In the wake of the Julia Gillard's announcement that the Multi-Party Climate Change Committee had agreed on the framework of a carbon price set to be introduced in Australia on July 1, 2012, Greens deputy leader Christine Milne tells Climate Spectator editor Giles Parkinson that:

– Thursday's announcement was important in that it clearly conveys the the message that the carbon price is coming and it will be delivered;

– Any failure to make the planned transition to the flexible carbon price would mean the fixed price with escalator would continue – thus sending the signal to the investment community that the price will go on regardless and that the pressure is on;

– The Greens think a carbon price must be high enough to start driving the transformation, particularly in the electricity sector;

– A carbon price alone will not drive the investment in the renewable industry sectors fast enough to get large-scale renewables up and running in the time-frame we need;

– The Greens see the carbon price as, 'carbon price plus, plus, plus'; plus regulation, plus complementary measures and so on;

– Industry will not be able to come 'rent seeking' as occurred last time – they’re going to have to argue a case;

– The Greens are prepared to compensate for trade exposure, but not for profitability;

– International permits would not drive transformation in the Australian economy;

– The Coalition has made a serious error of judgement in absenting itself from this process.

 

Giles Parkinson: Hi, thanks for joining us.

Christine Milne: Yes. Well, it’s a very exciting day for the Greens and this has been something I’ve been working on for a long time. As you know, we put the compromised position on the table in January 2010 and which contains virtually all the elements of where we are now.

Giles Parkinson: Why was it important to make this announcement today, because I guess a lot of people presumed that this was the framework that people were working on anyway, but there's none of the detail which people want to see?

CM: No, because the details are not worked out yet, Giles. So, basically, it had been hoped to be able to make the announcement after the last multi-party climate change committee last Friday, but then that wasn’t possible, because Tony Windsor wasn’t able to attend and there were some further details the government and the Greens needed to work through, and so we came to that agreement earlier in the week, and then it was a matter of when the media conference could be organised really. 

GP: Obviously the idea of introducing a carbon price into the Australian economy is momentous, but to all practical purposes, unless the details are actually agreed on, then I guess we won’t actually have a price, will we, next July?

CM: Well, that’s right, unless we agree on the details. But what has happened, if you just go through the time-frames, we put the hybrid model on the table in January 2010. At the time Minister Wong and Prime Minister Rudd just shunned it immediately and shoved it to one side and it’s now clear in hindsight that they’d already made a decision at that point to go with a super profits mining tax and abandon the carbon price. We went to the election with neither Liberal nor Labor committed to a carbon price and the Greens saying we were committed to real action on climate change, a carbon price, and as soon as possible. 

Then, when nobody won a majority, we got the agreement to set up a multi-party climate committee with experts to develop a carbon price mechanism. And now, some months later, having looked at the variety of mechanisms, there is agreement between the government and the Greens that this is the best mechanism to move forward because it does allow us to introduce the carbon price, allow us to introduce the emissions trading architecture without having settled the vexed question of the target, and it allows the carbon price to stay permanently in the Australian market either as the fixed price escalating or as emissions trading with a flexible price. 

So, really, what was announced today is this is where the intent is for both the government, the Greens and certainly for Rob Oakeshott – who is very committed to getting this as well – and Tony Windsor just wants to work through the detail before he signs off on the price, which is fair enough. 

So, the announcement today of the time-frames was important. We intend to have it operational by the first of July 2012. So, we will get balance of power in the Senate in July, so the time-frame is clearly to get the legislation drafted and through by the end of this year with a view to getting it started by the middle of next. So, everyone now has a time-frame and a date to work to, so there is some real focus on the unresolved questions of how high the price... .The breadth of the coverage is pretty well determined, as you will have seen by the announcement today.

The compensation: there is agreement between the Greens and the government, and always has been, that there be compensation for households. And then the issue becomes, how is the rest of the money expended; what level of compensation for the trade-exposed, and also the inclusion of consideration of how to maintain the carbon store in the landscape and enhance that store, will be part of the negotiations. So, there’ll be a big benefit for rural and regional Australia. So I think, today, that’s what people got from this; a clear timeframe, a direction of where we’re going, and the message, clearly, that the carbon price is coming and it will be delivered.

