Carbon chaos in Canberra
There is good reason why the government did not release the details of its carbon pricing package before the weekend. Broad agreement with the Greens and the independents may well have been reached on the key parameters, but an absolute bun-fight was continuing on the details.
Some accounts paint a picture of chaos in the corridors, as lobbyists and MPs and company folk suddenly realised, when Prime Minister Julia Gillard set down this Sunday as Carbon Day, that “OMG! They are going to do it,” and dived into the scrum to eke out an exemption or an extra dollar in compensation.
Plenty of details have already emerged though leaks – intended and otherwise – to the mainstream media. So here’s a quick wrap of what we know so far, and how to tell on Sunday whether Labor and their friends in the cross benches have done a good thing, or stuffed it up again.
Carbon price: The money seems to be on a fixed price of about $23, a compromise between the painless start desired by Labor and the strong signal sought by the Greens. Expect an escalator of 4 per cent a year (plus inflation) till a transition to an ETS in 2015. The transition arrangements will be key, as will the creation of independent institutions to advise on abatement targets and compensation arrangements. There is talk of a floor price and a cap mechanism in the ETS, which will spark much debate among the market boffins on whether this is a good idea or not. Another key point of interest will be access to international permits and the possible inclusion of Carbon Farming Initiative projects.
Compensation: Billions of it, everywhere. For consumers, Treasury modeling will suggest the cost is less than $10 a week, pushing up energy and grocery bills by around 1 per cent. The government has indicated 90 per cent of consumers will be covered, 70 per cent fully, through tax adjustments, and for retirees through quarterly payments.
Business: Trade-exposed industries will be covered pretty much as under the CPRS, with steel maybe getting some more goodies such as R&D assistance in first few years. Coal mines are getting a little less than last time, with around $1.25 billion focused on gassy mines. Key issues will be the rate of decay for EITEs, the possible introduction of a new tier of compensation, and how compensation is managed over the longer term. There is talk that the Productivity Commission could be given carriage. That could be fun, because the PC thinks such handouts are highly inefficient, as does Garnaut.
Coal-fired generators look to have hit the jackpot. There was a choice between giving them $7.3 billion in free permits as in the ETS, providing loan guarantees as suggested by Garnaut, or offering a buyback of capacity under an auction, as demanded by environmental groups and some generators. If the media reports are to be believed, they might get all three. Some politicians are genuinely scared the lights will be turned out, but will argue that an orderly closure of capacity will provide a strong signal for others to build baseload gas – our fuel of transition – which might not happen quickly enough without a strong forward price signal. There may be emissions standards as well.
Scope: Agriculture is out, and so is petrol, though larger fuel users may be impacted by changes to excise duties. So it’s not quite economy-wide – around 70 per cent. It seems some other greenhouse gases will be excluded, and covered under ozone legislation, cutting the numbers of affected parties to 500 from around 1000, which starts to make it look like a hybrid scheme between an ETS and the tool the US government is using to reduce its emissions.
Renewables: One of the key achievements of the Greens will be the creation of a new body, the Australian Renewable Energy Agency, which will have carriage over possible $3.2 billion a year in funding for emerging technologies, and will take over existing programs such as Solar Flagships. Importantly, this and a new clean energy finance corporation, will be a body independent of the government, which will be good news for the renewables industry frustrated with endless delays under the grants-based schemes managed by Energy Minister Martin Ferguson.
Other complementary measures: There's considerable speculation about energy efficiency and whether a trading scheme, as proposed by a government task force, will be introduced; or an extension to the Energy Efficiency Opportunities program. Many will argue that addressing such issues as EE and demand management, and the regulatory barriers, could be the most constructive thing his package could achieve. Infrastructure Australia may be handed additional responsibilities, according to CE Daily.
There may be myriad subtle additions and subtractions in the final package. The headlines will certainly focus on the price and the compensation, and there is no doubt that, in the final analysis, billions more than is necessary will be offered to business. But that’s politics. Or so they say.
In the end, the starting price will matter less than the signals that will govern the forward price curve – which is what will drive future investment. And a carbon market already exists, which is why, according to one spokesperson speaking in conspiratorial tones, the lock-up on a Sunday will have as much security (no modems, no phones) as a budget lock-up.
And the key to the forward price curve will be set by the abatement targets, the mechanism that will allow for these to be modified and respond to international developments, and the closure of the dirtiest generators.
Ultimately, this package will be judged on just a few fundamental criteria: its ability to drive transformation towards a low-carbon economy, and its ability to meet the full range of targets that are on the table in international talks.
