Thursday, August 20, 2009

Horse-trading beat grandiose sentiments and ETS ideals

Lenore Taylor | August 20, 2009
Article from:  The Australian,25197,25955054-5013404,00.html?source=cmailer

FOR all the lofty rhetoric about policy design, in the end passage of the government's renewable energy target came down to a horse-trade over industry exemptions. And in three months, the emissions trading scheme will be debated in exactly the same way.

At the weekend, the government proposed compensating just three industries for the extra electricity costs under the scheme -- aluminium, silicon and newsprint. By the end of negotiation with the Coalition yesterday, the compensation was extended to 40 industrial processes.

The government had also agreed that if the price of renewable energy certificates climbed above $40, it would provide extra assistance for the costs of meeting the basic renewable energy target put in place by the Howard government. Given recent debate, you could be excused for forgetting that both parties went to the last election promising to boost the renewable energy scheme -- the Coalition to 15 per cent of all electricity by 2020, including clean coal, Labor to 20per cent, as legislated yesterday.

You could also be excused for forgetting why both parties concluded that such a measure was necessary -- given they were both committed to also imposing a carbon price through a cap and trade ETS.

Their rationale was that to drive investment in renewables, a carbon price would need to reach $50 a tonne or more and investment needed to start straight away for sufficient generation capacity to be available.

But both major parties agreed that the cap in an ETS should be set at a level ensuring a relatively low carbon price in the initial years of the new carbon market -- under the government's scheme about $30 a tonne. So despite industry opposition, the renewable energy target was embraced as a temporary measure to force investment earlier than would have occurred under an ETS alone.

With agreement on the RET now secure, the opposition is turning its attention to amendments it will propose when the ETS is brought back to the Senate.

It is consulting with business over the Frontier report it released last week, although many industry sectors are undecided about its merits. That's because they are still running the numbers on whether its proposals would leave them better or worse off. And the Nationals and a sizeable minority of the Liberal Party are undecided about the merits of any scheme, while uncomfortably aware of the potential political consequences of a double-dissolution election. Stand by for another horse-trade.

No comments: