United Nations Environment Programme Emissions Gap Report estimates that even
pledges made on a strictly conditional basis by developed and developing
countries are just 60 per cent of what is needed by 2020 to keep the world onto
a trajectory that will keep global temperature rises to less than 2ºC in
comparison to pre-industrial levels.
The International Energy Agency concurs, stating that the 2ºC goal will only be
achievable with a dramatic scaling up of effort.
Coalition members of the inquiry don’t seek
to present a pessimistic outlook of global commitments, just a realistic one
that allows Australia to make policy decisions with our eyes open rather than
through distorted or rose-coloured glasses.
What policies are other countries pursuing?
Not only are many other countries not making the commitments
needed to reduce emissions, they are not pursuing policies at all comparable to
the carbon tax being advocated and advanced by the Labor Government in
Australia. Even supporters of the carbon tax, such as the Climate Institute,
acknowledge that action is not keeping pace with promises:
I think we would be the first people to acknowledge that the
level of global action at the moment is insufficient to meet the temperature
goals that countries have committed to internationally.
The impact of this was highlighted by, amongst many others,
The current CEF package exposes Australian businesses to some
of the highest carbon costs in the world, placing them at a significant
competitive disadvantage and generates a level of uncertainty that will
discourage ongoing investment in Australia. 
The World Bank report, State and Trends of the Carbon
Market 2011, provides a useful snapshot of what action is or is not being
pursued around the globe. The following points attempt to summarise some of
its key findings, along with evidence from the Brookings Institute and
information published by the Minerals Council:
has tied itself to the emissions reductions commitments and actions of the
United States. Emissions trading is off the table at the federal level, in
favour of sectoral action such as new fuel standards and new regulations on
coal-fired electricity generation.
introduced legislation to the Diet in March 2010 that included consideration of
an ETS component. Discussion on this component was deferred in late 2010
following strong opposition from industry and significant concerns about the
cost to their economy. This deferral occurred before Japan faced the shock
of this year's earthquake, tsunami and associated nuclear safety issues, which
have created even more policy uncertainty.
States has seen Congress reject various moves towards national cap and trade
schemes on four occasions in seven years and this year has seen Congress move
to suspend Environmental Protection Agency powers to regulate emissions under
the Clean Air Act. At the regional level the ETS planned within the so-called
Western Climate Initiative is now in doubt among proposed participants like
Arizona, Utah, New Mexico, Washington and Montana. Only a handful of states or
provinces may participate in its planned 2012 start-up.
in its latest five year plan sets an emissions intensity reduction target
against GDP of 17 per cent. This is consistent with their targets announced at
Copenhagen which, according to analysis undertaken for the Brookings
Institution and Harvard University will see China's actual emissions rise by
496 per cent by 2020, based on 1990 levels. The International Energy Agency
projects China will still build new coal-fired generation capacity of 600GW by
submitted a voluntary target under the Copenhagen Accord of reducing emissions
intensity against GDP by between 20 and 25 per cent by 2020, based on 2005
levels. The same Brookings / Harvard research suggests this amounts to an
emissions rise of 350 per cent based on 1990 levels, while separate analyses
have concluded that this pledge is actually above India's existing business as
usual emissions projections.
made an 'offer' under the Copenhagen Accord to cut emissions by 2020 by between
15 and 25 per cent against 1990 levels. However, reports by the Institute
for 21st Century Energy that in 2005 Russia's emissions were about
45 per cent below their 1990 levels and this generous 'offer' will actually see
a rise on 2005 levels of 26 to 43 per cent by 2020.
Then there's the oft cited European Union
(EU) who are preparing to move into the third phase of their ETS. The
different phases of their ETS are instructive as to why claiming it as an
example of what Labor proposes for Australia is misleading.
The early phases were the epitome of the
old adage about starting low and going slow. Even in the second phase, now
nearing its end, only around three per cent of permits were auctioned, with few
industries targeted. As the Minerals Council of Australia has reported,
over the first five years of operation the EU ETS raised about $500 million per
annum. The tax proposed for Australia will raise closer to $9 billion. That's
an impost 18 times more on an economy one-thirteenth the size.
Even in the planned third phase, the EU has
kept a far sharper eye on minimising carbon leakage and the concomitant loss of
jobs and industry than the Gillard Government has done with the proposed carbon
tax. Industrial sectors deemed at significant risk of relocating
production outside of the EU because of their carbon price will receive 100 per
cent of permits for free, based on an efficiency benchmark.
These facts in relation to the differences between Labor’s
proposals for Australia and the EU scheme were highlighted by numerous
submissions and witnesses to the inquiry:
… it is important to acknowledge that the rate of auctioning
under this scheme … is higher than it was at the start of most other emission
trading systems, including the EU scheme.
At $23/t the CEF imposes on Australians a price that is at
least 50% higher than the price being paid by Europeans 
… if we net out those permits. It is $50 billion in the first
6½ years for Australia and $4.9 billion for the European Union, so there is 10
times more revenue out of the Australian scheme than out of the European
Senator BIRMINGHAM: are you able to tell us what approach the
EU has taken to the lime industry?
Mrs DeGaris: we have not seen extensive trading and we have
not seen the extensiveness or the coverage, for example, that this scheme is
proposing for the industry here.
Senator BIRMINGHAM: You say that the fixed price is very high
by global standards.
Mrs DeGaris: That is right—it is $23 a tonne versus $15 or
$16 a tonne that we can buy today.
Senator BIRMINGHAM: There is a floor-price mechanism built
into this scheme as well. You have concerns about that?
Mrs DeGaris: Yes, certainly. That is another opportunity to
keep the price high, to cost Australia for liability purposes a higher price on
carbon credits, carbon units.
Mr Pearson of the Minerals Council gave a detailed statement
outlining the differences in the scale of the schemes between that proposed for
Australia and the vastly different schemes operating in the EU or New Zealand,
ultimately highlighting costs to business five times greater in Australia:
Mr Pearson: the minerals sector opposes the passage of the
Clean Energy Future legislation. The first of the two questions I want to talk
about is the fact that, on all measures, the proposed legislation will put
forward the world's biggest carbon tax. The carbon price will be the highest.
It will be $23. That is 50 per cent higher than the EU price, 2½ times the New
Zealand price and nearly 12 times the price that applies in the Regional
Greenhouse Gas Initiative emissions trading scheme that operates in the
north-east of the United States. The tax take per capita will be the world's
highest. The tax take will be many, many times higher per capita than it has
been in the European Union in the six years of the tax's operation to date and
than it will be as we look forward.
The transition period for industry to adjust will be the
world's shortest. In the European Union, an industrial firm will not buy all of
its permits until 2027. In Australia, there will be hundreds of industrial
firms, including in our sector, which will buy all of their permits from day
one. So there is a 25-year transition for a European industrial firm and no
transition for an Australian industrial firm. The level of assistance to
trade-exposed industry will be the weakest in the world. Seventy-five per cent
of European merchandise exports will be covered by free permits after they
start auctioning permits in 2013. About 20 per cent of Australian exports will
be exported by firms that will receive assistance.
The safeguards for jobs in the manufacturing sector and
mining sector will be far inferior to those in the EU. There are 14.6 million
Europeans working in manufacturing jobs that will receive free permits after
2013. Here, nine per cent of manufacturing jobs are in firms that will receive
assistance under the Jobs and Competitiveness Program under this scheme. The
cost burden on Australian exporting and importing competing industries will be
the harshest in the world.
Think of an average firm, and you can call it Joint Select
Committee Pty Ltd, operating with an identical emissions profile in Australia
and in Europe of one million tonnes of CO2 per year. In the first three years
of this scheme the Australian firm will pay $72 million. It is receiving no
assistance. As we have said before, very few Australian firms will. So there is
a $72 million burden for the Australian firm. The very same industrial firm in
the EU, receiving no free permits because of its trade exposure, will pay A$14
Witnesses also highlighted concerns about the veracity of
claims of action in some of the major emitting countries being made by the
government and others:
It had been suggested that the Chinese were putting a price
on carbon, but on closer analysis when the Productivity Commission looked at it
they said, 'That price is quite low. It is lower than the price that we have
here in Australia and it is not envisaged to go very much higher.'
