WA businesses cool on emissions trading scheme

Western Australian business has not warmed to the federal government's proposed emissions trading scheme, with warnings that the policy could drive billions of dollars of investment offshore.

The concerns have prompted the federal Liberals to warn that the government appears to be rushing into an ill-considered scheme.

Woodside Petroleum chief executive Don Voelte was one of the first to lash out after the government released its green paper on the scheme, saying that more than $60 billion in liquefied natural gas investments were at risk because the scheme penalised exports of clean gas.

"The emissions trading scheme will knock planned projects with relatively high emissions right off the block," he said.

"You can start with Gorgon and Browse and keep going," Mr Voelte said, referring respectively to Chevron's $20 billion LNG proposal on Barrow Island and Woodside's own future project north of Broome.

Mr Voelte said the scheme failed to recognise that Woodside was helping countries like China reduce their use of higher polluting energy sources, such as coal, by selling them natural gas, which is four times cleaner.

Woodside has also recently been hit by a federal budget decision to impose a tax on condensate, and Mr Voelte says an emissions trading scheme will make things worse.

"There are a lot of things on the horizon that possibly won't allow us to invest as vigorously in Australia, if some of these policies and changes to tax and other issues take place," he said.

Trade exposed companies that are emissions intensive will be offered free permits, and coal fired electricity generators will be offered compensation.

Mr Voelte said the $15 billion LNG export industry was unlikely to qualify for any free permits under the government's compensation formula for trade-exposed industries.

Prime Minister Kevin Rudd said the government would be in discussions with business on the details of the scheme during the next six months.

"This is not a cost-free, pain-free solution for the future. It involves some hard decisions," Mr Rudd said.

Federal treasurer Wayne Swan was unwilling to guarantee the continued existence of all LNG projects under the scheme.

"What I can guarantee is we will do the economically responsible thing by Australia, that we will implement our scheme in a measured way and economically responsible way," he said.

Opposition treasury spokesman Malcolm Turnbull said it was unacceptable for businesses such as Woodside to respond to the green paper by September, when the treasury's economic modelling on climate change would not be released until October.

"[Mr Rudd's] rushing it for political purpose, and now we already see he's putting at risk a vital industry," Mr Turnbull said.

"So every time China buys gas from Australia and uses it to replace a coal fired power plant it is doing some good work for the environment."

"So why would you put that industry at risk?" he said.

Premier Alan Carpenter says the scheme will need to be amended to compensate Western Australian trade-exposed businesses and that there was "room for discussion" on some parts of the plan.

Federal opposition resources spokesman David Johnston demanded further concessions for WA.

"What this highlights is the Prime Minister, the Treasurer, the Minister for Climate Change and the Minister for Energy have no concept of the way we do business in WA. These policies have got no WA input at all.

"It's all very well to take the revenue and the tax and the growth out of WA but you can't put those industries at risk," Senator Johnston said.

Details on carbon caps and compensation to energy intensive industries have yet to be set and will not be released by the treasury until October.