30/10/2008 - 15:16

Business concerned over ETS modelling

30/10/2008 - 15:16

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The Chamber of Commerce and Industry WA and the Chamber of Minerals and Energy say the federal government's economic modelling of its proposed emissions trading scheme has confirmed their concerns about the scheme and its impact on the state.

Business concerned over ETS modelling

The Chamber of Commerce and Industry WA and the Chamber of Minerals and Energy say the federal government's economic modelling of its proposed emissions trading scheme has confirmed their concerns about the scheme and its impact on the state.

CCIWA said it will need to closely study the detail of the report, however said it was concerned the global financial crisis had not been taken into account in the modeeling.

"This must be done before the government introduces the scheme," CCIWA executive director, industry policy, Trevor Lovelle said.

"Business urges the Federal Government to re-think its climate change strategy in light of the global financial crisis which is undermining business and consumer confidence, and threatening economic growth not only in Australia, but across the world."

The report revealed that the ETS, or Carbon Pollution Reduction Scheme, will erode the international competitiveness of some of Australia's emissions-intensive trade-exposed industries.

CCIWA said this is likely to include some of WA's major resources industries which are the bedrock of the state's economy.

Treasury finds "Australia is likely to lose competitiveness where its production is more emission intensive than its competitors..." and Western Australia will "face the greatest impacts from emission pricing", CCIWA said in its statement.

"These predictions are of concern to WA's major industry sectors, and may deter business investment and economic growth in the country's best performing economy," Mr Lovelle said.

Meanwhile CME chief executive Reg Howard-Smith said the modeling is too optimistic.

"The use of optimistic assumptions will tend to underestimate the impact on the broader Australian economy, as well as on specific sectors such as the resources industry," Mr Howard-Smith said.

"Many of our member companies are involved in both emissions intensive and trade exposed industries and, are consequently concerned by the Report's claim that there is little evidence of any risk of investment moving offshore.

"If Australia becomes too expensive for energy, then companies may make decisions to move processing offshore."

Earlier today both Treasurer Wayne Swan and Climate Change Minister Penny Wong said early action to tackle climate change will reduce gross national product by just a tenth of a per cent a year, with the economy continuing to grow strongly.

The modelling indicated that economies which acted early would face 15 per cent lower long-term costs.

"The earlier Australia acts, the cheaper the cost of action. The longer we delay, the more damage we risk to the Australian economy," they said in a joint statement.

"Many of Australia's key industries will become more, not less, competitive.

"The report also finds that average annual GNP growth will only be one tenth of one per cent less than it would be in a world without action to tackle climate change."

But delaying action, and then playing catch-up, would deliver a sharper shock to the economy in the years ahead.

"Putting in place the necessary economic reforms through the Carbon Pollution Reduction Scheme will also allow Australia to capitalise on emerging opportunities and gain a competitive advantage," they said.

"The report contains the most complex, comprehensive and rigorous analysis of its kind ever undertaken in Australia."

Meanwhile, under the ETS, households will pay $4-5 a week more on electricity and $2 a week more on gas.

As a result, Mr Swan said there will be a one-off inflation rise of around 1 to 1.5 per cent.

The modelling also showed that the costs of the ETS would not be high enough to make heavily exposed industries to leave Australia.

 

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