India does have a price on coal, whether it is imported or
domestic, of about $2 per tonne. That is not very much different from the price
we have on coal, which we call a royalty in New South Wales and in Victoria. It
is a revenue price; it is not a price that would have any effect in terms of
the operation of switching between fuels.
There is some new information that was provided by the Energy
Information Administration, which is the US energy research body, in its International
energy outlook on 19 September. In that report it projected that China's
2020 target that it agreed to in Copenhagen and Cancun is actually higher than
'business as usual' emissions. In other words, according to the projections
from the US Energy Information Administration, China's emissions target in
Cancun is actually higher than its emissions will be if it does nothing. In
2009 China's increase in emissions, 780 million tonnes, was more than
Australia's total emissions. China's increase in coal consumption in 2009 was
more than Australia's total coal production. In other projections, 75 per cent
of the increase in world coal production to 2035 will occur in China.
The US is abandoning its efforts at the federal level and
individual states are pulling out of previously announced emission reduction
commitments. The Productivity Commission, in its research that assessed
overseas emission policies, reported that of the 11 US States and Canadian
Provinces that had agreed to a carbon tax, only one remains fully committed. 
…China is not moving towards emission restraints, in spite of
its leaders proclaiming they will show global leadership on the matter – wind
and solar comprises less than one per cent of electricity supply. Japan stated
at Cancun that it was not going to take further action towards promoting
renewables and it would not introduce a carbon tax. 
The Institute of Public Affairs joined with other submitters
and witnesses in arguing that a tax or trading scheme in emissions may work in
the event of relatively uniform global action but the very absence of such
uniformity is a key factor in creating the problems they predict from the tax:
Mr Moran: If the whole world said, 'Bang! We are going to
have a carbon tax of $23 or whatever it is going to be and it is going to be on
all countries,' there would be no or far less need for that sort of action.
There would still be some issues. There are two matters. One is how we compete
with the rest of the world, which is the nub of your question. We have to have
a level playing field. The other is that people would have made investments
based on certain assumptions of government and, if the government changes those
assumptions, it could reduce the value of those investments and they may well
request and receive compensation. That goes to the question: where are the
property rights there? What would have been expected? What is reasonable? Is
not clear, usually.
Senator BIRMINGHAM: So this type of pricing mechanism works,
say, in the perfect economists' model, where you can create a nice vacuum and
put all other issues to one side and everyone acts in unison, but does it work
in the real-world situation we confront today?
Mr Moran: No. Obviously the government does not think it does
either, because it does not have a perfect price mechanism; it has various
industries in, various industries out, compensation here and compensation
there. Essentially, there is a recognition on the part of the government that
the perfect solution is not the carbon price. Indeed, it has its carbon price
and all the other accoutrements of the 20 per cent renewables and various
subsidies in place. With a pure carbon price you would say, 'There is a carbon
price. Get rid of the rest of it and let's go on from now.' I do not see anybody
in government saying that.
Senator CORMANN: Isn't the problem that what we are told this
whole carbon pricing package is supposed to address is for Australia to help
reduce global greenhouse gas emissions but we are operating as part of a global
market? The problem we are trying to address is a global problem. Because
putting a price on carbon outside of an appropriately comprehensive global
framework of pricing emissions does have international competitiveness
implications, as well as creating various other distortions, the problem,
really, is that we are trying to address a global problem through a domestic
policy without being able to influence what happens in other parts of the
world. Is that a fair comment?
Mr Moran: Yes, it is. It is almost like just putting a carbon
tax in place in New South Wales and not the rest of Australia. You would see
the industries migrating away from New South Wales to the rest of Australia.
That is the same situation as what you are suggesting, I think.
Senator CORMANN: This is the last point I will have time to
make. If there was an appropriately comprehensive global agreement, then
addressing a global challenge through a global market based mechanism would be
an effective way of going about it. The reason this is not effective is that
the proposal is for Australia to act outside an appropriately comprehensive
global carbon pricing framework. Is that right?
Mr Moran: That is right. There is no global carbon pricing
framework; there is no policeman set up to do it; there is no way in which it
can be done. It is basically goodwill and, indeed, it means Australia is
certainly moving ahead of all its competitors and relying on the fact that they
will come in behind us—which, if they do, it is well and good but, if they do
not, it will destroy huge segments of our industry.
Again, many of the thousands of unpublished submissions
received by the inquiry highlighted the significant differences between the tax
proposed for Australia and schemes operating elsewhere in the world, as well
the impact of such disparities:
To impose another tax on the Australian people, to attempt to
change the world, without other countries doing the same is to ruin our economy
completely. It will be helping world companies making billions out of the
schemes governments have put in place saying they will curb global warming. It
will be exporting carbon dioxide emissions to other countries such as China
with no effect on the amount of carbon dioxide entering the atmosphere at all,
as instead of buying Australian coal, they will use their own inferior product
with greater effect on the amount of emissions.
I am currently based in Jakarta, Indonesia, and the people
here (and around Asia) are laughing at our futile attempts at saving the world,
and eagerly look forward to receiving all the business that will leave
I also believe that there is no need to introduce such a tax
especially since the major emitters of carbon dioxide in the world, namely
China and the USA have stated that they have no intention of introducing
similar legislation in the near or medium future.
This legislation will place an unfair burden on our economy
and make us less competitive in the world market and have a negative effect on
our economy. It will increase inflation, increase unemployment and increase the
cost of living. This will adversely affect all Australians but especially those
who are in the lower socio-economic groupings.
If in the future America, China and India imposed the same
legislation, it could be reconsidered , but for our country to impose this
penalty at this time is sheer LUNACY..
How can we as a Nation continue to remain strong and self
sufficient when we are forced to disadvantage ourselves in favour of other
Nations who do not have this tax and to whom we must pay so much ?
High emitting industries will not cease production but merely
transfer to other countries that do not require an equivalent tax or level of
tax on carbon dioxide. Therefore a unilateral tax will have minimal effect on
world pollution but will drive Australian manufacturing jobs off shore to other
People were not happy about the GST but they accepted it
because John Howard had been upfront about his intentions. The introduction of
a carbon tax is not so urgent that it cannot wait until the next election given
the rest of the world is not coming on board any time soon. In fact the carbon
tax should be delayed until such time as America, China, India and the European
union adopt a similar scheme. Why should we be putting ourselves at a
competitive disadvantage by going it alone. I cannot see the logic in that.
My family and I - and everyone we know - are convinced that
any introduction of this form of Tax must be put on the back-burner until the
majority of all other countries, particularly those who emit the greatest
levels of carbon dioxide emission - have joined a world-wide agreement for all
countries to adopt a form of taxation that is applied in all countries.
Other nations, such as the USA, China and India are already
moving on this issue and we risk getting left behind. But that’s not
true, is it? The fact is that emissions trading is dead in the USA at a
national level and only a very few states have schemes. China may be
investing in renewables but the large bulk of its power will come from
coal-fired power for the foreseeable future. The PM is fond of pointing out
that China is closing a coal-fired power station at the rate of one per week.
What she fails to mention is that these are small inefficient plants (producing
real carbon pollution – see above) and that they are being replaced by larger
Models based on false assumptions
Despite all of the aforementioned evidence that brings into
doubt the extent of global commitments to reducing emissions and the actions
being undertaken to do so, the Gillard Labor Government has claimed to have
undertaken Treasury modelling for scenarios in which the world took uniform
action to achieve either a 550ppm stabilisation target or an even more
optimistic 450ppm target.
The Treasury confirmed their optimism, both as to the extent
of the pledges made and the current action to implement them, stating ‘we have
taken the Cancun and Copenhagen pledges as something that governments will be
going on to state:
What we have done in terms of the modelling assumptions for
international action is use the Cancun pledges and operationalise them in our
modelling. That is what we have done, but that does require that countries live
up to those pledges.
