to consider whether the government’s initial modelling is wrong or whether the IPART consideration is wrong. Clearly the two cannot co-exist. One or the other is wrong and I would have thought the people of Australia, and in particular the people of New South Wales, who I understand are facing power bill increases of some 21 per cent on 1 July this year—
So they have some very real interest in obtaining an answer to this question and I would be interested to see if the federal government has even bothered to start making inquiries to ascertain whether or not there is any basis to this report, which has clearly been deliberately leaked by the state Labor government because they are starting to panic about the consequences of this scheme. Interesting, isn’t it? Who had a state government report about the cost to power stations? We cannot actually see the report, but the details have found their way into the media. It would not have been the Victorian state government, would it, by any chance—another Labor state government?
Isn’t this a terrible display of ignorance? Power prices for every man, woman and child and every household in this country will be impacted by the CPRS. There is no doubt about that. When I ask about how high those power prices will go, a hapless Labor senator interjects and says, ‘Can we get back to the CPRS?’ Well, hello! Mr and Mrs Australian citizen and their children are genuinely concerned about the power prices. Labor might dismiss it, and undoubtedly a senator on a good salary can be dismissive of an increase in the cost of living of about $1,000 per annum, but there are many, many Australians who cannot.
Madam Temporary Chairman, I rise on a point of order. The senator is imputing motive and intention which was not there. He may make an argument but I would ask him to withdraw that comment. The senator made an interjection. That may not have been an appropriate thing to do, but that she interjected to try to get the senator opposite to be relevant is not to suggest that she is dismissive of the interests of working families, which seems to be the proposition.
I do have some general questions. I would like to know whether or not the federal government has asked Treasury or anybody else to have a look at this report to see if there is any basis for truth in it. It is clearly in the hands of the New South Wales state Labor government. Therefore, one would imagine it may be able to be shared, even on a confidential basis, with the federal government to let the Australian people know whether that IPART report can be relied upon.
Senator, there are a couple of things. One is that you made some assertions about questions being asked and not being answered or you not liking the answers. I have been in this chamber now for some 23 hours on committee debate. That is fine. I am happy to stay here until this finishes. When Work Choices was debated—which I recall as a very long debate, although it was guillotined by you, Senator—the committee debate went for 15 hours. We have gone eight hours of debate beyond the discussion of Work Choices. Let us just keep this in perspective when those on the other side assert that this government is not willing to go through a committee process.
I am being about as relevant as you were, Senator Abetz. I again make the point: Work Choices, a dramatic policy introduced by the Howard government, had eight hours less committee debate in total than where we are up to now. So, Senator Abetz, do not come in here and lecture me and other Labor senators about participating in this committee debate and answering questions, because we have gone well past the time that your government permitted for questions on an extreme industrial relations policy. That is the factual situation and that is the context.
In terms of the IPART report, I understand it is a draft. If and when that report is finalised and IPART believes it is appropriate for the federal government to consider it, obviously we will do so. But you are asking me on the basis of a media report to comment on a draft report that I have not seen.
The next point I would make is in relation to household assistance and the senator’s assertions about electricity prices and his inappropriate assertion that a Labor senator was dismissive of this issue. Labor are not. In fact, the largest single proportion of assistance under this scheme goes to Australian families. Ninety per cent of Australian families gained support from our scheme to help them manage the impact of a carbon price. We have consciously sought to do that. That has been a principle to which we have adhered.
As to the amount of compensation, Senator, I know you have not been in the chamber for some of this debate because you have presumably been off attending to other matters inside your party, but I have read out and put on the Hansard on a number of occasions the amount of assistance. I can keep doing it in response to a whole range of questions over and over again, but at some point I think the Australian public would have to ask if the continued re-asking of the same questions is a sensible use of the Senate’s time. As I said, we have now been in this chamber answering questions from the government side for some 23 hours—well beyond what you allowed in government as scrutiny of Work Choices.
Just related to that, as we still seem to be in a general question area—and I shall not hold up the chamber for long—I want to ask about the assistance for the low-income households. I understand, Minister, that earlier in the chamber you placed on record some of the figures. Throughout this whole debate I think I have only been away for about 10 minutes. I have tried my hardest to be in the chamber for the entirety of this debate. My questions are around the 90 per cent of the low-income households who are going to receive the assistance, as you say, equal to around 120 per cent of the overall cost increases they face. Could you advise the chamber how you determined that 120 per cent was the appropriate figure? We would assume that 100 per cent of that 120 per cent would relate directly to the increases in electricity costs and the other 20 per cent would relate to overall costs. If that is not the case, Minister, perhaps you could explain why it is that 120 per cent of the increase for electricity costs is being given to households.
As I have said previously, the commitment is to provide assistance to Australian households. The commitment to low-income households is to fully compensate them for the overall cost increase they face. Treasury has modelled the impact of not only electricity prices but also gas prices and the broader impact of the increase in the CPI, which is calculated to be 0.4 per cent in 2011-12 and 0.7 per cent in 2012-13. For example, we have calculated an additional assistance rate for single pensioners of some $455. We have calculated additional assistance for pensioner couples—people receiving the maximum rate of pension—of $686. I was asked a question in relation to middle-income households as well. Was that you, Senator?
