No relief from carbon cost king-hit

The proposed change to the Australian carbon pricing scheme to start from 2015 is an empty gesture.

It is tinkering at the edges, not the fundamental redesign for proper global alignment that is critical for an efficient and effective response to climate change.

The announcement does nothing to alleviate the high cost burden of the Australian carbon tax for the next three years.

Australian carbon tax and emissions trading scheme is far more onerous than any other scheme in the world, including the European Union’s.

The European Union scheme has properly adopted a phased approach to full auctioning of permits, building up over two decades from the start of their scheme in 2005; Australia instead has adopted a carbon king hit.

When the Australian scheme links to the EU’s in 2015, as announced by the Government today, EU companies will still have a competitive advantage over Australian trade exposed industries.

Other nations such as South Korea have also adopted a sensible phased approach – over 90 per cent of permits will be allocated to its trade exposed industries enabling a better transition to a carbon constrained world.

Australia's carbon tax started generating $77.3 million per week from July 1; Europe's emissions trading scheme - which covers 30 nations - has generated only $23 million per week so far in 2012. Australian business will be paying a carbon price 4 to 5 times higher than their European counterparts in 2012, while their competitors in the
US, Canada and other developed nations face no direct carbon costs.

It is the design of the carbon tax and emissions trading system which is critical. The Australian scheme fails every test of its objective and of good public policy.

It will not materially reduce emissions nor improve Australia's carbon productivity. The carbon tax imposes costs on the minerals industry that none of Australia's resources competitors will face. These same costs also undermine the industry's capacity to introduce the low emissions technologies needed to reduce emissions.

The carbon tax is designed to slow the growth of Australia's economy and that means jobs and exports for future generations will be forgone. That is the antithesis of economic reform. The Minerals Council of Australia will continue to strongly advocate for a better policy outcome.

An Australian carbon pricing scheme will be effective only as part of an integrated policy approach, including:

  • a global agreement that includes concerted and comparable action by all major emitters;
  • a measured transition to carbon pricing, with cost burdens comparable with those facing our competitors, and
  • the development and deployment of low emissions technologies.

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