GP: I got the impression, though, from the discussion document, that there was some doubt about the sectors that will actually be within this carbon price. There is no guarantee that they all would be included, and indeed it talked about the energy industry as having an emissions intensity target, as opposed to a carbon price? That seemed to be a bit confusing.

CM: Yes, well, my interpretation of what is out there is that we will be going to a hybrid scheme with a fixed price for a period of time to be determined, either three or five years, and then transition to a flexible price with the option of not transitioning to a flexible price if there was a valid reason to do so within the context of the caveats that are in the document. But the point of having the statement, that if the option is not exercised to go to the flexible price the fixed price with escalator will continue, is the very strong signal to the investment community that the price will go on regardless and that the pressure is on, of course, to resolve those outstanding matters. But in the absence of the target being determined, then that would just continue.

GP: Let’s go through those things individually then. Do you want the price to apply to all the sectors that were mentioned in the discussion document today, which is transport, fugitive emissions (ie, the mining industry), industrial processes (ie, manufacturing, etc)?

CM: Well, certainly the Greens have signed on to a document which says that we want the broadest coverage we can possibly have in a carbon pricing mechanism, and that’s what we’ve agreed to at this point. Any decisions about phasing or anything else have yet to be determined, but there is an agreement on broad coverage and that’s where we come from in principle.

GP: Ok. Now, what about price? What sort of price will you be looking for, because I guess that’s the big question.

CM: Yes, that’s a huge question, and there has been no discussion to date of a price. But the key for the Greens is that the price must be high enough to start driving the transformation, particularly in the electricity sector.

GP: So enough, in fact, to maybe get investment into renewables or gas or both?

CM: Well, I think I’m realistic enough, Giles, to know that to get the investment into solar, thermal and geothermal and so on, you would need a very high price, which we are unlikely to be able to negotiate in the current political climate, if you like, in Australia.

And so that is where you need to take a broad view about how much can be done by regulation, how much can be done by a carbon price, and how much can be done by complementary measures, because it’s clear to me the carbon price alone will not drive the investment in the renewable industry sectors fast enough to get large-scale renewables up and running in the time frame we need. 

And, as you know, the Greens want to see us move to 100 per cent renewables as quickly as possible, so we certainly see the carbon price as, carbon price plus, plus, plus; so plus regulation, plus complementary measures and so on. And that’s the context in which you’d have to see the carbon price mechanism and the actual level of the price.

GP: So, where will we start? Will we start at $20, or will we start at $25, or more?

CM: Well, that hasn’t – as I said, we’ve had no discussion about that at this point, so that is a matter that we are clearly going to move to, but aren’t there yet.

GP: Ok. There’s obviously going to be issues about how the money is allocated. There was talk today about some for households, some for industry, and some for innovation…

CM: And some for land use.

GP: ...and some for land use. That in itself suggests then that there will be less compensation available for industries, trade exposed, or for the electricity industry as was proposed under the CPRS.  Is that a fair assessment?

CM: Well, the issue really is to go back to the principles. We worked very hard to come to an agreement on the principles which should guide the design of the scheme and they state very clearly where we’re coming from in terms of making things fair and transparent and also, you know, giving people a very clear signal that we all agree that energy security is important, we all agree fairness is important, we all agree, you know, the innovation in the economy is important. So, from our point of view, the big improvement on the negotiations this time from where we were when the government announced the CPRS is that the productivity commission is doing its review on the effective carbon price of our trading partners.

And so, industry will not be able to come with a whole lot of unsubstantiated claims and rent seeking as occurred last time. And this time, they’re going to have to argue a case and the Greens have always said we are prepared to compensate for trade exposure, but not for profitability and clearly a lot of the claims that were made about leakage were wrong, just like the miners have been shown to be utterly and absolutely exaggerating their case with the tax, as has occurred recently. 

So, this time there will be some rigour in the debate and therefore I expect a much fairer allocation of funds, so it’s certainly the Greens and the government are agreed that households need compensation and we’ll be working on that. Industry to be compensated for their trade exposure… There’s certainly some commitment to getting R&D up, but there’s also an awareness that this is an opportunity to put some money into the land use sector in one way or another, but the key to that is getting agreement on how, and that’s very unclear at the moment and under active discussion. But what we want to see is money available to do the things that people in rural Australia want to do, and that’s protect the stores, enhance and restore forests, get rid of feral animals, you know, a whole range of things; weed eradications… Stewardship-type things need to be recognised and the rural sector assisted.