On the point of order: is it not appropriate that this debate move on and that there actually be an amendment before the chair after 23 hours rather than debating in general on the prospects of the bill and the intricacies of it?
Perhaps I could clarify this. There have been a range of questions in the committee that have been of a general nature, which have been quite useful in enabling those people out in the community to get an understanding of some of those issues they are particularly interested in that may not relate to specific amendments. I thank the chamber for its indulgence to continue very briefly. People out in the community, particularly those in the low-income area, are particularly interested to get some answers. I certainly do not intend to hold the chamber up for a very long period.
Could I interpose for a moment? I thank Senator Nash for the courtesy. This is the table I was having trouble finding that I had prepared for the Senator Milne debate on free permits to the electricity sector. I am happy to table the cameo analysis of household assistance packages. It is available on the website. Obviously family types differ, but, for example, for a sole parent on a taxable income of $25,000 or thereabouts with two dependent children—one aged between 8 and 12 and one aged between 13 and 15—we have estimated the total cost increase for that family type to be $544. The actual assistance being provided is in excess of $1,000. All of this information, with detailed cameos, is available on the website. If the senator would like me to table the document I am happy to do so.
Thank you, I think that would be quite useful. These will be my final couple of questions. I do understand that we want to move on. I do appreciate that the government is trying to compensate particularly low income households for their increased costs, but I am just struggling a little bit to find the rationale for why they should be overcompensated for the increase in costs. I think the minister just said it was $544 in this particular instance, yet the government was going to pay $1,000. I am at a loss as to the rationale for why they should be overcompensated for what are the identified increases. Given the obvious variable nature of these costs, I would also be interested to know how the government has determined to budget for that, taking into account this overcompensation. Perhaps the minister could advise of some answers to those questions and, indeed, the very important question of when this assistance runs out. I am sure the minister is going to inform me that it is in the papers here somewhere, but perhaps for those people listening it would be very useful for the minister to place on record exactly when this assistance runs out and at which point all of these families should expect that they are going to have to bear the full brunt of the ETS, unless of course it is ongoing forever. If it is ongoing forever that would be good to place on record.
I think the Prime Minister placed that on record a year ago. This assistance is ongoing. The amount of the assistance will be adjusted each year in the budget context. This is this government’s commitment. Obviously if a coalition government at some point is elected I cannot speak for what their policy would be. Our government’s commitment is that we would continue the assistance. The amount of the assistance or the adequacy of the assistance will be reviewed each year in the budget context. It is important to understand that the cost impact of putting a price on carbon is related to what that price is. If the price on carbon is high, therefore the revenue stream is high, therefore we can give more assistance to Australian households.
In relation to the question about where it is coming from in the budget, this scheme is essentially self-funding. Over the 10 years it is actually budget negative. But the households package continues to be funded out of the revenue stream. So the more polluters pay, the more that impacts in terms of the carbon price, and then we provide more assistance to Australian families. We make no apology for prioritising low-income Australia and middle-income Australia and providing that assistance. You asked about the level of assistance, the review of assistance and why we were giving so much to low-income Australians. We have made a policy decision about that. Then I think you asked about how we assessed overall cost increases: they are the average cost increase assumed for that household type. That is why we do have an additional amount built in for a great number of family types. Senator, you are about to jump up again; you have said now on two occasions that this was your last question.
by leave—I move Australian Greens amendments (10), (11), (19), (20), (23), (28), (29), (34) and (62) on sheet 5786 together:
(10) Clause 13, page 33 (line 17), omit “; and”, substitute “.”.
(11) Clause 13, page 33 (lines 18 and 19), omit paragraph (c).
(19) Clause 82, page 128 (line 15), omit “; and”, substitute “.”.
(20) Clause 82, page 128 (lines 16 to 18), omit paragraph (c).
(23) Clause 88, page 131 (lines 17 and 18), omit paragraph (d).
(28) Clause 93, page 137 (line 3), omit “and”.
(29) Clause 93, page 137 (lines 4 to 6), omit paragraph (1)(c).
(34) Clause 129, page 173 (lines 8 to 12), omit paragraph (5A)(a), substitute:
(a) an Australian emissions unit was issued in accordance with the emissions-intensive trade-exposed assistance program; and
(62) Clause 382, page 460 (line 6) to page 460 (line 32), omit subclauses (8), (9) and (9A).
These amendments go to one of the most unjustified and toxic aspects of the carbon pollution reduction scheme. This is the issue of free permits to coal fired electricity generators. The issuing of free permits to the very industry that has caused the greatest problem, that as a sector generates the greatest number of emissions in Australia is the coal fired electricity sector. Professor Garnaut, in his review, said:
There is no public policy justification for $3.9 billion in unconditional payments to generators in relation to hypothetical future ‘loss of asset value’. Never in the history of Australian public finance has so much been given without public policy purpose, by so many, to so few.
That is a big call, and I wonder what Professor Garnaut is saying now that the $3.9 billion has been massively increased to $7.3 billion? I repeat: there is no public policy purpose for these free permits going to coal fired power stations. Of course, they are not just bits of paper; they have monetary value.
