11-August-2009
Articles, Emissions Trading Scheme
In its current form, the Federal Government’s emissions trading scheme will export jobs and emissions because of the massive tax on electricity which will make key regional industries uncompetitive. There is an alternative.
The Coalition and Nick Xenophon’s release yesterday of research commissioned from Frontier Economics provides an alternative Emissions Trading Scheme that proves the Rudd Government’s scheme will unnecessarily drive up electricity prices, destroy jobs and expand the size of government in Australia, while doing little about emissions.
The modelling, which the Prime Minister and Minister Wong have consistently refused to conduct, puts further pressure on the Government to delay this week’s vote on their Carbon Pollution Reduction Scheme legislation.
This alternative model would provide for a greener, cheaper and smarter ETS. Greener because of a doubling of the target, cheaper because it will be 40 per cent cheaper than the Government’s scheme – a $49 billion saving to our economy over the next 20 years - and smarter because it will ensure that there are more jobs, more Australians in work, earning higher wages, particularly in regional Australia.
The ETS is the biggest deliberate structural change ever to be considered in our economy, yet the Government has refused to consider any amendment whatsoever and has taken a ‘take it or leave it approach’ – fixed on ramming their legislation through Parliament ahead of any other country.
The Frontier research shows that with the right model, a logical and well planned ETS can deliver an unconditional 10% reduction in Australia’s 2000 greenhouse gas emissions by 2020 (compared to the Rudd Government’s 5% unconditional target), wind back household electricity price rises from $280 (under the current legislation) to $44 (under the Frontier research) in the near term, and; have a net gain in employment in regional Australia of 70,000 jobs compared to the Government’s scheme.
Importantly, this research also gives certainty to Australia’s agriculture sector – by leaving it out of the cap, while providing an opportunity to be rewarded by generating carbon offsets. Minister Wong has left this sector in limbo, declaring that a decision will be made in 5 years as to whether they are to be included in the ETS, and refusing to allow agricultural offsets.
Rather than an abrupt 40 per cent jump in power bills, the changes proposed by Frontier would mean a small and gradual increase – giving households and businesses more time to scale back their electricity use by purchasing more efficient appliances, insulating buildings, and making other adjustments.
A much smaller and more gradual increase in power bills also greatly decreases the need for compensation payments to households. This, in turn, means the many billions of dollars of annual fiscal ‘churn’ created by an ETS can be greatly reduced.
Lower electricity prices will also greatly reduce the indirect costs of the Government’s ETS that would be faced by hundreds of thousands of small and mid-sized businesses. For example, under the CPRS, a typical dairy farm faced extra costs of $8000-$10000 per year. Under Frontier’s proposals, this would be reduced by 80-90 per cent.
Separately, the Coalition has also committed itself to a doubling of the compensation for loss of asset value proposed for the electricity generators, from $4 billion to $8-10 billion. This will provide the capacity for this sector to invest in low emissions technology and see a rapid reduction in their carbon footprint. The generator sector contributes 50 per cent of all emissions.
The onus is squarely now on the Government to sit down and discuss this alternative approach.
It also adds further weight to the argument that Australia should not finalise legislation until we see the outcome of developments in the United States, and developments at the world meeting in Copenhagen in December.
The Government must stop playing politics with this vital area of policy.