Although this was tempered by some caveats:
Mr TONY SMITH: So, just to be clear: firstly, you are
confident that the reductions you predict or assume in the modelling could be
achieved, would be achieved, by the US by alternative means if they did not
have an ETS in place?
Dr Gruen: We are doing the best we can do, based on the
information available now. What will actually happen in the world remains to be
seen, so I am not going to make statements about what will happen. I am happy
to make statements about what are reasonable assumptions to make, given what we
DCCEE at least conceded that in places the implementation
looks unlikely, especially through measures comparable to the one being
proposed for Australia:
If you come to the US in particular, their Cancun pledge was
for a 17 per cent reduction by 2020. It is true that there are few people in
the US at the moment that think they will achieve that through an economy-wide
Others seriously doubt the basis for the assumptions:
Senator BIRMINGHAM: The Treasury has made all of its
assumptions on the basis that the world will work towards a 550 parts per
million stabilisation target, as it is known. Do you see evidence that the
world is on track to achieve that?
Dr Moran: No, I do not see any evidence. Indeed, there is no
country other than in the EU which is taking action to get anything close to
that. There is certainly no country, other than in the EU, that has gone even
as far as Australia has with its 20 per cent renewables.
When looking at the detail of the modelling undertaken and
challenged by Senator Cormann that the 2008 Treasury modelling assumed that
Chinese emissions would be 16.1 billion tonnes of CO2 by 2020 compared with
updated modelling projecting that Chinese emissions will be 17.9 billion tonnes
of CO2 by 2020
the Treasury confirmed that:
expectations of Chinese development have improved relative to
the situation in 2008. We have raised the level of output in China, taking on
board the recent information …our expectation is that, if people meet the
Cancun Agreements, overall emissions in the world, which is what is important
for tackling climate change, would be broadly consistent with the 550 parts per
million trajectory, assuming people take action beyond 2020.
Coalition members of the inquiry query how it is that
Treasury, within the space of a couple of years, dramatically scales up the
anticipated 2020 emissions for the world’s largest emitter, but simply assumes
sufficient additional abatement action will occur beyond 2020 to offset that.
Other witnesses also noted and questioned changes from earlier models of
Treasury estimates of the costs we will incur have actually
been reduced quite considerably over the past three years in their modelling.
They are about half of what they originally suggested: $2,700 per person per
year and, in 2052, cumulative costs of about $40,000, five per cent of GDP et
cetera. I think we have to be very careful about the modelling. It has got a
lot of assumptions, some of which are rather heroic. Several of them, for a
start, involve all countries imposing a similar regime to that of Australia. We
know at the present time that that is not taking place. Only the EU has similar
regimes envisaged, or at least legislated for. Secondly, it does involve also rapid
technological development in carbon capture and storage and other renewable
technologies, and there really is not any evidence that this is happening
anyway. Thirdly, it does entail a continued expansion of coal exports, which is
difficult to envisage given the abatement regimes worldwide are intended
basically to kill off coal. Certainly it would not be possible unless there
were massive breakthroughs in carbon capture and storage, and, of course, there
are not any such facilities anywhere in the world.
A particular concern emerges regarding the assumptions of
international action made beyond 2020, with Treasury appearing to confirm that
their modelling is based on countries making the same emissions reductions as
they assume Australia will over that period, namely an 80 per cent reduction
against the baseline:
You are talking about a 550 parts per million scenario. To
2020 we have modelled the pledges that countries have put on the table through
the international negotiations. After that we have looked at a scheme where
countries make the same emission reductions as each other relative to their
'business as usual' path. So the analysis is that OPEC would reduce its
emissions relative to its business as usual path by the same amount as
Nonetheless, Coalition Senators welcome confirmation from
DCCEE that the carbon tax proposed for Australia is at least five times greater
in its initial impact than was the EU ETS, while querying the rationale for the
complete dismissal that a “pilot phase” might have been a relevant comparison
to make against the initial phase of Australia’s carbon tax:
If you were to try to do a comparison of the equivalent
market size over the same period—the three years in the EU scheme of
2013-15—and the Clean Energy Future package, the number for the EU ETS would be
around 145 billion and the number for the Clean Energy Future package would be
around 27 billion—if you were actually doing a like-for-like comparison. You
would have the EU scheme being more than five times the size of the Australian
scheme in the overall permit allocation on a like-for-like basis. I think the
reason that these claims are a little unusual is that they are making
comparisons of the first phase of the EU scheme, which was explicitly a pilot
As well as concerns about the basis on which the Treasury
modelling has been developed, numerous parties expressed concerns about access
to the models:
The Treasury modelling as such has not been released in any
detail, so people cannot examine it in the forensic way that he would like to.
Certainly in my own examination of where they state their assumptions they all
seemed to be very circular to me. The assumption is that we will continue
growing as an economy. The finding is that we will continue growing because
they assume we will. I think we have to be very careful in looking at models of
that nature and drawing conclusions from them.
We are also concerned, and this is one of the reasons that
have delayed us somewhat in trying to put forward a response as to how we think
the industry will be affected by the government's proposition, that Treasury
modelling to a large extent is not transparent. That has made it somewhat more
At the very least, Coalition members would have thought a
sense of prudence and caution would have necessitated taking the approach
advocated by the Australian Industry Greenhouse Network, who stated that the
… provides very little insight into the likely economic
impacts on Australia. None of the scenarios modelled by Treasury address one of
the most likely international outcomes — that being the Government’s commitment
to a -5% below 2000 emission unit budget by 2020 within a fragmented
international agreement. The short to medium term economic costs are not
measured by Treasury modelling and the environmental benefits remain very
uncertain in the absence of a robust international agreement. 
4. Emissions keep going up
A giant outsourcing project
The fact of the matter is that this policy does not
guarantee a reduction in emissions, particularly within our domestic market
within Australia. Even globally the combination of the growth in emissions
within key countries, as addressed in section 3, and the potential for carbon
leakage, addressed briefly in this section and again across sections 8 and 9,
means that Australia’s activities provide no guarantees of reductions.
Within Australia the Treasury modelling, with its optimistic
assumptions of the extent of international action, makes it clear that in the
period to 2020, even with the carbon tax in place, Australia’s emissions still
rise not just against the baseline year of 2000, but even go up 43 million
tonnes against Australia’s level of emissions in 2010.
This point was highlighted in a number of submissions:
Australia‘s CO2 emissions were 578 million tonnes in 2010 and
with the measures in place are expected to be 621 million tonnes in 2020. 
By 2050, even with the passage of nearly 40 years and with
the carbon price having reached $131 per tonne, emissions in Australia will
have dropped just 32 tonnes.
Again, this point was highlighted in submissions:
Even in 2050, with all the optimistic assumptions about new
technologies, industry restructuring and a carbon tax of $131 Australian emissions
are forecast to be 545 million tonnes … the modelling assumes that half
Australia‘s emission reductions will be purchased from other countries (largely
Asia and Russia). This involves Australia paying countries to abate their own
emissions. It also entails the overseas sources being able to abate more
cheaply, something that, 40 years hence, it is inconceivable we could know. 
Under Treasury’s modelled prices of $29 in 2020 and $131 in
which they argue will be comparable to the international prices, Australian
businesses will not only be paying multi-billion dollar bills to the Australian
Government for permits, but will also be spending billions overseas to purchase
Assuming Treasury‘s price estimates are accurate, Australia
will be paying overseas carbon dioxide credit suppliers annual sums that range
from just under $3 billion in 2020 to $57 billion in 2050. These are massive
sums – the 2050 bill is greater than the value of our current exports from coal
and more than twice the value of all our current agricultural exports. 
Some witnesses argued this structure of outsourcing our
emissions responsibilities, often to our trading competitors such as the BRIC
countries (Brazil, Russia, India and China), constituted a loss of opportunity
to Australia and an abrogation of responsibility by Australia:
We find it paradoxical, and disadvantageous from the point of
view of Australia’s international competitiveness, that the proposed Carbon
Pricing Mechanism will apply penalties (either directly through permits, or
indirectly, through increased electricity and gas prices) to Australian
businesses, whilst their competitors in the BRIC economies are paid to reduce
their emissions. 