Baker & McKenzie climate change specialist Martijn Wilder says there are two key points: the details of the policy; and the government’s ability to sell it.
“Most of the key industries that are affected know what their obligations will be,” Wilder said. “What will be revealed will not just be the carbon price and the fixed period, also the extent to which the greens have been able to effect significant changes from what was outlined in the CPRS.”
The Climate Institute has published its five key tests for the carbon policy package. They are:
1. Will the package allow Australia to meet at least the full range of carbon pollution reduction targets, backed by both major political parties, of 5-25 per cent below 2000 levels by 2020?
2. Will the package drive enough investment in clean energy, energy efficiency and carbon farming to see domestic pollution levels fall by 2013 and boost carbon productivity and competitiveness?
3. Will the package strengthen or weaken global cooperation on pollution and climate change?
4. Will decisions related to the scheme’s objectives be subject to transparent and independent advice to the Parliament?
5. Will transitional assistance measures, such as compensation, be fair and maintain incentives to reduce pollution for all parts of the economy?
Deutsche Bank analyst Tim Jordan says the key things to look out for include the starting carbon price, the level of assistance to trade-exposed firms and assistance for electricity generators.
Analysts will be busy crunching numbers over the next week calculating impacts on company earnings (and acting as a counter balance to the extreme claims of some lobby groups). Airlines may be hit hardest, according to Deutsche Bank, at least in terms of impacts on profits, while utilities such as Origin and AGL may actually experience a bottom line benefit.
And what happens next? Once the Government has announced the details of its preferred carbon policy, it will present legislation to Parliament in August or September and seek passage by the end of 2011.
Can they do it? The independents are on board, and know there is a unique opportunity. Labor knows its future depends on it. "While nothing is certain in politics, we note that the minority Labor Government has managed to pass more than 150 pieces of legislation since the election last August, with no rejections," Jordan noted.
Comments on this article
Why believe
Sorry Jason but the science is in and has been for some time. Frankly to say otherwise is akin to being a luddite, the world did not collapse with the coming of the printing press nor will it with the carbon tax.
We as a society must change our behaviour re green house gases. We are the primary reason why the globe is warming and the best way to change behaviour is to create a price on the offending product ie carbon. These are not my words but those of the Productivity Commission.
As to lie tell me what politician doesn't. Should we believe Abbott who prior to being elected opposition leader said one should create a carbon tax or should we believe him now? Gillard's statement was made on the assumption that she would win the election outright, Guess what she didn't ! Therefore to remain in government she needs to take on board the views and oppinions of those who support her.
So get over it, its here, the Parliament will legislate and we have make provision in our daily lives for it. Not so hard.
Why beleive?
Jason,
In her address today, Christine Milne proclaimed - From today, we turn our backs on fossil fuels. What a price to pay from eliminating our 1.5% of global emissions. Use a sledge hammer to crack nothing.
Why believe?
Hi All,
It can be broken down to an incredibly easy format.
WHY BELIEVE her.
-There is no scientific proof there is a problem
-It is a TAX for goodness sake(like we need an other)
-Yes, she lied about not having a tax
-And to the greenies; If she is capable of lying about not bringing in a tax, how do you know she will not remove it. Hmm..
Sack the B..CH when we can, bring someone in who will lie not so much(good luck with that I know).
Giles you were right. Chaos in Canberra, how about exposing it.
(See, Clearly, the hybrid scheme is now Carbon Tax & Direct Action 2011-07-08)
By exempting fifty per cent of the allege 1000 polluters, Gillard is trapped in a classic catch 22 situation, meaning that it's not now possible to have a lid on her carbon tax rate and substantially diminishing the carbon tax collection.
Lenore Taylor in her article today, seems to concur with my point of view VIZ ... it will even include some elements of the Coalition's Direct Action, including a tender for the early retirement of some of the highest emitting, brown coal-fired power stations. It will leave fuel out, possibly dealing with transport emissions through regulation: which is exactly what the Coalition environment spokesman , Greg Hunt, said should happen back in 2008.
CARBON DIOXIDE TAX.
Amazing that it has never been proven that carbon dioxide has anything to do with climate,
Fact that water vapor is huge compared to carbon dioxide in the atmosphere. But humans do not add much to that.
So we can't tax that. Just the stuff we breathe out and plants would die without it . CARBON DIOXIDE.
A climate tax haiku
The people rejoice,
Collect climate tax offset
And nothing changes
Compliance
"there is no doubting the compliance nightmnare it will usher in"...
