Polluters to get $12.5 billion in carbon hand-outs

• Tom Arup and Adam Morton
• The Age, May 20, 2009
• http://www.theage.com.au/national/polluters-to-get-125-billion-in-carbon-handouts-20090519-bec1.html?page=-1

Australia's six biggest polluting industries will get an extra $1.1 billion compensation over five years under changes to the Government's emissions trading scheme.

The bump in free permits to heavy polluting industries announced earlier this month means the Government will now hand out $12.5 billion in carbon permits, with $11.7 billion going to the 20 largest companies.

The details are revealed in an economic analysis by JPMorgan's RiskMetrics. The analysis was commissioned by the Australian Conservation Foundation.

Changes announced by Prime Minister Kevin Rudd included a one-year delay in the starting date until July 2011 and a fixed carbon price of $10 a tonne in the first year. It slashed revenue from the scheme in the first year from an estimated $11.5 billion to $4.5 billion.

ACF chief executive Don Henry — who has faced criticism for supporting the Government's changes due to its inclusion of a possible target of a 25 per cent cut in emissions by 2020 — said the compensation for the big polluters goes too far.

"I urge the Government to reduce the hand-outs to polluters and invest 10 per cent of permit revenue in low-emission technology research, development and deployment to grow the low-carbon economy and jobs of the future," Mr Henry said.

The research shows mining giant Rio Tinto will get the most free permits — $2.7 billion over the first five years.

Aluminum company Alcoa is second with $1.7 billion and BlueScope Steel third with $1 billion.

Free permits are allocated based on the amount of carbon emitted, the potential "trade exposure" and levels of production.

The recent changes included the percentage of free permits to trade-exposed industries being increased from 90 to 95 per cent for the most greenhouse gas-intensive companies.

The second bracket will get 66 per cent of permits free, up from 60 per cent.

Greens climate change spokeswoman Christine Milne said every dollar in extra help for industry was money taken away from community programs.

"The multibillion-dollar corporate welfare … will only make it harder and more expensive for Australians to face up to the climate crisis," she said.

Meanwhile, former government economic adviser on climate change Ross Garnaut said it was a "great relief" that Australia had put the possibility of a 25 per cent cut in emissions back on the table.

Speaking at an Anglican Church function in Melbourne, Professor Garnaut stepped back from his previous position that it was a "lineball call" whether it would be better to pass the Government's scheme or scrap it and start again.

"After a bit of wobbling, I think our position is now all right," he said.