The tax will do nothing to reduce greenhouse emissions as we
will be buying credits from other nations who have applied changes to their
economy that actually cut emissions. I am not saying that Australia should not
be doing something to reduce emissions but taxing citizens so we can buy
credits from other countries is short sighted and does nothing to make a real
reduction in emissions.
… will paying a third party (particularly an overseas entity)
to obtain a piece of paper granting 'carbon credits', in practical terms,
achieve any real improvement to the environment. To me, a slip of paper does
not in any way alleviate or remove any responsibility to make a physical and
actual effort to manage the environment. In addition to being obliged to pay to
obtain this slip of paper, the only real affect of proposed carbon tax will be
to add to the cost of nearly every commodity which, as we ought to all be
aware, will be passed down to nearly every consumer.
Globally, submitters such as the National Lime Association
highlighted how the leakage of emissions from Australia to other countries
could harm the capacity to reduce emissions overall, not just those in
Failure of the assistance package to protect EITE industry
until an international “level playing field” is established will result in
carbon leakage, and failure of the environmental objective to reduce global GHG
and avoid climate change impacts. 
Exigency provided an example of how this may occur,
highlighting along the way the nonsense of government claims that this package
doesn’t involve payments to so-called polluters:
When we look at the clean energy policy, the whole point is
that it pays polluters to reduce their emissions. The only difference is that
those payments go to the developing nations overseas. Let me illustrate that
with an example. I take a tonne of coal and I export that to China—I am not
picking on China; it just happens to be a clever country. The emissions
contained in that tonne of coal are free of carbon pricing. That tonne of coal
is used to burn in a kiln to produce cement. That cement comes back to
Australia in the form of railway sleepers to connect the new mines to the
ports—again, free of a carbon price. So that has tilted the playing field
against our own manufacturing base. Now, just to finish that picture, under the
clean development mechanism, we pay the cement manufacturer an incentive payment
to reduce the emissions from his overseas operation. The idea that an
Australian focused policy pays polluters and, by inference, this carbon package
does not is absolutely untrue.
Mr Allinson went on to argue that once a country starts
outsourcing its emissions reductions through the purchasing of international
permits there is ongoing pressure for it to continue doing so:
The real challenge for a penalty policy is: after the game
starts, the lobbying does not stop. One of the key lobbying features that we
see in Europe and that we will see here is that, once the permits are
allocated, there will be continued lobbying to issue more permits because, as
long as you have an open system with international credits, you can keep on
issuing permits as long as you balance your national accounts with an equal
number of offsetting international credits. So under this policy the federal
government becomes the buyer of international credits of last resort. You
cannot eliminate that risk and you cannot eliminate the rent seeking once we
get the green light to go—I am sorry, but it continues under a penalty scheme.
Of the thousands of comments received by the inquiry, many
questioned the impact of this approach on Australia, while others queried how
Australia would afford to send such large sums overseas in the future:
Secondly, there is the purchase of abatement certificates.
These are supposed to be purchased from ‘overseas’. Exactly where overseas and
how is not clear. Quite apart from the potential for rorting, a simple view of
this proposal is that it will cost this country dearly as we condemn future
generations to transfer our sovereign wealth “overseas”. If our industries have
moved “overseas” and we have only limited and unreliable access to power from
environmentally friendly wind and sun, how will we, as a nation, be able to pay
The Money to buy Credits will be money sent overseas.
Australia cops a net Debit from this Carbon Tax concept. The Australian
Government should be looking at ways for Australia to get Net Credits only form
any decisions made. Consider concepts that generate Australia Value Add
opportunities and Net Credits only from decisions at the National and
Credibility of international market
For this approach of relying greatly on
international permits to work it requires the existence of reliable and
effective permits. With the Treasury assumptions of agreed global action such
markets may well exist, but given current trends in the international carbon
market and the reality of international commitments and action there is cause
for genuine concerns about the reliability of credible international permits
into the future.
The World Bank report 'State and Trends
of the Carbon Market 2011' found that the total value of the global carbon
market stalled in 2010. The value of the primary Clean Development
Mechanism market fell by double digits for the third year in a row, ending
lower than it was in 2005, the first year of the Kyoto Protocol period. Overall,
the share of the global carbon market primarily driven by the European Union's
Emissions Trading Scheme rose to 97 per cent in 2010, dwarfing all other
Exigency made the point that, as is proposed in Australia,
the EU has effectively outsourced its emissions reductions:
I am talking in terms of volume and environmental
effectiveness. In the amount of paper that is traded, Europe is by far the
vastest: there is $150 billion of permits traded in Europe every year. What we
need to think about in terms of scale, though, is its environmental
effectiveness. The European scheme is only environmentally effective because it
has fundamentally outsourced its abatement activities to the clean development
DCCEE acknowledged the reality of the
diminishing global markets, while suggesting it was caused by international
uncertainty which, as discussed in section 3, appears unlikely to end anytime
I think the other thing that is very important to note about
the CDM is the supply has slowed down largely in response to uncertainty about
the international regime post 2012 but also in terms of which markets are
likely accept CDMs.
There is effectively only a European rather
than a ‘global’ market, and even it has its problems, with the theft in January
this year of €45 million of EU allowances leading to the closure of national
carbon registries. In March of last year Hungary was caught out selling
Certified Emissions Reductions that had already been surrendered under the EU
The same World Bank Report, under the
heading "The Carbon Market in Crisis?" summed up the woes of the
various mechanisms that comprise the global carbon market:
“The Clean Development Mechanism continues
to suffer from registration and issuance delays due to complex procedures and
capacity constraints. The Joint Implementation mechanism continues to be
challenged by inefficient domestic bureaucracy and varying political
support. There have been sovereign suspensions under the Kyoto Protocol
and alleged misappropriation of Assigned Amount Unit sale revenues. The
EU-ETS has suffered from alleged VAT fraud, money laundering and theft leading
to registry suspensions and a dramatic loss of confidence and liquidity on the
Other witnesses also highlighted the questionable status of
the global carbon markets:
… purchasing emissions from overseas, at quite a considerable
total cost, equivalent to something like twice the present value of our exports
of food and something like the total cost of our current exports of coal. So it
is a large balance of payments, a large impost—a gift, if you like, to the
overseas suppliers of these credits, for some of whom their source integrity is
Even supporters of the carbon tax acknowledged these problems:
… there have been some unfortunate and very specific examples
where there have been problems with the development of the global market …
To avoid the problems that have beset the market elsewhere,
especially given the vast sums of money involved, the committee heard the
system would require extensive policing:
Verification would require a comprehensive policing to ensure
payment is for genuine savings. Assuming Treasury‘s price estimates are
accurate, Australia will be paying overseas carbon dioxide credit suppliers
annual sums that range from just under $3 billion in 2020 to $57 billion in
2050. These are massive sums – the 2050 bill is greater than the value of our
current exports from coal and more than twice the value of all our current
agricultural exports. 
Even the manner in which the government has structured the
use of international permits in Australia drew criticism from some witnesses:
The floor price on international permits could lead to
inefficient carbon abatement outcomes and will raise the cost of the scheme for
Australia. Implementation of the proposed top-up fee will be costly and
difficult to administer. In our view it should be removed. 
Equally, many of those submissions not published by the
inquiry raised concerns about the reliability of the global markets on which so
much of this scheme depends:
This proposed tax is totally unnecessary, and will cause huge
damage to this country’s jobs, productivity and economy. It will cause $30
billion to be sent overseas to buy carbon credits, with no lowering of our own
carbon emissions and virtually no help to the planet.
