News | 21st Sep, 2011

State fudges carbon figures

Wednesday, 21 September 2011
Adam Morton, The Age

The Baillieu government's credibility on climate change has been undermined after economic modelling that it commissioned contradicted its own claims that Victoria would be the state hardest hit by a price on carbon.

The embarrassment was compounded yesterday when Treasurer Kim Wells gave a gaffe-filled media conference, in which he erroneously denied that the state had a legislated goal of cutting greenhouse emissions by 20 per cent this decade.

And despite describing the target as ''aspirational'', Mr Wells would not say that the government aspired to meet it.

A report by Deloitte Access Economics – commissioned and paid for by the Baillieu government – found Victoria's gross state product would be lower with a carbon price than without one. But it said Victoria would be less affected by 2030 than Western Australia, Queensland, New South Wales and the nation as a whole.

Despite the consultants' finding, Mr Wells continued to insist that Victoria would eventually suffer more than the mining states of WA and Queensland.

He said a carbon price would devastate Victorian families and businesses. ''We maintain that over the longer period it will hit Victoria the hardest,'' he said.

The Deloitte modelling found about 35,000 fewer jobs would be created in Victoria by 2015 under a carbon price than if it was not introduced, and that investment would be $6.3 billion – or 6.6 per cent – lower.

It estimated that average income would rise, but be $1050 less than it otherwise would have been in 2015, and the budget would be nearly $660 million worse off.

The Latrobe Valley, Geelong and Ballarat were tipped to be among the worst affected areas.

But the modelling did not factor in all federal compensation, including $5.5 billion for the owners of coal power plants and $500 million for the steel industry. Nor did it consider the proposed $10 billion Clean Energy Finance Corporation.

A separate analysis by ACIL Tasman found 97 per cent of the coal power compensation would go to Victorian plants.

In a gruelling media conference, Mr Wells said the Victorian 20 per cent greenhouse target was ''aspirational'' and ''not in legislation''. In fact it was included in the Climate Change Act, introduced last year by the Labor government without opposition from the Coalition.

Mr Wells appeared unaware of key differences in the assumptions behind the Deloitte modelling and an analysis by federal Treasury. Mr Wells said there were two main differences between the two sets of modelling – the Commonwealth believed there would be a greater drop in real wages, and was more optimistic about the pace of transition to clean energy.

But in what Deloitte described as a ''fundamental difference'', it assumed that Australia would cut emissions further on its own soil and buy fewer international carbon permits to meet its 2020 greenhouse target of a 5 per cent cut below 2000 than predicted by Treasury.

Deloitte said deeper onshore cuts would lead to a greater impact on economic production, investment and jobs.

It said economic growth would continue to be strong, but found a carbon price would lead to national gross domestic product [GDP] being 2.2 per cent lower in 2020 than it would have been without a price. In federal Treasury analysis, the difference was 0.3 per cent.

Shadow treasurer Tim Holding said Mr Wells's media conference had been ''disastrous'', and that he had failed to answer even basic questions. ''Mr Wells gave every impression he hadn't even read his own report,'' he said. ''In these challenging economic times, Victoria needs a strong, safe pair of hands, and these certainly don't belong to Kim Wells,'' Mr Holding said.

The Deloitte analysis finds a national carbon price would lead to Victoria's emissions being 19 per cent lower in 2015 and 25 per cent lower by 2020. It estimates 370,000 jobs would be created in the state by 2020 with a carbon price, against 388,000 without a carbon price.

Asked if an estimate of the jobs impact was meaningful without considering the full compensation package, Mr Wells responded by saying he had visited Alcoa's aluminium smelter at Portland on Monday and was concerned it would be affected.

Deloitte found aluminium output was projected to decrease by about 31 per cent by 2020. But Alcoa issued a statement saying its outlook was positive and it was confident of meeting the challenges of a high Australian dollar and a carbon price.

Prime Minister Julia Gillard said the Deloitte figures were flawed and unreliable. ''The estimates of the economic impacts are right out of the ball park – at least four times higher than other modelling shows,'' she told Parliament.

Environment Victoria campaigns director Mark Wakeham said: ''Either the state government doesn't understand the detail of the carbon price package, or the Coalition is willing to deliberately confuse Victorians by releasing this misleading report.''

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Read our media release about this issue here
Read about the carbon price package here
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