It will be very interesting to hear the government first of all justify why you would give free permits to coal fired generators, let alone the deal that the government and the coalition went into to increase that to $7.3 billion. When that figure was announced everyone assumed that was the extent of it. But no, the figures show that the $7.3 billion for no public purpose, given to the biggest polluters in Australia, is based on a cut of five per cent. If the cut in emissions goes to 15 per cent, then from our calculations it is well in excess of $10 billion. I would like the minister to actually specifically put on the public record what the cost is if this goes to a 15 per cent reduction in emissions, and what the cost is if it goes to a 25 per cent reduction in emissions.
This is extraordinary, and there is not one economist—you will not find one single economist—who will tell you that this is justified. This is robbery, in my view. There is no justification for it whatsoever. These companies have known for 20 years that a carbon price was coming, just like the tobacco industry knew for years and the asbestos industry knew for years. They have all employed the same tactics, whether it is tobacco, asbestos or coal: they have known about the greenhouse effect in all that time and they have known that a carbon price was coming. They have done everything in their power not to reduce their emissions, not to transfer out of coal fired power but, rather, to spend the money on expensive lobbyists here in Canberra, rent seeking.
Never have we seen a government cave in like this government has. At the weekend in the Australian Financial Review Brian Toohey called it ‘Carbon cop out: Rudd’s craven cave-in’, and frankly that is exactly what has happened here with the big polluters. The article says:
The biggest slice of the extra payments to polluters—$4 billion—
bear in mind that this is going straight out of compensation to households to the big polluters who have caused the problems, for no reason at all; not an economic justification can be found—
goes to the dirtiest of the coal-fired electricity generators. The only condition attached to the total payment of $7.3 billion to these generators is that they must not close down, although this would stop them from pumping out huge quantities of carbon dioxide (CO2)—
that is, if they were closed down. Interestingly, Citi Investment Research and Analysis director Elaine Prior said yesterday that the deal has secured the immediate future of coal-fired electricity. Well, how ridiculous is that? We are meant to be taking action on climate change to drive transformation in the Australian economy—to get rid of coal-fired generation and to transform to the new low-emission technologies—and what do we have? We have a guarantee on coal-fired electricity. As Ms Prior said:
One of the things that the package has done is provided more surety for the coal-fired generators to keep generating until roughly 2020 or beyond … So one might say in that sense that it’s on the one hand created more stability in the electricity market, but perhaps reduced the urgency for people to look at change.
If there is one component of the CPRS, apart from the targets, that demonstrates this is not about transformation but about entrenching coal-fired power, it is this completely unjustified wealth transfer—ripping it out of the pockets of Australians and into those of the coal-fired generators. There has never been a more disgraceful example of unjustified policy.
It is not going to be good enough for the minister to say, ‘This is the decision the government has taken,’ or ‘This is government policy,’ or ‘We have a different view.’ Let us hear from the minister what the economic justification is for sandbagging coal-fired power generators out to 2020 and what Brian Toohey meant when he said that the only condition is that they must not close down. If you go to the government’s own press release this is what you get:
… the Government will increase the quantum of assistance available under the Electricity Sector Adjustment Scheme …
… the Government will extend the period over which—
is provided from five years to ten—
so doubling the length of time in which the generators will be sandbagged—
… meaning that generators will be required to comply with the existing ‘power system reliability test’ over this period to continue to receive assistance—
that is, you only get the compensation if you keep on agreeing to pump out that much coal-fired power. That is why in Western Australia some consideration is being given to actually recommissioning decommissioned coal-fired power plants. How stupid is that? This is utterly and absolutely ridiculous.
supports energy security by preventing the exit of a generator from the energy market where this would be likely to breach power system reliability standards.
So on the one hand there is no money for geothermal, no money for wave power, no money for solar thermal, a renewable energy target which does not support those emerging technologies and no money in the scheme for research and development in those new technologies but, on the other, all the money going to coal-fired power generators on the condition that they keep churning out emissions. Even worse, the government will delay the windfall gains test that applies to this assistance to apply to the last three years of 10 years assistance rather than to the last two years of five years assistance and apply the test to only half of a generator’s allocation.
Come on! If the government thought it was reasonable even when there was no justification for this to apply a windfall gains test in the last two years of a five-year period, on what possible basis are they taking out this assistance to 10 years, applying the windfall gains test in the last three years and then only to half of a generator’s allocation in this three-year period, which will give generators greater certainty over their allocations? Of course it will, and that is what they set out to do. Wasn’t it a great investment in those lobbyists? Haven’t they done incredibly well out of all of this to the detriment of the whole community? This is a disgraceful, unjustified wealth transfer. The Labor government and the coalition are all under the influence of the lobbyists who came here to Canberra. How they must be laughing all the way to the bank.
This allocation is really the Achilles’ heel for the government. They can go out there and say, ‘We are taking action on climate change,’ but when asked, ‘How is that?’, they will have to say, ‘We are giving compensation to the coal-fired power industry and keeping them operating out to 2020. In fact, we are penalising them such that, if they cannot produce the level of coal-fired power, they will not get the compensation.’ So the only condition to the $7.3 billion is, ‘Keep on pumping out those emissions.’