Treasury figures show that we will achieve real cuts of only
60 million tonnes. The remaining 100 million tonnes of ‘abatement’ will have to
come by purchasing carbon credits from overseas, at an estimated cost of $3
billion. Perhaps we could buy some of them from the five new coal-fired power
stations in India and China that have been awarded nearly $1 billion in free
carbon credits by the UN under its’ Clean Development Mechanism! By the way,
that’s money going to dubious overseas schemes for which we will receive only
the satisfaction of knowing we have ‘done the right thing’. It’s money that
will not be available to fund the ongoing so-called ‘compensation’.
Buying Carbon credits from other countries with dubious
economic backgrounds is a recipe for disaster.
Already driving a ‘clean energy future’
Labor have billed this legislation as important to
‘transforming Australia to a clean energy future’
but as discussed over the previous pages their carbon tax proposal actually
outsources much of the change and delivers minimal change within Australia.
Numerous witnesses, such as the Clean Energy Council and GE,
acknowledged that the Renewable Energy Target (RET), a policy initially
implemented by the Howard Government and one that enjoys bipartisan support, is
actually the primary driver of investment in renewable energy:
From our perspective the renewable energy target—the RET you
are referring to—is the key driver of large-scale renewable energy in
Australia. That scheme was split into a large- and small-scale scheme last year
with the support of all major parties in the parliament and it will underpin
investment in renewables through to 2020 and beyond.
The RET is the prime driver for additional renewable energy
generation in Australia. The January 1, 2011 reforms with the segregation of
the RET into large-scale and small-scale targets provides sustainability for
the policy post-20% 2020 increase (or enhanced RET) legislated for in 2009. 
AGL agreed with the assessment of the Clean Energy Council
and highlighted some of the other benefits of the RET:
Mr Kelley: When the policymaker looks at why we would have a
renewable energy target there are two benefits. Firstly, there is energy
security, reliance on other sources and other suppliers of energy is eliminated
through renewables. Secondly, to kick-start that transition to a low emission
portfolio a renewable energy target is the perfect stimulus for that.
Senator BIRMINGHAM: Even if this legislation passes, in the
immediate future the primary driver of investment in renewables in Australia
will remain the RET won't it?
Mr Nelson: That is true.
AGL further argued that the RET target of achieving 20 per
cent renewable energy by 2020 is expected to deliver around $30 billion in
Such investment is already delivered large results:
Mr Griffin: Infigen is the largest owner-operator of wind
farms in Australia. We have wind farms operating near Geraldton, at Mount
Gambier in South Australia and near Bungendore in New South Wales. We have a
large pipeline of wind farm and solar farm projects in Queensland, New South
Wales, Victoria, South Australia and Western Australia.
Mrs GASH: How many more would you have in the pipeline?
Mr Griffin: We have close to 2,000 megawatts of new projects
under development. As a case study, near Bungendore we have Capital Wind Farm
and Woodlawn Wind Farm, which is immediately adjacent to it and connected to
the same substation. Capital Wind Farm was fully commissioned at the start of
2010 and Woodlawn Wind Farm will be complete in a matter of weeks.
The Clean Energy Council highlighted the transformational
impact this more positive policy is already having on the renewable sector
the RET is demonstrated to deliver the lowest-cost
large-scale renewable energy projects. I should say, as an adjunct, the SRES is
delivering and has delivered significant deployment of both rooftop solar hot
water and solar PV. It is worth noting that the cost of solar PV has fallen so
dramatically globally. It is a stunning success story of what disruptive
innovation looks like. The Australian industry is now talking about being able
to deploy that technology at a $1.50 a watt, which basically means it is game
over. The technology will be ubiquitous across Australia for the rest of the
century. It is past the tipping point of being a potential technology.
Organisations like ClimateWorks Australia presented evidence
to the committee that there is more that could be done within Australia to
We excluded the purchase of international credits from our
research because we wanted to show what was available on our own shores. I
think that what pleased many readers of this report is that there is more
available on our own shores than many realised.
Coalition members of the inquiry believe that if Australia
is serious about meeting targets to reduce emissions, which we believe as a
responsible global citizen we should be, then these opportunities at home
should be realised through more positive, incentive based action than Labor’s
approach of applying penalties at home and incentives abroad.
5. Hurting households
Prices will go up
All Australians will pay for the carbon tax, be they big
businesses, small businesses, charities, institutions, governments or
households. They will pay as the increased costs faced by those forced to pay
the tax directly or those facing increased fuel costs are passed on to all
consumers of goods and services, especially through key utilities and
“emissions intensive products, such as electricity and gas used for heating”.
As Labor’s climate change adviser Professor Garnaut said in
his updated advice to the government earlier this year:
Australian households will ultimately bear the full cost of a
Unsurprisingly, electricity price rises as a result of the
carbon tax stand out. As a result of this Labor Government policy, the
optimistic Treasury modelling indicates that electricity prices will rise by
between 9 and 11 per cent more than would otherwise have been the case in the
near term and by between 23 and 38 per cent over the period to 2050.
The variances in these figures relate to which state households or businesses
are in, with Victoria and Queensland the worst affected in the short term,
while Western Australia and New South Wales feel the greatest impact over the
One of the many unpublished submissions highlighted the
particular impost on Western Australia, where electricity price rises out to
2050 are forecast to reach 38 per cent:
I live in Western Australia and I cannot believe that we have
the newest coal fired power stations in the country and yet they do not qualify
under the proposed scheme for the exemptions enjoyed by the older eastern
states coal fired power stations. This increase in cost will undoubtedly be passed
on to the consumer in a number of ways not just the cost to turn the light
switch on at the family home. The cost of living in this country is already out
During the first year of the fixed price period, namely
2012-13, it is expected the impact will be most severe, with the percentage
rises translated in the Treasury modelling into the estimated weekly impost on
Household expenditure, on average, is expected to increase by
$3.30 per week due to higher electricity prices and by $1.50 per week due to
higher gas prices.
While these may sound like small increases to some people,
Coalition members of the inquiry recognise that they translate into hundreds of
dollars of extra costs for families and households around Australia. And that
is before the price impact is passed through to all other goods and services
The Democratic Labor Party highlighted the impact such price
rises would have on families in particular, arguing the cost impact of the
carbon tax becomes greater with each child added to a family:
Families ought not be faced with the threat of increasing
taxes as their families grow. More importantly, families ought not be faced
with increasing taxes as they welcome another child into their home. Yet this
is what the proposed Carbon Tax is designed to do.
Unsurprisingly, the impact on households and the cost of
living drew an enormous reaction from Australians of all walks of life, with a
large proportion of the thousands of unpublished submissions received by the
inquiry addressing this issue. Many realised that the cost rises faced by
businesses as a result of this tax will be passed on:
I do not believe for one moment that the cost will not
trickle down to and affect my business and my lifestyle. I say that simply
because I cannot ever remember ANY tax or government impost in that past that
has not. The very nature of the way western economies are run ie: Supply and
Demand essentially, dictates that all costs are passed up or down the economic
ladder, eventually and irrespective of protection, government legislation and
This is a BAD tax for Australia, it will push up the cost of
living and make us, the working Australians, poorer. If you think the major
polluters are not going to pass on the tax to the consumers you are very much
Any suggestion that it will only be "large
polluters" who will pay this tax, is totally untrue and an insult to
intelligent Australians. The "flow-on" effect to consumers will be
devastating financially, as many are already struggling to cope with the rising
cost of living.
Industry will not bear the cost alone of this tax, but will
pass it on to the consumers of these goods- us. We will bear the greater cost.
Average Australians are doing it tough already, with costs of things rising,
e.g. Electricity, rent, and basic cost of living. Taxpayers, who supply this
country’s money supply are such as these and are not an endless source of money
for the Government to milk.
To tax 500 of the country's largest emitters of carbon
dioxide is NOT a protection for residents from bearing the impact of the tax as
all 500 companies will pass on these costs to consumers. To claim otherwise is
I can barely afford my mortgage repayments, child support
payments and the cost of utilities, let alone the other cost increases that are
going to occur under the Carbon Tax. You may say that only the “big polluters”
get hit with this tax but we all know that it is everyday people like me that
get hit in the neck with this.
