Mining Groups Raise Concerns Over Ets
Mining groups raise concerns over ETS
THE Rudd government's carbon pollution reduction scheme white paper has received a lukewarm response from mining and business groups around Australia.
The federal government has unveiled an "unconditional" 5% cut to greenhouse gas emissions, at 2000 levels, by 2020, which may be raised to 15% if there is a global agreement to make a similar reduction.
Under the scheme, the government will provide assistance worth $3.9 billion in free permits over five years to the most emissions-intensive coal-fired generators.
However, the Minerals Council of Australia said it was "profoundly disappointed" that the white paper was not better aligned with progress towards a global agreement on reduction commitments, new low emissions technologies and emissions trading schemes in other countries.
"We need a scheme that doesn't pitch Australia so far out in front of the rest of the world that we run the risk of severe economic contraction without attendant environmental benefits, " the MCA said.
The MCA also said the white paper would impose the most aggressive ETS and interim targets in the world.
"This will impose the highest carbon costs in the world on industries severely constrained in their ability to adjust due to current economic circumstances and the rate of development of new low emissions technologies, " the MCA said.
"Affected Australian businesses will be required to raise more than $8 billion per annum under this scheme during an unprecedented "credit crunch".
The MCA added that an average firm emitting 1 million tonnes of carbon dioxide per year would bear costs around $100 million over four years, whereas its European competitor would pay less than $6 million, while in the first three years Australian businesses would have paid up to $30 billion for permits before a single European competitor had paid a Euro.
Meantime, the Queensland Resource Council and Chamber of Minerals and Energy of Western Australia cautiously welcomed the release of the white paper.
However, Chamber of Minerals and Energy chief executive Reg Howard-Smith said the design of the scheme and the rate at which it was implemented was critical if the country was to avoid the risk of creating economic uncertainty without any net environmental benefit.
"Interim targets in the range of 5 to15 per cent of 2000 levels are welcomed, but will be a big ask of industry without new low emissions technologies and a global agreement, " Howard-Smith said.
The Chamber of Commerce and Industry of Western Australia supports the introduction of an emissions trading scheme, provided WA's international competitiveness was not undermined.
"While business and industry accepts it has an important role to play in lowering emissions, careful consideration is needed to ensure the international competitiveness of our world-class resources and energy industries, and the companies that supply them and the people who work for them, is not compromised, " CCIWA chief executive James Pearson said.
"WA's energy intensive, trade exposed industries will, for the foreseeable future, be largely responsible for guiding WA and the nation through the current economic uncertainty. It does not make sense to handicap them now."
According to analysts at Citi, the scheme at first glance does not appear to contain major surprises, while a leading climate change lawyer has warned businesses will need to get prepared immediately if they are to be ready for the scheme when it begins on July 1, 2010.
Allens Arthur Robinson partner Darren Murphy said the federal government had already begun preparatory work to establish a single independent regulator to oversee the scheme.
"This means that businesses must immediately digest the federal government's proposal and look at what they need to do to ensure they are best placed, " Murphy said.
Murphy added the reduction target of 5-15% was likely to draw criticism from some sectors, but did bring a much-needed degree of certainty for business.
In its white paper, the federal government has pledged $6 billion a year in compensation to households, including a 2.5% rise in pension rates, to tackle higher electricity prices.
Under the scheme, the first carbon permits are to be auctioned in the first half of 2010 with the initial carbon price to be around $23 per tonne if the 5% long-term target is adopted, or around $32/t if the 15% target is adopted.
"In designing the carbon pollution reduction scheme, we've been mindful of the challenges facing the Australian economy today, " Prime Minister Kevin Rudd told a Press Club address.
"We will be attacked from the far right for taking any action at all. We will be attacked from parts of the far left for not going far enough by refusing to close down Australia's coal industry.
"The government believes we have got the balance right."
The European Union is targeting a 20% reduction in greenhouse gas emissions by 2020, while incoming US President Barack Obama has proposed cuts of 25%.
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