Australian Government Repropose ETS, Opposition Produce Carbon Plan

by Mary Swire, Tax-News.com, Hong Kong

03 February 2010

As the Australian government reintroduces its proposed emissions trading scheme (ETS) into parliament for a third time, Tony Abbott, the leader of the opposition, has released a climate change plan that, he says, would reduce carbon emissions without taxation.

The present situation in Australia on climate change is that, after an agreement with the government on the ETS was ended by Tony Abbott when he assumed his new role late last year, it was rejected by the Senate for a second time at the beginning of December.

Under the ETS, the government would introduce an Australian emissions unit auction charge, the cost of which would be established in the first half of 2010 through an auction mechanism. Businesses emitting greenhouse gases would need to purchase a permit based on that charge for the volume of gases each produced. The scheme, scheduled to start on July 1, 2010, aims to reduce Australia’s carbon emissions by at least 5% by 2020 (using 2000 as the base year).

The government has re-presented the ETS into the House of Representatives to make its course again through the parliamentary process. It is, however, assumed that it has little chance of being accepted in its unchanged form, given that the government continues not to have sufficient votes in the Senate.

In the meantime, the Green party recently proposed that a two-year carbon price fixed at AUD20 (USD18) a tonne be implemented as an interim measure, in the transition to an ETS. This could help in providing time for the ETS to be re-discussed after this year’s general elections. The government has said that it is still discussing the proposal with the Greens.

In a press release, the opposition have now said that the same emissions reduction target as the government could be achieved without “a great big tax”. It says that, in its climate action policy, incentives would be provided for Australian families and businesses to reduce their carbon emissions and there would be a focus on “direct action” to improve Australia’s environment.

It emphasizes that its policy will not be funded through any new or increased taxes. “Over the forward estimates, the policy will cost AUD3.2bn,” it says. “In the comparable period, the government’s ETS will cost AUD40bn.”

The opposition would establish an emissions reduction fund (EDF) to provide direct incentives to industry and farmers to reduce CO2 emissions. Businesses that reduce emissions below their baseline or “business as usual” activity would be able to sell their CO2 abatement to the government, as a direct financial incentive for firms to take action to reduce emissions below baseline levels. Businesses that emit above their “business as usual” levels would incur a financial penalty.

By providing incentives, rather than imposing massive balance sheet liabilities, it says that the capital would be available for businesses to invest in emissions reduction technology. An expert body would be established to assess tenders and make recommendations on activities to be supported by the EDF.

The EDF would commence operation in 2011-12 with an initial allocation of AUD300m; increasing to AUD500m in 2012-13, AUD750m in 2013-14 and AUD1bn in 2014-15. It would also consider tenders for projects that would reduce emissions through, such as, forestry abatement, utilising waste coal mine gas for electricity generation and energy efficient building projects.

In addition, direct action would be taken, particularly to replenish soil carbon. Significantly increasing soil carbon levels would, the opposition says, boost agricultural productivity and water efficiency. The EDF would be used to deliver about 85m tonnes per annum of CO2 abatement through soil carbons by 2020, with an initial purchase of 10m tonnes of abatement through soil carbons by 2012-13.

The opposition would also introduce a range of measures, including rebates on solar energy use, to support the increased uptake and use of renewable energy in homes and communities, and provide an additional emissions reduction of up to 3m tonnes a year by 2020. It would also commit to the planting of an additional 20m trees by 2020, to re-establish urban forests and green corridors.

Predictably, initial reaction to the opposition emissions plan points out that there would be no actual caps on pollution production, and focuses on the lack of a real incentive for the largest polluters to reduce their emissions. It has also been said that, if businesses were to reduce their emission significantly, the EDF would be overwhelmed with demands on its resources.

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