I’m a uni student… don't forget that a carbon tax will impact
on the price of everything that has to be delivered anywhere, and impacts on
public transport as well as private transport. if you make big businesses
absorb the costs then they will pass those costs onto everyone, and anyway, what
is the purpose of a tax that doesn't create surplus? Someone has to lose and if
it's the suppliers, then it's the consumers too.
The big companies are just going to be passing the costs on
and in time, the rebates (for those eligible) will have no effect at all in
countering the increased costs of living.
Others highlighted the continually increasing nature of the
carbon tax, which goes up every year, from the fixed $23 in 2012 to a forecast
$131 by 2050:
I have read up on this subject and I believe that implementing
such a tax will cause financial hardship to people of Australia. This tax will
start off at one level and will no doubt increase to a higher level as time
The cost of living has increased considerably in the last
couple of years, particularly petrol, electricity and food. I believe the
Carbon Tax will increase the cost of living even further.
Australians are under pressure
Australians are already feeling a significant cost of living
pressure. The inquiry heard from thousands of people who know that the carbon
tax certainly won’t do anything to ease that pressure and fear that it will
make it worse.
Agencies working in the welfare and community services
sector brought to the attention of the inquiry the cost of living pressures that
many households face and the particular role that costs of basic utilities,
such as electricity prices, play in those cost of living pressures:
Low-income earners are the most vulnerable to even small
increases in costs of living, as spending on food, fuel and utilities takes up
a large portion of weekly income. While the Government’s proposed compensation
measures aim to support households according to income bracket, we are
particularly concerned about the impact of rising electricity prices.
…38% (rounded) of the poorest 30% of Australia's households
were unable to pay electricity bills on time, due to financial stress, while
15% (rounded) of Australia's total population were unable to pay for
electricity on time, a significant indicator of financial stress… It is most
likely that a higher proportion of the population would now be unable to pay
electricity bills on time.
AGL equally highlighted the impact of rising electricity
costs, indicating that under their predictions by 2015 it is possible that 6.6
per cent of households will be spending more than 10 per cent of their
disposable income on electricity.
The impacts of these price rises have resulted in an
increase in the need for assistance to households to cope with rising costs.
UnitingCare Australia and the Brotherhood of St Laurence highlighted such
… that involve partnerships with utility companies to address
and ameliorate people's energy poverty. We run one in several states now, the
Kildonan model, in partnership with utility companies. It is a model that
enables someone who, from the utility company's perspective, is a bad debtor,
but, from our perspective, is somebody who is in dire financial and usually
family crisis to be able to turn their lives around over the course of a year.
Many low income earners, particularly pensioners, retirees,
carers and young people, contacted the inquiry to express their concerns and
highlight their personal situations with respect to cost of living pressures:
From a personal point of view it is difficult enough for
retirees now to cope with all the price increases that have occurred in
essential goods over the last couple of years, without further excessive
increases due to another tax.
As I get a small super widows payment from the state government,
I will not be entitled to any pension increase, and the proposed tax assistance
is negligible. I will get no assistance whatsoever with these increased living
I write to express to you my deep opposition to the proposed
Carbon Tax, I am a pensioner and at the present can barely afford my utilities
charges now I am reliably informed that all the utilities will raise their
Prices to accommodate this.
I am writing this submission as both a concerned Australian
resident and as one who relies on a carers pension for the survival of myself
and my two children with Autism. I have been following the Carbon tax debate
and researching as much as possible over the last few months. It has come to my
attention that if the full price off the carbon tax was passed onto consumers
(as has been predicted) then the total cost of living for myself would exceed
the proposed compensation by a calculated three to four hundred dollars per
year. As you can imagine the Carers Pension is only $250 a week, so this expense
rise will take a heavy toll on my family that is already struggling to meet its
I am only 21 years old and don’t live at home. I find it
extremely difficult to pay for all of the utilities I use and have had to cut
back on food allowances to be able to pay for my bills. The carbon tax will not
help me in any way shape or form when it comes to paying for living expenses.
Others highlighted the extent of the existing tax burden on
Australians or the particular pressures felt by families:
I feel that as a nation we are already heavily taxed and that
any further tax would become a such a financial burden on many Australians that
financially they will be at a crisis point.
My firm belief is that this tax will harm the Australian economy,
and that major companies taxed will pass on the increased cost of production to
consumers, and that families already struggling under increased cost of living
will be even harder hit.
I am an average Australian with a wife and three kids. I
struggle to pay my bills now as it is. This carbon tax will not change the
climate one bit but will cost the average person hundreds if not thousands of
dollars a year for no gain. It is a tax to spread wealth, that's all it is.
I am a 46 year old wife and mother of 4 children. My husband
is a self employed truck driver and I am an Allied Health worker. My husband
works up to 80 hours per week and I work full-time. This will send my family
budget up more than you would even know or estimate. We already have had huge
increases in our electricity and gas bills and I don’t know how much more we
can absorb. You would consider us high income earners, however with a mortgage
and 4 dependent children living in Sydney's western suburbs, I can assure you
we are not affluent.
My husband's income is seen as 'high, and therefore I only
receive a part pension of $23.70 per fortnight. I have a chronic health
condition for which I need a lot of medication and supplements, and my son who
is 15 year, has autism and severe language delays. And yet, a mere increase in
my husband's salary of $20 per week would deem me ineligible for any pension
whatsoever. I don't mind paying taxes if I can see what the money is being used
for (and see a good cause), but I you cannot get blood from a stone. We, the
people of Australia, are slowly being squeezed in any and every way possible.
Other submitters, such as Mr Jason Horton, simply posed the
question of whether ‘the risk of rising power generation costs and subsequently
retail energy prices’ would push basic services out of reach of many
Australians ‘with some choosing to live without heating and cooling in fear of
the cost’. Mr Horton asked the insightful question ‘if the impact of the tax
was negligible why then does the package include huge sums of compensation that
are at risk at some future time for removal?’
Millions still worse off
Around three million Australian households will, according
to the Government’s own optimistic modelling, be worse off under this carbon
tax proposal. The Government expects Australia to have nine million households
by 2012-13 and claims that almost six millions ‘will receive assistance that
covers at least the average price impact of the carbon price on their cost of
Labor claims ‘households will see cost increases of $9.90
per week, while the average assistance will be $10.10 per week’.  Coalition
members of the inquiry note that the assistance payments are fixed and certain,
while the estimates of cost increases are just that, estimates based on
modelling that itself is based on optimistic assumptions about the operation
and impact of Labor’s carbon tax policy.
With an average buffer of just 20 cents per week, the
estimates of the average cost impact of the carbon tax on Australian households
would need to be out by little more than 2 per cent for millions more
Australian households to find themselves joining the three million who are
already known to be worse off.
Coalition members of the inquiry are also concerned that
many of the low income households the Government forecasts to be better off may
in fact be worse off as a result of their high exposure to electricity price
Some low-income households are very low users of energy. Some
of them are high users of energy because they have disabilities, chronic health
conditions, lots of kids and there is a lot more need in the household or they
are living in rental properties, particularly private rental properties, where
the infrastructure is not being renewed.
In some instances the compensation being offered lacks
transparency. While the changes to the tax free threshold, income tax rates
and Low Income Tax Offset may bring greater transparency to the marginal rate
of tax, they have been misrepresented by many within the Government, including
the Prime Minister who claimed without qualification to be “tripling the tax
free threshold”. The truth of these
tax interactions is more complex:
The low-income tax offset, which is currently $1,500, reduces
to $445 and the withdrawal rate reduces from four per cent to 1½ per cent.
Currently what happens is that through the range from about $37,000 to about
67½ thousand dollars people are effectively paying 34c in the dollar currently,
being 30 per cent on the statutory rate and four per cent on the withdrawal of
the low-income tax offset. Effectively what the changes do is rebalance and
make more transparent the rate that people are paying. So the effective rate
will still be 34 per cent through $37,000 to about $67,000.