Er, no. All the 500 or so high-emissions businesses who will have to pay have been complying with the reporting regime brought in by John Howard in 2004. The 'army of public servants' overseening compliance are already employed, having been recruited by, er, John Howard.
"for heavens sake make it simple, so we mere working mortals can comply" Mere mortals won't have to comply, as they won't be paying it. What could be simpler?
We need a Kennedy
Someone who will say something like this:
75% of Australia's power will be via renewable sources by 2025.
Finite resources are finite.
bloated
Shocking that when so many people across the globe will face life threatening scenarios in the not too distant future as result of climate change, that we are perversly handing out cash to the very people who have always benefited - thats us and our corporations.
Will we ever be able to take responsibillity for our past emissions and the effect that has and will have on our planet
TAX
Why should I have to pay a TAX on something I will be compensated for?? STUPID. INCOMPETANT.
Dumb Dumb
This carbon tax is a total waste of time it will do nothing to help this precious planet we live on, we just have to accept the fact that we humans have stuffed this whole thing up. All the while the worlds population grows & grows with more people just like us who will want the same silly things which we have been told we need to make us happy. Just accept the fact that things are going to change and enjoy this wonderful place while we still have it in it's present state.
Carbon Chaos
I must say this is a magnificent list of wishes. Looks like a large part of the population will be provided a benefit greater than their increased costs, industries impacted will be compensated and there is a fantastic "possible" wedge to be thrown towards the Australian Renewable Energy Agency. This must be the most majestic magic pudding ever contemplated, given the entire premise is to load costs onto non preferred methods to generate electricity and to direct users of electrical power to seek efficiency or other sources.
If so many are to be protected, then there must be a narrow group only who will bear the burden for both themselves and those who they will carry. If that burden is to be meaningful surely they will be squashed to the point of being eliminated or leaving. I hope they are not responsible for lighting the lights. I rest easy on the assurances of our leaders with integrity, NOT.
Alternatively the tax will have no impact, except for creating the new renewable industry, actively collecting carbon imposts, sharing it out to the worthy and funding a new suite of alternate power generation or efficient power use think tanks, urgers, proposers. I am yet to see any proven base load generation proposals to take the place of what will be retired.
How Dumb Are You Ross?
You acuse Peter of being dumb. One of the justifications Gillard plans to use is Treasury modelling that shows the coal industry will grow by 40% over the next 5 years (with lower profits due to the Carbon Tax). All that growth is going into coal exports, mainly to China.
China is doing nothing about emmission reductions except posturing. So Gillard will say we are reducing emmissions through this tax (which is yet to be proven ... NZ has actually increased theirs under an ETS) while using a growth in Chinese emmissions as a justification for our Tax.
Ross, you are clearly as dumb as all those fools who believed Gillard when she said she wouldn't introduce this Tax.
You can't claim to be reducing emmissions by 5% by 2020 when you are actively ecouraging China to increase there emmissions every month by more than we emitt annually through increased coal exports. Unless you are also dumb enough to believe a reduction in Australia offset by a 100 fold increase in China is somehow a reduction.
The Carbon Tax is a sham. Just another piece of Labor spin. It will achieve nothing but lower standards of living in this beautiful country while they take TAx from us and TAx from increased coal exports at the same time. Talk about double standards!
"We" are DUMB! well some of "us" are
We deserve what we get and we voted for a Labour/Green government that hasn't a clue what to do other than grand stupid gestures.
Even reducing Australia's emmissions to ZERO will not make the slightest bit of difference to world CO2 levels, just wait for the next volcano to go off and the levels are back.
The focus should be on using less of everthing! That way it lasts longer!
Don't forget the tale of the Kings (Queens?) New Clothes!
Impact on The Labour Party
While Gillard will spin the line of the low [initial] cost of the carbon tax, she is diverting attention away from the prospect that the tax is going to mean destruction of the Labour Party - recent NSW election as indicator. The polls are two to one against the tax, Gillard does not have a mandate - yet she pushes on. So then why is she trying to destroy the Labour Party???
Abbott needs to make his argument more consistent: that Australia should go slow on carbon reduction until the major global polluters and our major trading partners also act under a global agreement - that while keeping the 5% reduction target he would not hold firm to the 2020 deadline.
The whole argument that the carbon tax/ETS is the most efficient way of reducing emissions - and so say economists - diverts attention away from the impact this Australian action will have on the global climate. Too much focus on implementation and not enough on end result - return on investment (ROI).
