CPRS DEAL – A $114 BILLION GAMBLE ON A GLOBAL CLIMATE DEAL AT COPENHAGEN

Today’s deal on the Carbon Pollution Reduction Scheme means it is imperative for the United Nations climate talks in Copenhagen to deliver a binding agreement so that Australia’s exporters are competing on a level playing field and all emitters are taking comparable steps to reduce greenhouse gases.

If the Copenhagen meeting fails to deliver, Australian exporters will be saddled with the highest carbon costs in the world while their competitors in both developed and developing nations face no such costs. Without an agreement at Copenhagen global greenhouse gas levels will increase despite Australia’s CPRS.

Today’s deal between the Government and Opposition on the CPRS means Australia will have the most aggressive emissions trading scheme in the world. According to the Government’s own estimates, the scheme will raise $114 billion from Australian industry and households by 2020 – equivalent to $5428 for every single Australian over this period.

The deal amounts to a $114 billion gamble on the outcome of Copenhagen. It is a `bet’ on the rest of the world committing to reducing greenhouse gas emissions.

The proposed CPRS will make no material difference to the global level of greenhouse gases entering the atmosphere if Copenhagen fails to deliver a global protocol committing all major emitting nations to sustained reductions in greenhouse gas emissions.

Without a Copenhagen deal the consequences for Australia are simple, but devastating. The revised CPRS will reduce the competitiveness of Australian industry. New investment will be lower as a result. There will be fewer jobs in exporting and import competing industries. Regional Australia – where 1 in 4 jobs are dependent on exports - will suffer most.

Throughout the debate on the Carbon Pollution Reduction Scheme, the Minerals Council of Australia has advocated a measured transition to a low emissions economy with a carbon reduction scheme that is calibrated with global efforts to reduce emissions and the deployment of technology to reduce greenhouse gases.

Today’s deal does not deliver that measured transition to a low emissions economy - or address the underlying fundamental flaws. It is imperative to get the design right.

The MCA welcomes the minor improvements to the Emissions Intensive Trade Exposed program. But even after today’s amendments, only 10 to 15 per cent of Australian minerals exports – which operate in fiercely competitive global markets – will receive any ‘shielding’ from the world’s highest carbon costs.

Other proposed amendments are less than they seem at first glance. The ‘concession’ in the CPRS package will mean that the Australian coal sector will pay $12.5 billion rather than $14 billion in carbon costs to 2020. At present there is no prospect that any other major coal producer – including in the European Union and United States – will face any such costs.

Other key minerals exports will face a substantial burden under this scheme. The short-term assistance on electricity prices, while welcome, will provide only fleeting assistance, and will not address the entrenched competitive disadvantage that the CPRS will impose ahead of matching action by other nations.

The Australian gold sector will still face costs of between $1.6 and $2.3 billion to 2020 while Australian nickel producers will face costs in the range of $1-$1.5 billion over the same period.

While the proposed amendments have produced minor improvements, the reality is that the revised CPRS is a second-rate scheme that will act as a drag on the Australian economy for decades without delivering appreciable environmental benefits.

The proposed CPRS remains pre-occupied with raising revenue rather than delivering a positive outcome for the environment.

It is hard to identify a single dollar of the $114 billion raised by the scheme that will be spent on new low emissions technologies. The scheme is all stick and no carrot. Contrary to claims that much of this revenue will be provided to the business sector as compensation, two thirds - about $75 billion – goes to motorists and households.

Climate change is a global challenge. It will only be solved with a global deal that provides the same disciplines and rules for all major greenhouse gas emitting nations. It makes no sense for Australia to conclude its scheme without knowing what those rules are. Australia should not impose different rules on itself than the US imposes on its industry and economy, nor indeed other countries.

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