One of the disturbing elements of the so-called compensation
package that accompanies the carbon tax is the increase in income tax rates,
with the 15 per cent rate increasing to 19 per cent in 2012-13 and the 30 per
cent rate increasing to 32.5 per cent in 2012-13 and rising further to 33 per
cent in 2015-16.. This will bring about
the first increase in marginal tax rates in Australia since the 1980s,
increasing disincentive within the tax system and further harming Australia’s
Coalition members of the inquiry also note that the
thresholds for eligibility to receive the planned assistance are often fixed
and concur with the Council of the Ageing that ‘threshold creep’ may quickly
see many Australians lose eligibility for compensation they are currently being
One of the issues that COTA is concerned about is that, to
keep the value of the package, the income levels that are used to set
eligibility for some of the payments, such as the Commonwealth seniors health
card and the low-income supplement, need to be indexed in the future to keep
pace with increases in average incomes in the community, otherwise people are
going to have bracket creep out of eligibility quite quickly. That is one of
the things that are not built into the package that needs to be there.
For most Australians any compensation comes solely in the
form of the income tax adjustments. However, these are at risk of being
subjected to ‘bracket creep’ just as other payments may face ‘threshold creep’
with the committee receiving evidence that confirms there are only two
adjustments to income tax planned in the package before the parliament,
notwithstanding the estimates of the carbon tax impact stretching out to 2050:
Ms Winzar: There is also a standard provision for indexation
of income support payments and family payments going forward beyond the period
covered by this first phase.
Senator BIRMINGHAM: That is only part of the compensation,
Ms Winzar: That is true.
Senator BIRMINGHAM: And it does not reflect the income tax
Ms Winzar: No, the income tax adjustments are handled
Senator BIRMINGHAM: There are only two phases of income tax
adjustments—is that correct?
Ms Winzar: Yes.
Labor has repeatedly promised that compensation will keep up
with the increasing cost of the carbon tax. However, when questioned during
the inquiry about this promise, the DCCEE was unable to point to any part of
the legislation before the committee and the parliament that actually delivered
on the promise:
Senator BIRMINGHAM: I just turn to a statement the Prime
Minister made on 11 July 2011, when she said:
Compensation is going to keep increasing so that as the
carbon price moves, household assistance is permanent and it will continue to
increase as well
How does this legislation fulfil that promise?
Mr Comley: Treasury can come up the table and talk about that
if they want. That is a question of the tax law. But I believe that is a policy
commitment—the intention of the government going forward.
Given the Gillard Labor Government’s lack of commitment to
its previous intentions regarding having a carbon tax, Coalition members of the
inquiry are deeply worried about relying on a commitment or intention of the government
that is not actually reflected in the laws that are currently being rammed
through the parliament.
There is even a question as to whether the Government will
be able to fund increases in compensation within the budget into the future.
As established in section 4 of this report, ever increasing billions of dollars
are expected to be spent under this plan by Australian companies to purchase
international permits. DCCEE confirmed that companies would pass on these
costs to consumers but was unable to clearly demonstrate how government could
fund ongoing compensation given the billions of dollars in revenue from the
purchase of international permits that goes overseas rather than into
Mr Comley: Purchases of international permits by domestically
liable parties do not go into the budget in any way because they are not
through the government.
Senator BIRMINGHAM: Yes, indeed, Mr Comley, as you said
before; however, those companies will pass on the costs, won't they?
Mr Comley: Yes, and that is factored into the modelling.
Senator BIRMINGHAM: Can you explain how it is then that the
government will be able to keep compensation up with those costs that are
passed on when the government is not receiving the funds for those
international permits that are purchased?
Mr Comley: It still has sufficient funds to do that because
of the expectation of auctioning the permits.
Senator BIRMINGHAM: How do you know? Can you present some
evidence that there are sufficient funds?
Mr Comley: We have not got modelling beyond the forward
estimates, but the government has made a policy commitment to do that on an
As outlined in section 9 of this report, Mr Comley went on
to suggest that there may need to be a trade-off between industry compensation
or household compensation … a policy decision for the future that Coalition
members of the inquiry note would result in a choice between further damaging
the competitiveness of Australian industry or placing further pressure on the
cost of living.
Coalition members of the inquiry also note that the current
package of government measures runs at a budget deficit of more than $4.3
billion over the forward estimates; a period during which
all revenue comes to government due to the initial prohibition on using
international permits. This begs the question, if the Government cannot
provide the compensation required to underpin its carbon tax without increasing
the budget deficit when there is no cost impact from the use of international
permits, how on Earth does it believe it can ensure compensation will keep pace
when there is a cost impact from the use of international permits?
The concerns of Coalition members of the inquiry about the
likely immediate costs of the carbon tax, adequacy of compensation arrangements
and the ongoing impact of these factors were again shared by many who submitted
their thoughts to the inquiry:
I work as a long distance truck driver and this tax will make
me work even longer hours than I already do now to cover the extra costs that
this tax will bring.
I am an ex-service veteran of the Vietnam War trying to
survive on pensions. With the huge increases in the cost of living the last
thing I need is another tax which will increase further the cost of living. The
government says that I will be compensated to offset cost increases. I just
don’t believe that this will occur.
We, as self funded retiree’s, have suffered huge financial
losses to our Superannuation funds, due to the GFC. The cost of living is
growing at an alarming rate, in electricity, food, fuel, gas and water and
everyday expenses. The introduction of this new tax WILL impact on our ability
to pay our bills and the stress on our already diminished Superannuation based
allocated pension, and our personal wellbeing, is unconscionable.
The fact is every quarter me electricity and gas bill
increase. My supermarket bill is also inflating monthly. Not to mention the
cost of diesel, public transport etc. The cost of living in Australia has risen
rapidly without a carbon dioxide tax. What are we to expect next July? I will
not, nor will any of my friends or family receive any compensation from the
government. We are all very scared and uncertain about our future due to this
I am a 70 year old self funded retiree. I am a Bachelor of
Commerce and formerly practiced as a Chartered Accountant, Certified Practising
Accountant, Registered Tax Agent, and Registered Company Auditor. It will
adversely affect our economy, make businesses less competitive, and put people
out of work. It will increase the daily costs and expenses of all entities and
There is no doubt in my mind that increased costs produced by
this tax will impact every business, family and individuals in a substantial
way. Unemployment has already increased in regional Australia, and this is
where the tax will have the most negative impact, due to job loss and increased
transport and industry costs. Australian products will not be able to compete
against imported products (as many imported goods will be cheaper as they do
not have a carbon tax) and consumers will be forced to buy from overseas.
6. Small business squeeze
Small Business to be hit hard by the carbon tax
Small business, the engine room of our economy, will be hit
hard by the carbon tax. Australia’s 2 million small businesses are facing the
lowest business profitability environment in 18 years according to the Sensis
Business Index and know a carbon tax will just make a tough situation worse.
Treasury, however, believes small business can just pass costs on:
Mrs GASH: I will be very quick. Small business and
medium-sized enterprises will certainly feel the full flow-on effect of
increases to electricity and so forth. How much compensation have you modelled
in for small businesses?
Mr Comley: The first point to make is that many small
businesses will actually pass on the costs that they will face. It is not a
form of compensation but if you think of one which is not particularly
emissions intensive in the broad scheme of things—a dry cleaner et cetera—they
face little international competition and they would pass that on.
This is stark contrast to business groups who understand the
market environment and conditions facing small business owners:
… the chamber unambiguously represents the views of
businesses as energy users but, more particularly, the views of small and
medium ranking businesses, which face the prospect of much higher energy prices
and also hikes in the prices of their inputs. It is true that these business
range across many sectors and have varying degrees of exposure and varying
degrees of market power as well. Consequently, these entities will have limited
capacity to pass on higher energy prices or higher costs of other inputs. Nor
are such businesses able to adjust their processes to substantially alleviate
the associated price impacts. Therefore, their earnings and competitiveness
will suffer, and so will jobs and expansion opportunities.