In regards to Michael Rynn's comparison to the GST. Here are some big differences: The GST started at 10% and has not increased since -- the Carbon tax will go up at least 7-8% per year then likely more closer to 2020 and attract the GST on top of this; the GST eliminated lots of taxes with some consumer items less - carbon tax, only increases; the GST expense for businesses was fully deductable against GST received on revenue - carbon tax not deductable.
Clearly, the hybrid scheme is now Carbon Tax & Direct action
So why not engage with the Coalition Party to devise proper and lasting carbon pollution reduction targets instead of wasting our tax dollars on a Mickey mouse scheme designed by has been glory hunters,
Necessary, but not sufficient
@Ross Walker: actually, Peter Lang is pro-nuclear. He'd like to see coal left in the ground, but has a very strong bias toward nuclear & against other renewables (as he firmly believes they can't do the job without bankrupting the country).
To Peter, I'd say this: Emission reductions by Australia are necessary for reducing world emissions, but not sufficient by themselves to fix the problem. You're absolutely right that the rest of the world needs to get on board. Having taken some steps ourselves toward meeting our commitments (a paltry 5% cut from 2000 levels, which is actually an increase from 1990 levels, which is what most of the world uses as a benchmark), we can help apply political pressure on the recalcitrant emitters. A few years worth of carbon tax / ETS will also help to assuage the fears of those who think such measures will destroy their economy.
Of course, the years of additional delay will mean that any action the late-comers make will end up being more expensive, but that's their choice. Just as Australia's actions now will be more expensive than if we'd started the job back in 1997, when Kyoto was signed. That's 14 years spent dithering, and it'll come back to haunt us.
Compliance nightmare
Once again, we have the shiny pants set in Canberra making their compromises, give a bit, take a bit, the end result is a faustian tangle of regulation and loopholes those of us who actually add value by producing things people buy have to try and navigate.
Whichever "side" of the carbon "debate" you fall, there is no doubting the compliance nightmnare it will usher in. The supreme irony is that the ABS will measure this activity and add it to GDP, when even the simple minded amongst us can see ithe compliance is just wasted effort, adding no productive value to the economy in any way.
If we are to have a tax regime, for heavens sake make it simple, so we mere working mortals can comply and get on with making a bob to pay the bills.
Lower Emissions is Just the Beginning ...
At last, we see a start to Australia's contribution to lowering worldwide carbon emissions. What opposers fail to recognise is that the damage we cause to the planet now from unabated carbon emissions will take thousands of years to rectify through it's own systems. A few decades of profligate consumption by a wealthy few countries will change our planet way beyond the scope of their understanding. I am amazed at the narrow thinking of those who want to consume and exploit our planet to suffocation.
Green-Labor have stuffed us again
I'm with Peter. How dumb are we?
The only winner here is Canberra, as myriad MORE public servants are employed to administer this complete and utter mess. This will create more tax-payer pain and create more upward pressure on interest rates.
Guess what, the economy will suffer, and therefore make us LESS able to invest in smart sustainable energy sources.
The Rudd/Gillard governments have stuffed up everything they have done- including some real gems like Pink Batts, school halls, live cattle exports and so many more. If you seriously think they will get this right- you are dreaming.
I agree: How dumb are we?
How dumb are you?
Peter Lang asks "How dumb are we?"... "Carbon tax imposed on Australia will not cut world emissions".
I ask, how dumb are you, Peter? At long last Australia will now cut its carbon emissions compared to BAU, and are we not a part of the world Peter? Sure, our effect on reducing global emissions will be small, but proportional to our economic size. We're not the "first off the blocks" either; many other countries are way ahead of us. And the economic cost will be tiny, a far cry from the exaggerated claims of Tony Abbott. Your mates in the coal/coal power industries will be obscenely well looked after Peter, unfortunately.
We're almost on our way. It's a weak start, but this is just the beginning.
Carbon tax lite will not harm economy
Compared to the short term effects of GST on economic growth, the carbon-tax-lite will be a transient blip. It will be hard to notice any affect on the coal mining and carbon burning, nor a decline on the too-sensitive scales corporate profits and CEO remuneration, which might even get fatter.
The annual increase in the low carbon diet regime has promise, as does the hope of a real investment exercise in renewable energy projects. The carbon obesity of Australia has a long way to go down.
Yes, Green-Labor have stuffed it again
Of course Green-Labor have stuffed us again.
Carbon tax imposed on Australia will not cut world emissions, in either the short term or the long term. So it will not change the climate.
However, it will certainly disadvantage us economically. Therefore, we will be less able to implement effect ive policies in the future.
How dumb are we?
Why do we continually shoot ourselves in the foot with irrational policies and useless symbolic gestures?