News | 24th Feb, 2011

Carbon tax plan raises long list of questions

Thursday, 24 February 2011
Lexi Metherell and Paula Kruger, ABC News

Peak business groups are happy there is some indication of the Federal Government's broad direction on addressing carbon emissions, but they are crying out for more detail.

Environmentalists and welfare groups are also concerned about the difficult process of working out the detail, but are relieved there is finally agreement between the Government, the Greens and key independents on a carbon price mechanism.

Prime Minister Julia Gillard says now is the right time to put a price on carbon and the scheme will be rolled out from July 2012.

The price, which will be announced at a later date, will be fixed for a period of three to five years before moving to a cap-and-trade system.

The details of compensation for households and business have yet to be worked through, but agriculture is to be excluded from the price while farmers will be compensated for reductions.

Opposition Leader Tony Abbott has lashed out at the plan, which he says is a historic betrayal of the Australian people.

"Nothing is more fake than making a promise to the Australian people before an election and breaking it after the election," he said.

Business groups have a long list of questions following Ms Gillard's announcement and say there are huge gaps to be filled in.

They are concerned the Multi-Party Climate Change Committee has not set a 2020 target for emissions cuts.

Malcolm Roberts, executive director of the National Generators Forum, whose members are some of Australia's biggest polluters, says he needs more information.

"What the starting price of carbon will be, when emissions trading would commence, what will be the transitional assistance offered to households and industry," he said.

"One of the points that's missing from today's announcement is an agreement between the Government and the Greens about what the 2020 targets should be. We have to work backwards from the target to set the price."

Under the plan, businesses will not be able to get credits to pollute from overseas while the carbon price is in place, but they will be able to once the ETS is up and running.

The chief executive of the Australian Industry Group, Heather Ridout, says businesses must be able to import credits.

"This would be a deal breaker in a sense if we move to an ETS and it wasn't open to companies to be able to buy credits overseas to manage their responsibilities," she said.

"This would really defeat the purpose of having an ETS as part of a global response to climate change."

Australian Chamber of Commerce and Industry spokesman Greg Evans says Australia is acting alone.

"We're going to have a carbon impost whereas our competitors will not, so we're going to be at a competitive disadvantage to international competitors," he said.

"The largest three countries of the world – the US, Japan and China – don't have one and they don't look as though they're likely to impose some sort of carbon pricing regime.

"We think it's detrimental to the Australian economy to move ahead of those major nations."

Electricity generator Origin Energy, which does not own coal-fired power plants, says the carbon price will only be effective if it is more than $25 a tonne.

Getting it done

Environmentalists and welfare groups have welcomed the scheme, but they too have concerns about the difficult detail ahead.

They also question whether there will be enough help for households and the renewable energy industry.

Richard Deniss, executive director of the Australian Institute, says it is a pragmatic decision and a welcome sign of progress.

"What this process allows us to do is say, well what's the starting price that we're comfortable with? What's an escalator for that price? How can it go up over time?" he said.

"And then, down the track when there is a bit more certainty around the world, then we can come back and revisit some of the sort of arguments about targets and emissions trading but not let the details get in the way of getting on with the job."

Dr Deniss says he has little sympathy for some of the concerns expressed by some in big business.

"Anyone who's bought a power station in the last 10 years, anyone who's retrofitted or invested in any big polluting technology has known full well that this would come," he said.

"So there'll be a lot of claims that the sky is falling but these people have been building the scaffolding to hold it up for quite some time now."

Sky is falling

Mark Wakeham from Environment Victoria says some of the difficult details ahead are the starting price of carbon, how much will go to households to help cope with higher prices and how much will go to polluters in the form of compensation.

"These really important decisions will determine whether pollution actually rises or falls in the next five years in Australia, and of course the whole purpose of introducing a price tag on pollution should be to ensure that our pollution is falling," he said.

For Tony Mohr, the manager of the Climate Change Program for the Australian Conservation Foundation, a carbon price is long overdue.

"The majority of Australians have supported climate action for many years now. They're mainly frustrated by the bickering and the infighting between political parties," he said.

"It's understandable when you're hearing business voices saying that the world's going to end and the sky's going to fall in, but they also know the science consistently tells them that we need to cut our pollution if we're going to avoid some of the most dangerous impacts of climate change."

All sides of the debate insist on getting it right, but there are different opinions on what right is. All do agree the transition to a low-carbon economy will be a big and difficult job.