ANY MOVES to give coal-fired electricity generators more money under an emissions trading scheme would be an "abominable policy innovation" the Government's former climate change adviser Ross Garnaut has warned.
Reflecting on the state of play a year on from handing a copy of his final report on climate change to Prime Minister Kevin Rudd, Professor Garnaut added the way major economies were handing out free permits to industry under climate policies could spark a trade war "which will cost us all dearly."
Professor Garnaut's comments on assistance for coal power come as the Victorian and NSW State Governments and the Federal Opposition all push for more compensation for major energy companies for the loss in value of coal power plants under an emissions trading scheme.
In July a committee was established headed by the Secretary of the Department of Prime Minister of Cabinet Terry Moran, with input for senior Treasury, Department of Climate Change and Department of Resources, Energy and Tourism officials, to look at coal plant asset values.
That committee charged financial firm Morgan Stanley to review the asset value loss of electricity generators, which has now returned some results to the Federal Government. The final results of that report, which included Victoria's Hazelwood plant the focus of protests on the weekend, will not be released by the Government.
Victoria is worried some of its coal plants will breach debt obligations if the asset value of the plants fall under emissions trading, while the NSW State Government would have to carry the value loss of state owned power plants in its budget.
Professor Garnaut said yesterday he had not seen the Morgan Stanley report but to compensate generators based on asset value loss was "an innovation in Australian public policy and an abominable innovation."
"If we had worked other reforms on that principal we would not have had reform we would still have high (economic) protection," Professor Garnaut said.
Professor Garnaut added the way Australia, the US and the European Union was compensating it polluting industry under their climate change policies would cause trade issue. Professor Garnaut said principles outlined in his final report was a better way to compensate high polluting companies, rather than trade-exposure used by the Government which he called "protectionist."
But in a boost to the Government, Mr Garnaut said one year on from his report the Government emissions trading scheme should be passed by the Senate were it is stalled because his recommend 5-25 per cent emissions reduction target range on 2000 levels by 2020 had been adopted.