When does the government think we are going to get carbon capture and storage, which you will remember was going to be the saviour of coal-fired power? It was around the corner. It was only a matter of years away. Then it was decades away. Now it is more than decades away under the Treasury’s own modelling. It shows that electricity generation emissions are not going to fall in Australia until 2034. Why 2034? It is 2034 because that is when the government and Treasury assume carbon capture and storage will come into its own. Everybody knows that is a joke. Nobody in their right mind now believes that carbon capture and storage is going to be real. So all we have here is a guarantee that the biggest polluters will get the most out of this scheme. Money is being taken out of the pockets of households. The compensation provisions for households have been changed. Billions have gone out of households and straight across to the polluters. It is $7.3 billion to keep on polluting. So those people who are saying, ‘Just pass this and we will improve it,’ should think again. You cannot improve it. You are locking in $7.3 billion for nothing. It is nothing for householders and, worse still, it is locking in failure by guaranteeing that these coal-fired polluters will keep on polluting out until 2020 at least and beyond.
Remember—and we will get to an amendment on the science very shortly—the IPCC has said global emissions must peak and come down by 2015. We are talking about less than six years from now and yet the government has sandbagged coal-fired power and locked in a guaranteed failure in terms of transitioning the electricity sector at least out until 2020. So do not let us hear any of this talk about transformation in the Australian economy. Every one of you that supports this package is supporting the transfer of $7.3 billion into a situation where, as Professor Garnaut describes:
Never in the history of Australian public finance has so much been given without public policy purpose, by so many, to so few.
There is no justification for this hypothetical future loss-of-asset value. That loss-of-asset value was already calculated in the share price and in the investment. Those companies had already calculated that into their activities. That risk was already there.
This is just a windfall gain. It is for nothing at all other than to give multinational companies a massive gain at the expense of the Australian community and at the expense of transformation in the electricity sector. I really look forward now to hearing from the minister and from the coalition. What is your justification? What is the public policy explanation for this appalling handout to multinational corporations in return for nothing, other than the fact that it is a craven cave-in to the coal-fired electricity sector?
I do have some response, Senator. The answer to your question about why we are doing this is very simple—this is about the security of Australia’s electricity supply. That is the public policy question to which we addressed our minds. It is not about giving people a windfall gain. It is not about being craven. It is not about being corrupted. It is about this government responsibly working with the opposition to deliver a package which, we believe, secures Australia’s electricity supply through this transition.
I have to say, Senator, that I find two things about your contribution difficult. You are entitled to your view, but I find it difficult to be lectured about transformation by somebody who is voting for Senator Fielding to stop this bill and I find it difficult to be lectured by somebody about being corrupted. I again put on record what I put on record last week—it seems to escape the Greens’ focus that sometimes people of goodwill can approach a public policy question and come to a different answer. It is not because we have been got to. It is not because we are craven. It is not because somehow we have been corrupted. We simply come to a different view. We disagree with your policy proposition. This is one of those occasions.
Some of the factual circumstances you outline are, in fact, incorrect. I want to try—briefly, if I can, because I know Senator Abetz was jumping to his feet—to deal with them. I will try to deal with them as best I can. One issue was that you asserted that people have to keep polluting to get this assistance. It seems to me, respectfully, that you have misread the power system reliability test that the government has included in the original bill—I will come to the amendments we are moving shortly—which is a requirement for receiving assistance under this scheme. What we have said to the recipients of this scheme is, ‘You cannot exit unless the market operator says you can.’ That is about ensuring that we can continue to supply. It is not saying ‘You have to stay.’ It is saying, ‘If you want to exit, you have to exit with the consent’—with a certificate, I think, is the way we have regulated it—‘of the market operator.’
The second point I would make is that one of the changes that will be moved by the government at some point—I suspect now that it will be sometime on Wednesday or Thursday at the rate we are going—is for the inclusion of a low-emissions transition incentive which enables recipients of this assistance to retain their allocation if they invest in new generation capacity progressively to replace their existing high-polluting capacity. That new investment must have an emissions intensity of less than current best practice coal-fired power generation capacity in Australia.
So your assessment of the eligibility requirements, with respect, is not correct. In addition, one of the amendments we are moving is saying, ‘Let’s amend that so as to ensure that, if people want to invest in lower emissions generating capacity, they can do that and still receive their assistance.’ That is an incentive for the transformation to which you refer. I apologise, Senator. I do not believe that amendment is yet before the chamber. I understand we have foreshadowed it. I recall why—it is because we need some consultation with the stakeholders and I am advised that it is quite difficult technically to ensure that it is properly drafted, so we want to make sure that that occurs.
The point is that part of what we have agreed is, yes, additional assistance, but it is also assistance that is very focused on security of supply. I have said publicly—including in the face of various companies asserting that they should have significantly more than is on the table—that we do not believe the public policy proposition that we need to consider is full compensation for all loss of asset value. The public policy proposition is what we need to do to ensure we have a package which ensures confidence in the sector and which delivers the continued security of Australia’s electricity supply through this, as you quite rightly described it, transformation.
