07/05/2009 - 00:00

Carbon trading outcome uncertain

07/05/2009 - 00:00

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Kevin Rudd’s backflip highlights the divide on the emissions trading scheme.

Carbon trading outcome uncertain

THE federal government's announcement this week that it would modify its proposed emissions trading scheme and defer its introduction by one year has had some surprising consequences.

The immediate lesson to be drawn from this decision is that the Rudd government is prepared to change just about anything.

The introduction of an emissions trading scheme was a key plank in its policy platform at the last election, yet its introduction has now been deferred until 2011.

The prime minister has attempted to retain some conviction on the issue, announcing an increase in the targeted emissions reduction to 25 per cent of 2000 levels by the year 2020 - but only in the unlikely event that the rest of the world agrees to ambitious targets later this year when leaders meet in Copenhagen.

Without a global deal, Australia's commitment is to achieve a five per cent reduction, which may be more palatable for business but hardly warrants the bold rhetoric we heard in the lead-up to the last election.

The government's decision prompted two very different reactions from the business community.

National business groups criticized the lack of certainty; Western Australian business groups welcomed the delay and called for more change.

Business Council president Greg Gailey typified the first response.

"In the interests of business certainty, the BCA calls on the Senate to pass the legislation this year to establish an (ETS), including the package of measures announced," Mr Gailey said.

Shell Australia chairman Russell Caplan echoed this concern in a speech delivered earlier this week.

"A critical part of consistent leadership is in government setting clear rules within which markets then operate," he said.

He acknowledged the debate over Australia's proposed carbon pollution reduction scheme was fierce and complicated by economic turmoil.

"Resolving this policy debate is essential and it is urgent. If the CPRS legislation is not enacted now, it is in my view inevitable, that it will come back in some form.

"In the intervening period, we will have left open an important question, adding to the uncertainties that threaten to undermine the investments needed in energy supply.

"So, while there are important issues still to be resolved in the CPRS, notably how we manage the competitive disadvantage of applying a carbon price in Australia before our trading partners, I believe it is important that we do resolve them, and that our representatives pass this legislation."

Chamber of Commerce and Industry of WA chief executive James Pearson welcomed the delay, saying it would give business more time to prepare.

"Delaying the start of the proposed scheme by one year will assist business and industry hit hard by the global economic slowdown, by giving them time to plan for the scheme's introduction, developing the necessary systems for reporting and compliance, and integrating them into existing business operations," Mr Pearson said.

He emphasised the importance of getting the scheme right, saying the carbon trading scheme was one of the most significant policy decisions in modern history.

Chamber of Minerals and Energy WA chief executive Reg Howard-Smith welcomed the proposed changes but advocated further changes before legislation is passed.

The CME believes Australia should not adopt a carbon trading scheme until there is a global commitment from all major emitters.

It wants the Australian scheme aligned with an international response to ensure cost burdens are comparable with competitors and wants to see significant progress in the development and deployment of low emissions technology.

That would be an ideal outcome for industry in Western Australia but is highly unlikely.

The federal government has pledged to take a leadership role on emissions trading and Australia's status as a wealthy nation gives it more capacity than most countries to do so.

Doing so in a way that provides certainty and equity across different industries will be the big challenge.

 

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