Business cautious in ETS response

The federal government's white paper on emissions targets has received mixed responses from lobby groups and companies across the country, while one of the loudest critics of the scheme keeps relatively quiet.

Woodside Petroleum chief Don Voelte, who over the past few months has been one of the more prominent critics of the ETS, says the company will take time to understand how the liquefied natural gas industry will be affected.

Today the federal government set a maximum cut to emissions of 15 per cent by 2020, only if the world signs an effective climate pact.

If no pact is signed, Australia will go with an unconditional 5 per cent cut in emissions.

In the white paper, the LNG industry was included among emissions intensive businesses that may qualify for some free permits under the planned carbon trading system.

The LNG industry was not included to receive free permits in the federal government's green paper, which prompted an outburst from the sector which warned that certain projects were at risk.

In a statement today, Mr Voelte said Woodside looked forward to working with the government to minimise the impact of the scheme on the LNG sector.

"Our concern remains that, in implementing an emissions trading scheme, the Government does not make the industry less competitive with producers elsewhere in the world," Mr Voelte said.

"We do not want a scheme which will cost Australian jobs or lead to an increase in greenhouse gases through the burning of higher emission fuels."

The views were echoed by the Australian Petroleum Production & Exploration Association (APPEA) chief executive Belinda Robinson.

'While the design of the CPRS [Carbon Pollution Reduction Scheme] has taken a significant and positive step forward, as a country we still have a way to go in accepting that Australia's gas reserves represent a major strategic asset for supplying Australia and the Asia-Pacific region more broadly with a substantially cleaner source of energy," she said.

'APPEA will be spending the next few weeks analysing the White Paper in detail to assess its impact on the capacity for Australia's gas industry to make major inroads to reducing global greenhouse emissions - the goal at the heart of any responsible carbon pollution reduction scheme.'

The final decision on the eligibility of industries for free permits is expected to be made next year with the pulp and paper manufacturing industry, the iron and steel industry and plastics, chemicals and glass manufacturing possibly included.

The Chamber of Minerals and Energy WA welcomed the government's emissions targets, but said questions still remain on the impact to business compared to international competitors.

CMEWA chief executive Reg Howard-Smith said the design of the scheme and the rate at which it is implemented is critical if we are to avoid the very real risk of creating economic uncertainty without any net environmental benefit.

"Interim targets in the range of 5-15 per cent of 2000 levels are welcomed, but will be a big ask for industry without new low emissions technologies and a global agreement," he said.

Premier Colin Barnett has praised the federal government for not setting higher targets to cut carbon emissions.

"That is a more moderate introduction," he told journalists in Perth.

"I do still have some concerns about the July 2010 startup that is not very far away.

"However, clearly the prime minister, the federal government, has listened."

Meanwhile the Minerals Council of Australia said it was "profoundly disappointed" with the white paper, adding that the scheme pitched Australia too far out in front of the rest of the world.

"The White Paper would impose the most aggressive emissions trading scheme and interim targets in the world," the council said.

"Under the White Paper an average firm emitting one million tonnes of CO2 per year will bear costs in the order of $100m over four years whereas its European competitor will pay less than $6m.

"In the first three years Australian businesses will have paid up to $30b for permits before a single European competitor has paid a Euro.

"We acknowledge the Government has made a number of improvements since the Green Paper, but we are disappointed that the Government has not adopted a phased approach to the auctioning of permits for the trade exposed sector."

Responses from the housing industry were mixed with the Housing Industry Association saying the government needed to conduct more detailed assessments of the downstream impacts on businesses, investment and employment and the cost of new housing.

The Masters Builders Association gave cautious support, welcoming the $6 billion in household compensation measures and the $1.4 billion small business capital allowance program to assets builders to invest in energy efficient equipments.

Meanwhile, Environment Business Australia said the 5-15 per cent reduction targets were a "soft start"

"Today Australia did not seize the full opportunity to drive deep cuts or build its next competitive edge," the council said.

Straight off the blocks, the scheme will hand more than $4 billion to the coal industry to compensate it for efforts to tackle climate change.

Some households will also receive generous compensation for the scheme, which the government says will push up electricity and gas bills by $6 a week. Electricity prices will rise by 18 per cent and gas prices by 12 per cent.

Pensioners, seniors, carers and people on the dole will get an increase to their payments which are worth more than the cost increases.

Other low-income households will be fully compensated for the costs, partly through a small tax cut.

Middle-income households will also get compensation, which in most cases will fully cover the costs of emissions trading.

The emissions trading scheme will give so much compensation and so many free permits to business that there is little money left over for other measures, such as energy efficiency.

While experts such as climate adviser Ross Garnaut called for some of the revenue to be used to cut emissions, almost all the revenue will be churned back to households and businesses.

The scheme is expected to earn about $12 billion a year; the government has promised all of this will go towards helping Australians adjust.

Of the $12 billion, about $10 billion will go for compensation and free permits. Some $700 million goes for energy efficiency measures.

In terms of how the scheme will work, as expected, petrol will be effectively excluded from the scheme for the first three years, and agriculture for the first five years. Emissions from logging will not be counted.

The government thinks the carbon price will start at $25 a tonne. A price cap will be set for the first five years, starting at $40 a tonne.

Australia will be able to buy carbon permits from overseas.

Emissions trading is expected to cause a spike in inflation of 1.1 per cent.