That is interesting, isn’t it? In the context that this bill should have been voted on at the end of last week, where would we have been on that issue if the bill had been passed last week? That is just an interesting observation.
In general terms, can I endorse the minister’s response to Senator Milne in relation to why the coalition will not be supporting the Greens amendment. I had sought previously, in an orderly way, to ask a few general questions. Unfortunately there were interruptions by other senators and now Senator Milne has moved her amendment. That is fine, but I will now ask a raft of general questions and seek to get the minister’s response to them in due course.
It makes good sense when you have a debate that goes over a number of days that new information will come to light. The new information, for example with the IPART report, is a matter that could not have been asked about beforehand in the general discussion of the committee or before the report was publicly released. If a senator is to be condemned for raising a general matter of this nature in the committee stage, that would mean that the senator would be locked out from asking questions about what is a very serious matter.
Yes, but this only became public knowledge today, and I have been seeking a convenient time, Senator Pratt, to ask about this. So all I will say to the minister is that the household assistance to which she has referred was based on the original modelling. If this modelling was correct then clearly there will be a shortfall for the households.
I also refer to something that I only became aware of this morning, and that is that on Inside Business yesterday Michael Hitchens, from the Australian Industry Greenhouse Network, made some comments and predictions as well—and there was no earlier time to refer to his comments other than today. He believes that the government, in assuming a price of $26 for each carbon emission permit, may well be wrong. He believes it will be more like $35 to $40. Now either the government agrees with Mr Hitchens or they do not. If they disagree with Mr Hitchens, can they please tell us not that they have done earlier modelling but why this literally hot-off-the-press information is wrong? Could they also give us all the calculations as to why his assertions are wrong? Because clearly, if there is going to be in rough terms an extra $10 cost for each carbon emission permit, the impact on the economy must of necessity be considerably greater.
Mr Hitchens also made the observation about these matters being quite ‘sensitive’, to use his word, because the Treasury estimates of revenue were based essentially on the Australian dollar staying at 90c to the US dollar over the next 10 years or so. But, if that falls—and for every 1c it might fall it is over $1 billion of revenue to the Treasury—and if we get back to what is considered to be sort of a long-term rate with the American dollar, which is around 80c, then the Treasury is looking at a shortfall of about $12 billion. This is just hot off the press. It was reported yesterday. Today is the first opportunity to raise it in the chamber, and I have given way to other senators for other particular debates and amendments in this place. But these are fundamentally important issues that the government really do have to answer to the Australian people for. They may have perfectly good explanations. If they do, that is great.
The other lot of general questions that I was hoping to be able to raise—and I will raise them now as well in this contribution because otherwise I fear I may well continue to be interrupted—is whether the government has undertaken any analysis of the East Anglia Climate Research Unit—
I have not; a colleague of mine may have asked about this. If that is the case that is good, but I just wonder whether the government is going to provide an official statement or document in relation to what has now become known as ‘Climate-gate’, where clearly the information has been doctored or, to use that terrible term, ‘sexed up’. I said ‘clearly’ but I should have said that that is the allegation. The allegation is that that has occurred. That allegation has now been in the community for some two to three weeks. I still have not seen an official government position being put out in relation to that by way of a document indicating whether the allegations are true or not. It would seem, given the response of the academics involved, that they have been unable to deny the truthfulness of the email exchanges and that there is an absence of the raw data which would enable people to rework their calculations. That must be a matter of considerable concern.
There are now allegations that something similar may have happened in New Zealand. And we do know, albeit in a different vein, that in the CSIRO in Australia Dr Spash has not been allowed to have his article published—although I think he fully accepts the so-called consensus science. But if there are these restrictions being placed on scientists—especially at East Anglia, which is the institution pre-eminently relied upon by the IPCC for its predictions—and if scientific research is found to be wanting then the whole underpinning of the IPCC reports begin to crumble. And if that begins to crumble then the whole approach that humankind may or may not be taking to the issues before us may well have to come in for genuine and general reconsideration.
I think the Australian people are entitled to a full and detailed explanation as to what the government has done to examine whether it is satisfied that Dr Jones, Dr Mann and others have doctored information. It seems to be now relatively agreed that Dr Mann’s so-called hockey-stick graph is no longer to be relied upon by the IPCC because it was debunked by a mathematician-statistician who was able to show that the calculations on it were completely—
wanting in rigour. I am very careful with my words, most of the time, Senator McGauran, so rather than accusing them of anything I just want to know the whether the government accepts that Dr Mann’s hockey stick-graph has now fallen into disrepute. Then it might stand to reason that other science and other so-called facts that Dr Mann and his crew have put before the IPCC are worthy of further detailed consideration and analysis to ensure that we are absolutely certain, before we embark down this track of what will represent the largest structural reform or change in the Australian economy that has ever been undertaken by a government and, many people believe—
Not much longer. Many people are of the view that this legislation, if passed, will be irrevocable. The minister kindly asks how much longer I will be, but the situation is that Senator Milne used just as much time as I have. What I have indicated is, given that the committee stage is progressing in the way it is—rather than senators being able to ask brief individual questions and getting answers back, as one would have hoped a committee stage might operate—it is now unfortunately necessary for me to put all of these questions in a tranche. If the minister is able to provide answers in due course during the debate, if I could be notified of the time—
I thank you for that contribution, Senator Abetz. You took us just past 24 hours—so I am advised. In relation to household assistance, that is scaled to the carbon price, and the document I tabled is scaled to the carbon price that was assumed as a result of the MYEFO change. In relation to Mr Hitchens’s calculations of a carbon price, you will have to ask him. I have no knowledge of what assumptions he utilised.
