Thursday, July 17, 2008

High-emitters set to reap benefit

Tim Colebatch 
The Age, July 18, 2008

NEW high-emission businesses such as black coal mines, aluminium smelters and cement plants will be given free emission permits under the Federal Government's emissions trading scheme, raising fears that Australia's emissions will continue to rise.

A closer examination of the Government's green paper, released on Wednesday, shows that industries generating 25% of Australia's emissions will be given 90% of their permits free, blunting any incentive to reduce their emissions.

These include beef cattle farms (which generate 11.2% of Australia's emissions), aluminium smelters (6.1%), sheep (3.4%) and dairy (2.7%) farms, and cement and lime kilns (1.4%). Farms will be initially excluded from the scheme.

Industries generating a further 12.5% of Australia's emissions stand to be given 60% of their emission permits free, at least for the most energy-intensive parts of their activities, an appendix at the back of the report reveals.

Parts of many other industries would also qualify, with free permits being awarded to energy-intensive activities rather than overall industry emissions. In the steel industry, for example, making basic steel generates massive emissions, qualifying it for permits, whereas refashioning it into sheets, rods and consumer products does not.

The Government's proposed aid to coal-fired power stations will be restricted to those stations already built or firmly committed by June 2007. By contrast, a little-noticed sentence in the green paper spells out that free permits for emission-intensive activities will be on for new and old.

"The Government proposes to assist new EITE (emissions-intensive, trade-exposed) investments in these activities in a manner comparable to the way in which it treats existing investments," it said.

The Government envisages free permits lasting until 2020, unless an international agreement makes covering the industry, or bringing all countries under emission controls, unnecessary. It will then review whether they are needed.

Environmental strategist Guy Pearse, who left the Howard government to write an expose of its environment policy, High and Dry, said that while the policy was intended to prevent "carbon leakage" of emission-intensive industries out of Australia, it will now go much further.

"Far from preventing carbon from leaking out, it will encourage carbon-intensive industry to leak into Australia," Dr Pearse wrote on his blog, "and should these sheltered industries grow rapidly, the burden on the rest of Australia will increase even further.

"Especially egregious is the implication that black coal mining will be eligible for 60% of its permits for free. It already creates 5% of our emissions, it's responsible for more greenhouse emissions abroad than Australia in total, and production is projected to more than double."

Mining black coal causes the escape of coal seam methane, a greenhouse gas. But mining companies are investing to capture the methane and convert it to liquefied natural gas. This will make it easy for them to cut their emissions — and sell the free permits.

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