Phillip Coorey, Chief Political Correspondent
EXEMPTING the coal industry from the emissions trading scheme would cost the scheme $10 billion in revenue over 10 years and force the Federal Government to either cut compensation to households and other sectors or take money from the budget, Government experts say.
Senior departmental officials are urging the Government to stand firm as the coal industry and the Opposition increase demands for more money, free permits or exemption for coal.
The officials are also disputing claims by the Leader of the Opposition, Malcolm Turnbull, and the coal sector that the scheme being developed in the US will treat polluting industries more favourably than the Australian scheme.
Today the coal sector is running more newspaper advertisements warning of job losses in NSW and Queensland. Yesterday Mr Turnbull used a business speech in Sydney to call again for the legislation to be delayed until early next year – after the international climate conference in Copenhagen and by which time the shape of the US scheme should be clearer.
But Mr Turnbull conceded that because the Government was determined to press ahead, it was likely the Coalition would come to a deal before the end of the year, thus avoiding a trigger for a double dissolution.
''We believe the scheme would be best legislated … or finalised after Copenhagen, but we will participate constructively in the debate about the design of the scheme in the course of this year.''
The comment brought Mr Turnbull another broadside from the renegade Liberal backbencher Wilson Tuckey, who sent his Coalition colleagues another email yesterday, blaming a drop in the polls on the attempts by Mr Turnbull and the Coalition to deal on the scheme this year.
''For those who wish to blame party division for their polling demise, just remember who broke ranks,'' Mr Tuckey wrote.
''Is it just possible we could get on a winner and criticise the ETS as the wrong solution to climate change?''
Last week, after an internal party brawl about when or if the Coalition should try to amend the bill, Mr Turnbull tried to unite the party behind a new position consisting of nine changes the Coalition would demand.
One of these involved exemptions for coal.
Under the proposed scheme, the coal industry is not counted as a heavy polluter or entitled to free permits. Most coalmines are low-emitting, open-cut projects that would have to pay for permits, and officials say this would add between $1.50 and $2.50 to the price of each tonne of coal.
The worst affected are 23 gassy, methane-emitting mines in NSW and Queensland. They pollute so much that the cost of permits would increase the price per tonne of coal from these mines by $20 to $25. Rather than giving them free permits and allowing them to go on polluting, the Government wants to give them $750 million to implement measures to reduce emissions.
Government officials argue this would lower the mines' emissions liability on a permanent basis, whereas exempting the coal sector, or giving it free permits, would cost $10 billion over a decade in lost revenue.