I am answering the question. You spoke on a range of questions which, as a matter of courtesy, I am responding to. They have nothing to do with the amendments, and I would invite the chair to start to consider, given that taxpayers are paying for us to be here, the fact that these are completely irrelevant to the amendments moved by Senator Milne. They are completely irrelevant. Can I say that, whilst I did not agree with what Senator Milne said in her speech, at least she was speaking to her amendments. Senator Abetz, you will have to ask Mr Hitchens what his assumptions are for his carbon price calculation. We have been transparent about our calculation of the carbon price. That is the MYEFO estimate. I would make the point that the international carbon price, from memory, is currently around $22. So one would, just as a matter of logic, not have thought that $26, which is the assumed starting carbon price in the first year of a floating price, is that demonstrably different.
In relation to East Anglia, those questions have been asked by your colleagues previously and answered. I refer you to my previous answers. I note that Senator Abetz cannot help himself. He has to come in here again and argue the science of climate change. If there is a conspiracy on the issue of climate science, it is a conspiracy that involves conservative figures such as Mrs Thatcher; Mr Howard; the Nationals Prime Minister, Mr Key, in New Zealand; and David Cameron, the leader of the conservatives in the United Kingdom. This government accepts the science that has been made clear by the weight of scientific opinion around the world. We accept the advice and the views of the Bureau of Meteorology and the CSIRO about the impact climate change will have on Australia. Senator Abetz, I know you do not. That is your right. I disagree with it, but we are no longer in the business of re-traversing an issue which the world has broadly come to a view on. What we are doing is seeking to act on that knowledge.
I note that Queen Elizabeth II, in addressing the CHOGM meeting, indicated that she thought it was appropriate that the Commonwealth act to drive a good agreement in Copenhagen. I am sure we would not have monarchists like Senator Abetz impugning the Queen and suggesting she was part of a left-wing conspiracy. I would assume this would not be the case.
I just wanted it on the record, Minister, before I began that it was Queen Elizabeth II who did encourage the Commonwealth to take action and that I, for one, would never suggest she was part of a left-wing conspiracy. I want to move on to the serious issues that I raised in relation to compensation for coal fired power. I did ask the minister specifically whether the $7.3 billion compensation pertained to a five per cent cut in emissions, exactly how much this would rise to if there were a 15 per cent cut in emissions and what that would rise to if there were a 25 per cent cut in emissions.
I also go to the minister saying that there will be a low-emissions transition incentive that will amend the power system reliability test to allow generators to receive credit for their own investments in replacement capacity, and that not only will they get that but they will continue to receive their remaining scheduled compensation payments at the same time. I would like to know what the quantum of the low-emissions transition incentive is. Is this an unlimited amount of money? This is over and above the compensation we have talked about. Can the minister say what quantum is expected there in addition to the specifics of exactly how much compensation these coal fired generators are going to get if the emissions reductions rise to that which I have suggested?
Is the only justification the minister can offer for this completely unjustified handout to the big polluters that it is about energy security, about keeping the lights on and about keeping the generators producing? The whole point of an emissions trading scheme, surely, is to put a sufficient price on emissions so that gas and renewables are more cost-effective against coal. This surely deliberately undermines one of the central tenets of the whole point of emissions trading. As I indicated before, the share price for coal companies, coal fired generators and electricity generators has reflected the risk of carbon pricing for a long time. You cannot suggest that the same companies who are now generating coal fired power are necessarily the companies that are going to be offering energy into the future. We do not owe them a living. There are a whole lot of new companies that are involved in renewables and that have moved across to gas and so on. They have a right to be in the market, able to compete. As we know, the generators can pass on the costs, and this is getting to a point where the competition is such that gas and renewables take over. What is happening here is that you are undermining all of the drivers for that to happen. So I again would like to ask the minister why she is undermining her own scheme with sandbagging the big coal fired polluters. Can she give me the quantum of figures in relation to those matters?
In relation to the first issue, all of the price estimates are based on five per cent because that is the unconditional offer. Obviously there were some carbon price estimates in the Garnaut modelling and the Treasury modelling from 2008, but I do not have further modelling on those figures to provide you. You could extrapolate though—it is just a calculation of multiplication on what the carbon price estimate under the Treasury modelling is. But those are the figures which are in the Treasury modelling. Perhaps I was not clear when I was explaining what the low-emissions transition incentive was. That is not an additional payment; that is a change to the eligibility requirements that enables a generator to invest in replacement low-emissions capacity as a requirement for continuing to receive their existing ESAS allocation. So it is not an additional payment; it is saying that you can continue to receive this if you invest in low-emissions technology.