GP: One thing that has already raised some comment today from industry, is the lack of access to international credits under this scheme. Is that something that you guys brought to the table, or was that something brought by Labor?

CM: Well, certainly, if you have a look at the detail of our interim carbon price, we have never supported the wholesale inclusion of overseas permits, and one of the good things I think about the structure as it’s currently proposed is that while it is a fixed-price phase, there will be no international permits, because that does not drive transformation in the Australian economy and that was always our big issue here; that whilst addressing climate change, we also want to see transformation in the Australian economy and that wasn’t going to happen if you had a 5 per cent target and allowed unlimited access to overseas permits.

GP: And let’s try to understand about the cap. The discussion about moving the cap beyond 5 per cent has been put off for a couple of years. That probably won’t happen until, as I understand it, there are discussions about the transfer to a market-based scheme. Is that right? And when do you think those discussions can or would properly be held?

CM: I can’t give you dates because we don’t know because the proposal out there at the moment is that it would go from a fixed price to a flexible price within possibly three or five years, and then you’ll read the statement that says that the decision on the target and any other conditions that might apply in the flexible price phase have to be made no later than twelve months before that. 

So, basically, that decision can be made anytime up until 12 months before the expiry of the fixed price term, whatever we decide that to be. And at the moment, as I said, it’s actively under discussion whether it’s three or five years. But if it were three years and it started on the first of July 2012, then you’d be expecting it to go to emissions trading on the first of July 2015, but a decision on the target and any conditions on quantity and quality of overseas permits would have to be made before the first of July 2014 if it were three years. The same applies out to five years. It’s a year before. And if a decision was made not to go to emissions trading at that point, you could also review no later than one year out from the expected change, the level of the escalator. 

GP: What’s your preference for the fixed term? Is it three years or five years?

CM: We haven’t discussed that in a party room. The Greens would like to see us go to emissions trading as quickly as possible because that gives us more certainty in terms of emission reductions, but that… having said that, it has to… that has to be in the context of the level of ambition of the scheme and its design which is all, you know, up in the air while we continue to talk about it in the committee. And as a matter of principle, we prefer emissions trading as a flexible price and would like to see that as quickly as possible within the context of what I said about level of ambition.

GP: Ok. And where do you see the possibility for compromise with the Labor party, because at the moment the Coalition is dealing itself out of the debate for practical purposes.  You and the Labor party… The Greens and the Labor are going to have to find compromise or this framework will actually amount to nothing.

CM: Well, it’s absolutely right, but look at where we’ve come from; from election day with only five… six people in the federal parliament at that point wanting a carbon price. We’ve effectively negotiated with the government. We created the space for people to be able to negotiate this. We’ve brought in the Independents. We’ve brought in the government. The Greens are there around the table with experts to work this through and I think that’s an amazing amount of progress from where we were six months ago. So, that’s why I think some credit needs to be given to the Greens for actually coming up with a proposal that is able to move beyond the impasse and then use the fact that the people didn’t vote for one party or another to bring multi party politics to work in a way that is making genuine progress and I think that’s something that really needs to be considered.

GP: Does it suit you that the Coalition is not in the debate or would you prefer them to be in there negotiating on things like compensation and transition arrangements and things like that?

CM: Look, if you want to bring about long-term change, it is desirable that you have all the players in the room working towards an outcome that they can all own, but often that doesn’t happen. In my political career, one way that that’s been facilitated has best been through conscience votes on things like gay law reform. It was a tripartite process that got us gun law reform in Tasmania.

And now, it is a process of all parties – except the Coalition – working together and I think the Coalition has made a serious misjudgment… a serious error of judgement in absenting itself from this process and it will be exactly like the GST; that once you introduce a significant change in the economy and people make decisions about their future business and activities on the basis of that, you are not going to see any party try and wind that back, and in this case, even when we can legislate a carbon price in Australia and give that price certainty and people make investment decisions that are very big decisions that have… that result in infrastructure with a life of, you know, up to fifty years or whatever, they are not going to think very kindly of a party that says we intend to tear that down.  And I think that the Coalition, providing we can get this up and running by the first of July 2012, will not be able to go to the election in 2013 with a policy of tearing it down.