Call for collaborative approach to ETS

INDUSTRY has welcomed the one-year delay of the start of a national emissions trading scheme (ETS), with the extra time providing companies with some breathing space to better plan for its introduction.

It also gives some companies, particularly those that consider themselves as likely to be significantly affected by the scheme, greater opportunity to lobby the federal government and have some influence over the scheme's design.

Together with the revised start date, the government this month announced major changes to key elements of the scheme.

The emissions reduction targets were adjusted from a range of between 5 per cent and 15 per cent cuts in emissions on 2000 levels by 2020, to between 5 and 25 per cent, the upper range applicable if a global agreement is reached.

The government has also provided a 'global recession buffer', providing extra assistance to the energy intensive trade-exposed (EITE) industries eligible for free permit allocations.

But there is still major concern around some key elements of the scheme.

The classification of what constitutes an EITE company, and what level of assistance they should receive, has been a major source of contention.

In its submission to Senate Select Committee Inquiry on Climate Policy, Woodside called for the allocation of 100 per cent free permits to Australia's trade-exposed industries until competitor countries impose similar costs.

Alcoa manager of environment and sustainable development, Tim McAuliffe, said while the one-year delay was a step in the right direction, there were still significant issues of detail in the design of the scheme that needed to be addressed.

"The issues we have with the current scheme, we think, can be readily resolved. We think they should be done in collaboration with the government and the opposition. So we think it's refining the CPRS not throwing it out and starting again," Mr McAuliffe told WA Business News.

"The issues for us are ensuring there's adequate EITE allocation, that those allocations don't erode ahead of international competitors.

"All EITE should get at least 90 per cent allocation, which should not decay until international competitors reach the comparable price.

"We need to learn to walk before we can run with this. We're going to make mistakes, we're going to find things that didn't work the way we thought, certain provisions might need changing after we've ground-tested them. So the idea of a slow and low start is smart, in our view."

In the absence of a formal ETS, companies such as Alcoa have made significant progress in reducing their carbon emissions.

Globally, the organisation set a target to reduce direct emissions by 25 per cent by 2010 compared to 1990 levels.

That target was achieved in 2003, with the organisation now sitting at about 35 per cent less direct emissions compared to 1990 levels.

The reductions were achieved through a combination of emissions controls and improved energy efficiencies.

Its Australian smelters have reduced their direct emissions per tonne of product by 61 per cent, with WA refineries reducing emissions by 12 per cent per tonne of product.

"These refineries are among the most efficient in the world. Every tonne of alumina we produce here in WA has got less than half the greenhouse footprint of some of our Asian competitors because we're able to fire them on gas, they're relatively modern and we've brought in technologies like co-generation," Mr McAuliffe said.

In preparation for the ETS, the company has developed strategies around trading both in the Australian market and the international market; it's also looking at energy efficiency, fuel mixes and forestry abatement projects.

A spokesman for Wesfarmers said while the company was prepared for the scheme and was on track to meet the 2010 start date, the delay was a constructive step forward in light of the current economic climate.

"A range of companies captured under the scheme might not be in the position, from a business and balance sheet point of view, to meet that criteria," Wesfarmers' Mark Triffit said.

"We've done a lot of work in terms of the impact of the scheme in terms of the carbon price and we have a good idea of how it might impact the business."

The extent of preparedness among the WA business community is mixed, and consultants working in the area say many aren't adequately prepared, even those that will have a direct liability under the scheme.

Scott McIntosh, WA state manager of audit and carbon management advisory business Carbon Planet, said the level of knowledge among business about the scheme was limited.

"We're educating everyone about it at the moment; there's a lot of political spin on the scheme, but no real education on what it means for businesses," he said.

"People are catching up now ... but we're saying you need to act now or at least get the ball rolling because it's happening and it's very real."

Mr McIntosh said companies that were part of a supply chain might not be aware that the effects could flow through to their businesses.

"The requirements on those companies at the top of the supply chain are filtering down to the companies below them, in terms of cost. Everyone who feeds into that chain gets affected," he said.

Daniel Huxtable, environment and sustainability team leader at engineering firm MWH, said the extra 12 months gave affected companies more time to adequately assess the risks and opportunities.

But, he added, business was still left with some uncertainty while the details of the legislation were being finalised.

"It's difficult to know where everyone is at with this, but I'm sure than most parties won't mind having an extra 12 months to get their heads around it," Mr Huxtable said.

"How much is going to have to be modified to make it agreeable for everyone. In other words, what it will look like when it's ultimately passed is really hard to say.

"And that's a problem for business because there's still a fairly wide range of possibilities in terms of what it could mean for business."

WA Sustainable Energy Association chief executive Ray Wills was disappointed with the delay.

"The easiest time to do this is while we're restructuring, while were offering incentives and fiscal stimuluses, to change the way we behave, and the most prudent time to do that is when you're spending the money," he said

"It also delays action, because there's no point in doing anything until it starts because you don't get a return from your carbon concessions before the concessions are available."