Sunday, December 14, 2008

Rudd locks in 5pc emissions cut

By Online parliamentary correspondent Emma Rodgers

Posted 21 minutes ago
Updated 15 minutes ago

Prime Minister Kevin Rudd says Australia will cut its greenhouse gas emissions by 5 per cent of 2000 levels by 2020, but could make a cut of up to 15 per cent if other countries also sign up to stronger reductions.

The Federal Government has also promised around $6 billion a year in compensation and a 2.5 per cent rise in pension rates to help households cope with expected price rises when the carbon pollution reduction scheme begins in 2010.

It is estimated there will be a one-off rise in inflation of 1.1 per cent with the introduction of the scheme, and growth will slow by just 0.1 per cent a year to 2050.

The details of how the scheme will work and its expected cost to homes and businesses has been outlined in the Government's white paper released today.

The paper says by 2020 Australia will cut its emissions by 5 per cent of 2000 levels even if no progress has been made to finalise the next international agreement to reduce global emissions.

The 5 per cent cut is likely to anger the Greens and environmental groups who have been calling for a much stronger mid-term cut in emissions.

But it is closer to the level some business and industry groups were lobbying for.

The Government has left the door open to cut Australia's emissions by up to 15 per cent if other major economies also agree to significantly reduce emissions and advanced economies take similar action on cuts.

It has also reaffirmed its commitment to cut emissions levels by 60 per cent of 2000 levels by 2050.

The Government says it agrees with its climate change adviser Ross Garnaut's recommendation that a 25 per cent cut in emissions is in the national interest but that international agreement on a larger cut at international talks next year is unlikely.

"Australia's commitment of a 5 -15 per cent reduction by 2020 is a serious and credible commitment to the global action required and is realistically attainable in the current circumstances," the paper says.

Household compensation

The Government says around $6 billion a year will be provided through various measures to compensate families for price rises and estimates around 90 per cent of low income households will receive assistance of 120 per cent of their increase in cost of living expenses.

Aged pensioners, seniors, carers and those with a disability would receive a 2.5 per cent increase in the rate of the pension once the scheme begins.

Low and middle income families would be eligible for a range of measures through increases in the low income tax offset, a 2.5 per cent increase of Family Tax Benefit Part A or Family Tax Benefit Part B.

The white paper estimates that with a carbon price of $25 per tonne, electricity is expected to increase by around $4 per week, with a rise in gas prices of around $2.

Despite a large drop in petrol prices in recent months the Government will keep its cut in the fuel excise announced in the green paper on a cent-for-cent basis as the scheme causes a petrol prices rise.

Around $2.5 billion, as part of the Climate Change Action Fund, will also be allocated to help small businesses and community groups adapt to the scheme and lower emissions.

Trade exposed industries

The Government has increased the amount of free permits allocated in its green paper to those industries described as trade exposed because they face international competition and cannot pass the cost of a trading scheme onto consumers.

One threshold for eligibility has also been lowered, meaning more companies will be covered by the assistance.

The amount of free permits available to those industries - such as aluminium, cement, lime and silicone production - has been increased to 25 per cent, compared to 20 per cent flagged in the green paper.

That amount would rise to 35 per cent once agriculture is included in the scheme, which is not expected until at least 2015.

Industries now also have the choice of being assessed for assistance via two different tests based on either revenue or the value it adds to the product in the manufacturing process.

If an industry produces over 2,000 tonnes of emissions per million dollars of revenue or 6,000 tonnes of emissions in the value it adds to a product it is eligible for 90 per cent of free permits.

If it produces over 1,000 tonnes of emissions per million dollars of revenue or 3,000 tonnes of emissions in the value it adds to a produce it is eligible for 60 per cent of free permits.

The Electricity Sector Adjustment Scheme will also provide $3.9 billion assistance to coal fired power generators over the next five years.

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