Wednesday, July 16, 2008

Emissions trading scheme slugs consumers: Nelson

ABC News Online, Posted 1 hour 37 minutes ago 

Updated 1 hour 29 minutes ago

The Federal Opposition has accused the Government of slugging consumers with more taxes and higher costs through its proposed emissions trading scheme and will not support a 2010 start-up date.

Opposition Leader Brendan Nelson says the cost of petrol, groceries and electricity will be pushed further up under the proposed Carbon Pollution Reduction Scheme, released by Climate Change Minister Penny Wong today.

Dr Nelson says the Government has not properly considered the economic impacts of such a scheme.

"He [Kevin Rudd] hasn't yet dealt with the cost of living pressures and now he wants Australians to take him on trust to do something after the next election," he said.

Senator Wong says the Government is committed to covering the costs which would be passed onto consumers after the implementation of the scheme, in which businesses must buy a permit to pollute.

Dr Nelson has also criticised the Government's plan to match higher petrol costs caused by the scheme cent for cent by cutting the fuel tax. However, Senator Penny Wong has admitted that the cut would be reviewed after three years.

The Coalition's policy to lower fuel was to make a permanent five cent cut to the fuel excise.

"What he's asking Australians to do is to trust him to cut the excise to offset the new carbon tax until after the next election, but he's not going as far as the Coalition and taking an extra five cents off the excise," Dr Nelson said.

"When Mr Rudd says he's going to review the excise cut in three years, in plain language that means that after three years he's going to take the excise cut away.

"That's Rudd speak for doing something that he really doesn't want Australians to know before the next election."

Dr Nelson says the Government should also be seeking a firm commitment from major emitters, such as the US, China and India to lower pollution, however he said under a Coalition government the scheme would still go ahead in 2012 regardless.

He has also warned that jobs may be lost in emissions intensive industries but the Energy sector has welcomed the green paper.

Energy supplies

Coal-fired power generators will be eligible for compensation once the emissions trading scheme is implemented in 2010, and 20 per cent of polluters will have free emissions permits.

John Boshier from the National Generators Forum says the measures outlined in the Green Paper will secure energy supplies.

"The Government is seeking to ensure a gradual industry transition which avoids the need for sudden large scale capacity before sufficient replacement capacity can be installed, and so ensures that reliability of supply will be maintained, and we welcome that," he said.

But the Greens' Environment spokeswoman Christine Milne has accused the Government of playing politics and says the compensation measures listed in the Government's discussion paper contradict the aim of lowering carbon emissions.

"The whole point of an emissions trading system was to send a price signal to the market so that people change their investment decisions and change their behaviour," she said.

"In every single sector that the Government has nominated they have rushed to compensate, to neutralise the impact of the price signal.

"What they've done is move from the polluter pays principle to the polluter gets paid principle."

Senator Milne has also described the scheme as a further blow to Australia's renewable energy sector.

"Minister Wong used the word transformation many times in her speech and yet they have put no driver, no signal in that package, that will lead to transformation of the Australian economy to low carbon," she said.

Greenpeace says the Government's discussion paper is pandering to the interests of big business.

Campaigner Simon Roz says the bigger trade exposed companies should not receive free pollution permits.

"The whole point of an emissions trading scheme is to make fossil fuels unattractive," he said.

"What this simply says to industry is that you can actively block efforts to implement a price on carbon and then simply cry foul at the end and demand compensation from the Government this will be a very big win for industry."

Economic impact

John Conner of the Climate Change Institute says while it is good that low income households will be protected there are other areas of concern in the paper.

"What's not so great and not so clear is the fact that we'll be ripping billions of dollars out of the climate action fund through this petrol excise reduction," he said.

"What's also not great is that we're unclear about what assistance will be given to our neighbouring developing countries to clean-up their development which is so critical to the fight against climate change but also to the future of economic prosperity here in Australia."

Economists say the effort to reduce carbon emissions will suffer because of the Government's plan to protect motorists by lowering the fuel excise.

A senior economist with ANZ, Julie Toth, says that will keep fuel prices at around the level they would have been without the scheme.

"What this is going to do is reduce the effectiveness of the scheme in terms of changing people's behaviour with fuel use," she said.

"The scheme is essentially a price mechanism and although it's good for households and for household budgets that the fuel excise will be reduced a little bit, it's not good at an aggregate level in terms of trying to reduce our carbon dioxide emissions."

She says it is estimated that the cost of petrol would rise by between 10 and 15 per cent under a scheme.

"I do have concerns that the excise-offsets, if they continue long-term, beyond those one-year and three-year review periods will dull the effect of the emissions trading scheme in reducing carbon," Ms Toth said.

The Australian Chamber of Commerce and Industry's spokesman Greg Evans says the detail provided in the green paper is welcome.

But he says much more information is needed for businesses to properly assess the impacts of the carbon trading scheme.

"We still await the Treasury modelling which disappointingly won't be available to business until as we understand it, until October," he said.

"Critical aspects of that Treasury modelling will indeed be the economy-wide implications of an emissions trading scheme and also particular compliance costs that will be faced by Australian businesses."

Reserve Bank Governor Glenn Stevens says careful thought will be required on how to respond to the inflationary impact of the emissions trading scheme.

"The issue here's going to be that if it's a one-time change, you can think of it as a little bit like we treated the GST, it was a one-time effect," he said.

"We looked through that, and focused on how inflation was going to look once it had passed.

"If it's a one-time change, you can do that.

"The slight complexity with climate change might be that it's a whole sequence of somewhat smaller changes over a run of years, and there will need to be some careful thought given to how we would treat that when the time comes. But that's a way off yet."

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