More criticism as feds delay emissions plan

A FRESH attack on the Rudd government’s proposed emissions trading scheme has added weight to calls for the existing proposal to be scrapped and redrawn.

Independent public policy think-tank, The Grattan Institute, said the government’s proposed industry assistance package for big carbon emitters, including gas and coal producers, would be a “$20 billion waste of taxpayers’ money”.

The institute’s criticism came just four days before the prime minister confirmed the government would defer implementation of its Carbon Pollution Reduction Scheme at least until late 2012, and that no funding would be allocated in this year’s budget.

Mr Rudd blamed the decision on the opposition’s blocking of the scheme in the Senate, and the slow progress by other major governments in formulating a response to climate change.

He said that, by the time the current Kyoto agreement expired in 2012, the government would be in a better position to assess the direction of global action on climate change.

Handing down its own report on the impact of a carbon reduction scheme on the Australian economy, the Grattan Institute said assistance in the form of free carbon permits would be counter productive and would delay the structural changes needed to move to a lower carbon economy.

“Rather than being ‘free’, the industry assistance will be very expensive,” institute chief executive John Daley said. “Its one-size-fits-all approach is counter-productive. Fears about large-scale job losses or cost increases are not supported by the evidence and have led to irrational and costly policy.”

Critically, the institute said putting a price on carbon would have only a minor impact on most of the economy, with the direct impact on costs and competitiveness likely to be far smaller than other factors such as exchange rates, labour costs and fuel prices.

It also said implementing a carbon price would require far less structural adjustment compared to the major reforms of recent decades, such as reducing tariff protection.

The study found that if carbon was priced at $35 a tonne, the level used in Treasury modelling, key industries such as liquefied natural gas production, alumina refining and coal mining would be less profitable but still internationally competitive without free permits.

The only industries that should receive such permits should be those likely to quit Australia for locations where they would not been required to reduce carbon emissions, such as the steel and cement industries.

Controversially, ‘targeted assistance’ should be provided directly to workers and communities reliant on other high-emissions industries likely to fold in Australia, such as oil refining and aluminium smelting.

“These industries may well be forced offshore by carbon pricing, but they are likely to move to locations where they will emit substantially less greenhouse gases,” the report said. “The very purpose of carbon pricing is to promote this result.

“Consequently, we find that concerns about industry competitiveness are misplaced, and no reason to delay introducing a carbon price.”