Finally, I think the senator postulated what the whole point of an emissions trading scheme was. I say that it is a scheme that enables the lowest cost transformation of the Australian economy. That is a transformation over time and I have outlined previously the policy rationale for the ESAS.
I would like to ask the government to do that calculation for me. I do not know what projected price they are suggesting, but the Australian community has a right to know. When the $7.3 billion went out there as a price it was never made clear to people that that was based on a five per cent reduction. I am not suggesting that the government needs to put all detail in always, but I think it is imperative, since the government is saying that its scheme is five to 25, that the Australian community knows what five, 15 and 25 would do in terms of this compensation for coal fired power. So I would like to ask the government to do that calculation.
After a generator has invested and transitioned to low-emissions replacement generation capacity, and has received credits for doing so, I would also like to know what the possible justification is for them receiving their remaining scheduled compensation payments? If that is not a windfall gain, then I do not know how you would define a windfall gain.
Minister, you gave reference to the Garnaut modelling in the calculation of what you believed would be the appropriate compensable agreement in the amendments. To what extent is the Garnaut modelling in the white paper prevalent in the calculation of your change in direction in the amendments?
If you go back to the Hansard, Minister, you referred to Garnaut in the modelling that appears to be one of the prerequisites in you ascertaining the process of compensation that is prevalent within the ESAS. To what extent is it there, or is Garnaut modelling not prevalent at all?
I do not understand what the question, ‘How is Garnaut prevalent in the ESAS?’ means. I am sorry, Senator, I genuinely do not. I often try to understand what is behind your question, but I genuinely do not on this occasion.
I was referencing the various scenarios which were modelled under the Treasury modelling of 2008, which drew on, from recollection, two Garnaut scenarios and two government scenarios. When the senator asked me about carbon price estimates, it was published modelling to which I referred her.
Chair, respectfully, I ask you to rule on the relevance of that. We are not discussing assistance to coal—we have discussed those amendments. We are discussing assistance to the generation sector. I have sought to treat Senator Joyce’s questions with due regard for his office, but I do not see how that question has any relevance in terms of assistance to coal when we are talking about assistance to generators.
Thank you, Chair. To the best of my knowledge, the vast majority of electricity generation is done by coal—or maybe things have changed since five minutes ago. So it has an immense connection to coal because the generation of electricity is done by coal. Minister, using that 2008 modelling, which you say is also premised on two factors from Garnaut, is this a part of your compensation arrangements for electricity generators?
On this issue, I would like to raise the concern of the aluminium industry from my state of Victoria. I believe it is relevant. I certainly hope the minister does not give me short shrift like she gave Senator Joyce. In regard to the aluminium industry of Victoria, the government scheme purports to assist large energy users of over 2,000 gigawatts per hour of electricity. It provides certificates for large energy users whose energy source emits up to one tonne of CO2 per megawatt hour—very technical. That is the default electricity allocation.
However, the scheme affects the viability of the aluminium industry in a unique way. For the record, as the minister and the advisers would well know, the Victorian aluminium industry depends on the coal fired power generators. The industry just eats electricity. It is probably the largest user of brown coal generators in Australia—located in the Latrobe Valley—using 1.25 to 1.6 CO2 megawatts per hour. Therefore, the aluminium industry is adversely affected by the one tonne default electricity allocation factor, known as the EAF. This disadvantage is known to the government, I believe, and the government have therefore, under the existing contracts—the ones already in place—made an exception. But what concerns the industry is that, once those contracts run out, there will be no certainty. They will have to pay over and above the one tonne CO2 MWH, megawatts per hour—the benchmark, if you like, to keep it simple. They will have to pay anything over that. That will be passed on to them by the brown coal fired generators from the Latrobe Valley—0.25 to 0.6 CO2 megawatts per hour will be passed on to them.
This is in my state of Victoria, where Alcoa have aluminium plants at Geelong and Portland, essential to the economies of both regional towns, providing employment by the thousands. They have calculated that that will affect their bottom line by $40 million. If that is the result, that will be unsustainable for Victoria’s largest exporter, Alcoa, and yet they cannot get certainty from the government. So my question to the minister is: what certainty can you provide the industry once the current contracts run out?
The Temporary Chairman:
There is no point of order. The minister is at liberty to answer or not answer questions as he or she sees fit. Senator McGauran has asked a question. Minister, I will call you to answer that question.
All right. I will give you an hour and a half. I will make it 23 hours, Senator Parry. Senator Joyce, I think any reasonable observation would be that I have sought to answer a great many questions. I genuinely do not understand what you are asking. I do not understand what the phrase ‘prevalence of Garnaut in modelling’ means. I do not understand what the reference is to coal. Are you talking about coalmines or coal-fired generators? I genuinely do not understand the questions, so I am unable to assist you.
In relation to Senator McGauran’s questions, which I think essentially go to a contract with Alcoa for electricity supplied through the SECV, obviously the precise details of that contract are commercial-in-confidence. However, I would emphasise as follows: the issue is not the emissions intensity of the generators; it is the increase in price. The modelling indicates that the change in price is less than that assumed or given by the electricity allocation factor. For this argument to be correct, coal fired generators would fully pass on their costs and would have no loss of asset value. That is not consistent with the argument from the generators. I do understand. I am familiar with this issue. It has been raised with me by the company and others. There is a negotiation between the company and generators. That is a matter of commercial negotiation.
