Fiscal/Political Risk In Australia ETS Debate: Report
Date: 19-Nov-09
Country: AUSTRALIA
Author: Michael Perry
SYDNEY - The Australian government's carbon trading plan would reduce more CO2, create more jobs and produce a budget surplus, compared to opposition plans which carry billions of dollars in fiscal and political risk, according to an independent report issued Thursday.
The Climate Institute released the report on the government's planned Emissions Trading Scheme (ETS), the world's most comprehensive, and amendments the opposition is seeking before it will support the proposal in a Senate vote expected next week.
"Under both scenarios...the economy will continue to expand strongly even while shifting onto a low carbon footing," Institute, an independent research organization, said in its costings report.
But the Institute said the opposition's plans "risk greater short term job impacts and carry tens of billions of dollars of extra fiscal and political risk."
The opposition Liberal-National coalition's scheme, which seeks to increase compensation to major emitters, would result in a deficit of more than A$37 billion ($33 billion) by 2020, while the government's plans would generate a small surplus, it said.
The government wants carbon trading to start in July 2011, covering 75 percent of emissions in what could become the second domestic trading platform outside of Europe.
The ETS legislation was rejected by the Senate earlier this year and a second defeat would give Prime Minister Kevin Rudd a trigger for a snap election.
Australia's carbon debate is being closely watched overseas, particularly in the United States where lawmakers are debating their own proposals.
The government this week agreed to an opposition demand to exempt agriculture from the ETS, increasing the likelihood of a deal being reached before the Senate vote.
GOVERNMENT EXCLUDES AGRICTULTURE FROM SCHEME
The Institute report found exempting agriculture without additional policies to reduce emissions would cost businesses and taxpayers an additional A$7 billion.
The government had planned to include agriculture in the scheme from 2015. Agriculture accounts for around 16 percent of Australia's emissions.
Australia, the world's biggest coal exporter, produces about 1.5 percent of global emissions and is one of the world's highest per-capita emitters of greenhouse gases.
The Institute said the costings report was based on an earlier Australian commitment to reduce emissions by up to 15 percent below 2000 levels by 2020.
Australia has now set a reduction target of 5 to 25 percent, with the upper level kicking in if a strong agreement is reached at U.N. climate talks in Copenhagen next month.
"The opposition's amendments would result in a far smaller change in domestic emissions," said the report.
The government's scheme would see 12 percent of the reduction target met through international permits, compared with the opposition's plans, which would see 44 percent of the target requiring permits at a cost of A$7.1 billion by 2020.
Under the government's scheme, trading at a fixed price of A$10 a tonne of carbon dioxide would start in July 2011, requiring businesses to secure a permit for every tonne of CO2 they emit, providing an incentive to curb carbon pollution.
"Unless the government maintains the ability to modify assistance and drive emission reductions in uncovered sectors such as agriculture it is locking in fiscal risk, not managing it," said John Connor, The Climate Institute's CEO.
"Locking in excessive financial support also potentially further undermines Australia's ability to help achieve an effective, binding and fair global agreement by constraining investments in national and global climate change solutions," Connor said in a statement.
"This research shows we should be strengthening, not weakening the CPRS (Carbon Pollution Reduction Scheme), and that both major parties need to come clean on how agriculture will be doing its fair share of the national effort to reduce carbon pollution," he said.
(Editing by Ron Popeski)
