News | 24th Apr, 2013

Power firms warn Abbott on carbon

24 April 2013
Marcus Priest, AFR
Demand for review of direct action Power companies are demanding the federal opposition rethink its "direct action" plan for reducing carbon emissions, warning that its company baseline approach could be more difficult to operate than Labor's trading scheme.
The Energy Supply Association of Australia said falling demand for power meant the Coalition must review its energy and climate change policy if it gains power at the September 14 federal election. The warning comes amid growing support by multinational companies and major business groups for a market-based scheme, such as an emissions trading scheme, linked to the currently low prices set in European and other international markets.
ESSA, which represents big power companies such as Origin, TRUenergy and International Power, has long supported an emissions trading scheme.
"What we are seeing is the conditions in the market moving so quickly that there is a need to rethink the rules with a view to resetting or rethinking Direct Action," ESAA chief executive Matthew Warren told The Australian Financial Review on Tuesday. But the Coalition is refusing to budge.
The opposition's spokesman on climate action, Greg Hunt, said on Tuesday that it was committed to dumping the carbon tax. "We remain completely committed to the policy as it removes a costly taxon business," he said.
"We have made it clear that setting of baselines is a matter for the white paper and we are encouraging organisations to make submissions at that time, if we are elected."
Business groups and companies are reluctant to talk publicly about the Coalition's plan because they don't want to be seen to take sides this close to the election.
Privately, however, they worry it will be expensive, complex and will put the cost on taxpayers. And manufacturing and resource company executives say they have postponed making long-term investment decisions, in part because of the uncertainty over the carbon price under a Coalition government.
ESAA's Mr Warren said his members, who pay the bulk of Labor's carbon tax, also had concerns about the opposition's Direct Action policy. The opposition has pledged a white paper after the federal election to consult on the details of Direct Action, which includes a budget fund to pay companies to reduce carbon emissions via a "reverse auction" process.
It is also likely to consider cutting the 20 per cent Renewable Energy Target if electricity demand remains weak.
Mr Warren said it would be challenging to design an effective baseline and credit scheme, as envisaged by Direct Action, to enable companies to be paid by government if they reduced their emissions below their baseline. 
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