Generally—and it is applicable to this situation—we have been confronted with a range of requests from different parts of industry for the government to enter commercial negotiations ahead of the scheme. I have taken a very clear policy view that governments do not second-guess commercial negotiations. That is the case essentially across the board. I certainly am aware that there are a range of different views about the outcome of a range of contractual negotiations and how prices will or will not be passed through. What I can say to you is that the policy position of the government is that the electricity allocation factor which has been established is a reasonable one.
The figure I quote in international negotiations is around 80 per cent, I think. I would have to take advice to check if that is correct. People are nodding. I think that is correct.
Perhaps I can assist in this way: I think what you are asking about is not the amendments before the chair but the government’s original decisions around the design and quantum of the Electricity Sector Adjustment Scheme. At the time of the white paper the government made announcements about its view about the appropriate quantum of the Electricity Sector Adjustment Scheme. I am just asking my officials to go back to that, because my recollection is that there were three different modelling exercises undertaken by private sector companies which informed the government decisions in relation to the Electricity Sector Adjustment Scheme.
The Temporary Chairman:
Senator Joyce, before I call you, I have had it drawn to my attention that Senator Xenophon may wish to join in this questioning or debate. So with the leave of the Senate if he wants to do that he should signal to this chair and we will accommodate his contribution from his seat, rather than standing.
That is what I was referring to, and it is at chapter 13, page 19 of the white paper. We outlined the results of the three different modelling exercises which were done by MMA, ACIL Tasman and Roam Consulting.
I am just going piece by piece because I do not want to confuse anybody or mislead anybody. So that modelling, which has been the most recent requirement and which is part of the $3.055 billion that makes up a substantial amount of the $8½ billion approximately of extra costs, is 2008 modelling. Do you think the 2008 modelling is current to the costing mechanism of where we are right now in 2009?
Perhaps I can be very clear. The modelling to which I have referred looked at a range of issues. What we have put here is the model change in asset value. It is the case that there was a very significant variation in the asset value that was modelled. That is all public; it is on the public record. There was never a mechanical link between the modelling and the policy decision. We did not contract out a government policy decision to a few modelling firms. We contracted modelling firms to model and that informed government policy, and that informed the negotiations with the opposition. As I said, I think the best way to say this is that we considered a range of issues. One of them was the modelling which informed our decision but was not determinative of the decision of the government. I cannot speak for the opposition, as to what process they undertook, but we did come to an agreement on what was regarded as a sensible approach.
I would not get into those sorts of predictions. My job as minister is to carry through the parliament, if the parliament will support it, a bill which will start to reduce Australia’s emissions, which will put in place a carbon price and which will support a whole range of sectors in our economy through this transition. The energy sector is one of them. What private sector individuals or companies do as a result of us putting in place a carbon price will be a matter for them. We are unashamedly and absolutely changing the incentives. For once we are saying, ‘Yes, you should have some regard to the cost of climate change in the decisions you make,’ and the way will do that is by putting in place a carbon price.
I want to follow a line of questioning from Senator Milne, the mover of this amendment. As I understand the nub of the issue, this is about the allocation of permits to generators. I have made it clear that I do not have so much of an issue with the allocation of free permits, because it is important to have continuity of supply. My concern is the question of the conditionality of that and, if you like, the mutual obligation. If taxpayers’ funds are being used, what do we get in return in the context of a scheme that is meant to reduce greenhouse gas emissions? I would be grateful if the minister, with respect to the amendment moved by Senator Milne, could elaborate on the matters raised by Senator Milne about the potential costs.
Secondly, in relation to the low-emissions transition incentive referred to in the joint media release of 24 November from the minister and the Treasurer, what would the criteria for that be? How conditional is it, and how robust is the process to ensure that for the billions of dollars in free permits there is a requirement for coal-fired power stations, for instance, to mandatorily moved towards lower emission technology?
Senator, I do not know if you were here when I gave two contributions which did address those issues. In relation to the 25 per cent/15 per cent carbon price, I have referred the senator to the modelling that was produced last year. The government has, for the purposes of this and all of the costings before the parliament, modelled its unconditional commitment. Obviously, that is five per cent. If the government changed that position then the government would provide, through the parliament, to the Australian people an indication of its remodelled costs in relation to the CPRS, assuming whatever target the government committed to.
In relation to the low-emissions technology incentive, to understand that I would refer you to my answers on the power system reliability test. In other words, as the focus of this package, as the government intended, is on ensuring we have a package that delivers energy security, we put in place criteria which required that a generating capacity not exit without the market operator’s consent. What we have said is that you can, in terms of maintaining the available generation capacity, invest in low-emissions technology—that is, lower emissions than best practice coal—in order to meet the supply availability test. I went through this previously with Senator Milne.
That the amendments (Senator Milne’s) be agreed to.
Sitting suspended from 10.01 pm to 10.00 am Tuesday, 1 December 2009
Tuesday, 1 December 2009
The PRESIDENT (Senator the Hon. John Hogg) took the chair at 10.00 am and read prayers.