Many small businesses simply will not be able to pass on
increased costs to customers:
Our organisation is in a situation where we will not be able
to pass any additional costs from an increased tax on to any consumers and as
such we will wear the full impact of this legislation.
… while I can see the rationale regarding the economic need
to price carbon, I feel that this is not an effective measure in isolation and
neither is this appropriate at this time. In fact I feel this will have a
greater negative impact on Australian productivity with no gross or net impact
on carbon emission whatsoever.
I am a small business owner and employ 12 people. They are
mostly single and young married. Some are working and studying part time.
Others are paying off homes. In my office we are all hard working, tax paying
and voting Australians.
The services we provide are to larger companies and we rely
on their corporate health for our work. Electricity prices are a great concern
for us. My office electricity has increased from $410 per month 2 years ago to
over $530 per month. We cannot increase our prices and have had to give
substantial discounts to clients to help them through the GFC. My business and
our jobs cannot survive more cost increases.
Jobs at risk, businesses crippled
While the Government likes to claim just 500 businesses will
pay the carbon tax, electricity prices will be felt across the board, cost
pressures will be felt by large and small business alike and the world’s
largest carbon tax will cost jobs:
Australian businesses have seen that, under a carbon pricing
regime and associated schemes, electricity prices will probably double between
now and 2015 and perhaps triple by 2020. And it is not hard for those
businesses to do their own calculations as to how that might impact on their
profitability. Many of our members have in fact done that exercise.
The Queensland Resources Council said that $23 per tonne
Australia will have the highest carbon price in the world. Our own Queensland
Tourism Industry Council said that it will increase the cost of doing business
for many industries, including tourism, through the direct and indirect impact
on energy costs. Qantas was quoted as saying that this tax will rip $110
million to $115 million from their bottom line in 2012-13. Virgin Blue were
quoted as saying that higher air fares are inevitable and that international
airlines do not have to pay carbon tax in their own markets. The Australian
Retailers Association were quoted as saying that retailers are at the very end
of the manufacturing and supply chain and cost increases along the line will
ultimately be caught by them. Australia's leading meetings and events company
was quoted as saying that this tax will increase the cost of holding business
events in Australia. When those sorts of quotes are in a very public forum, and
our organisation's role is to inform our members and our businesses, they are
pretty strong quotes.
For businesses the carbon tax just adds more weight to their
workload and is another example of the Labor’s heavy taxing approach to
It is factual that businesses constantly tell me that they
are drowning in red tape, their fees and charges are going up, with local
government and state government taxes and ultimately this federal tax. The
general viewpoint of businesses right across the board is that they are being
forced to deal with consistent increases in red tape and they feel that
increased charges are being constantly put upon them. That is not my view; it
is what our businesses are constantly telling us. Any new tax proposed by any
level of government, whether it be federal, state or an increase in local
rates, does alarm businesses.
Rural Australia will also be hit by the carbon tax, not just
with increased transport and business input costs, but increased power costs
will hit struggling sectors hard:
… the grain sector we believe will be by far the worst
affected. Also the dairy sector, because some of our dairy farmers have very
high power usages growing green feed during very long summer periods. Some of
those dairy farmers will be well and truly affected by increased power costs.
As the owner operator of an engineering business located in
rural Australia this tax is going to significantly increase my operating costs
as well as raw material costs and is very likely I will have to reduce staff in
order to compensate. Our company employs 23 local people and our weekly wages
contributes a significant amount to the local economy. The increases to us will
come by way of significantly increased electricity costs, increased steel and
aluminium prices, increases in poly tank prices, and possibly higher wages
demands so that staff can also offset the increased household costs.
The carbon tax is a direct threat to jobs as input costs
rise and consumers, faced with price rises across the board, have less
As an example, take my daughter and son in law, who own and
run two small businesses employing up to 60 staff, they will be adversely
affected should such a tax be imposed. … In the case of small businesses
already reeling from floods, cyclones and similar natural disasters the only
way to make ends meet will be to lay off staff. This will be a direct result of
this tax. … The only beneficiaries of this tax will be this country's
competitors. Countries such as China, Indonesia, Malaya, India, the US and the
Arab Nations will be making huge profits at the expense of our own industries.
As a small business owner involved in the retail industry,
the effects of the carbon tax, that has not been introduced as yet, are already
being felt. We run a good business but that does not help when people are
worried about basic life essentials becoming more expensive.
As a Caravan park owner … It will mean that we will be forced
to increase our fees & charges which ultimately will hurt our permanent
residents & also force our fees up for tourists increasing the risk of
reduced occupancy of the park. Our tourists are mainly Grey Nomads who are
already feeling the stress because of the worldwide financial turmoil in
regards to their investments, this has already reduced our occupancy this year.
I am a small business owner and can see that as a direct
result of this tax that my costs will significantly increase - every time I
switch my computers on or get into my car to see a client I will be paying this
tax. I do not believe that I will be "compensated" for these
additional costs and will be left with the option of absorbing them or passing
them on - I along with thousands of other small businesses will be passing them
on and I would suggest that whatever modelling may have been done does not
reflect this cost to Australia.
Small businesses such as my daughter’s dog grooming salon
(which has been running successfully for just on 21 years) are struggling with
viability at the moment and can only look forward to a further plunge in
incomes when customers cannot afford such as small thing as having their pet
dog washed and clipped!
For many businesses, the carbon tax may be the final straw:
I am the part owner of a micro business which is trying to
export Australian owned and made goods to various parts of the world. Over the
years we have built up relationship in Asia, Europe, North America and New
… If a carbon tax legislation is enacted it will increase the
manufacturing prices which will in turn will be passed onto us in goods what we
are trying – struggling – to export and might just will mean for some of our
customers that they will either try to find an alternative and cheaper supplier
or cutting back on orders.
I am a director of a small Australian manufacturing company
& we are already down to break-even margins competing against imports, many
of these imports being subsidised by overseas Governments. Any additional cost
burden placed on our business will certainly result in a loss of sales, which
unfortunately will follow onto a loss of jobs & possible closing of our
We are not a big company & it will not hit the news if 30
more people no longer have a job, but there are lots of small businesses in the
Australian market that are just like my company.
We own a small printing business and since 2008 we have been
struggling to keep the doors open due to the GFC. We have been in business for
18 successful years but are now in a position, if the Carbon Tax comes in, and
everyone loses any more confidence in spending, we will lose our business, our
house and our livelihood. …
We will suffer significant price increases in purchasing from
the suppliers, paper, plates, ink, bindery etc. …
We also don't want to destroy our employees' livelihoods,
they have house loans and young families to support. They are like our family,
all working hard to survive these very tough times together.
The Government claims many small businesses are not trade
exposed in the manner that some of the industries receiving compensation are.
The reality is many actually are and this carbon tax won’t just send many big
businesses off shore, but small businesses as well. That’s investment, jobs and
emissions being shipped overseas where there is no carbon tax and where
emissions may indeed be greater than they were here:
My major objection to it is that it will cost me and my
business about $100-$200 a week for no real reduction in carbon emissions.
Already I have done things with installing solar ($45,000
approx) and gas services ($5,000), insulation ($5,000) and other energy
reduction matters to reduce my emissions but there seems to be no real
compensation for these types of action “going forward” …
What we seem to be doing or setting up to do is push
pollution off shore and make the same things at worse pollution rates!
I … object strongly to a carbon tax as our family business
which recycles waste plastic will face costs that we cannot afford or are unable
to pass on. Plastic recycling uses vast amounts of electricity and utilizes the
heavy transport industry extensively and therefore will feel the full brunt of
this tax. We are an environmentally beneficial business who is not compensated
by government in any way and will have no choice but to take our business
offshore in order to compete with imported resin if this tax goes through.
It is clear that the carbon tax will come at significant
cost to small business at a time businesses can least afford it. Many small
businesses operate on tight margins and increased electricity prices, transport
costs and reduced consumer spending power will drive many to the wall.
While all sides of politics want to lower Australia’s carbon
emissions, the Labor-Greens plan to pull the shutters down on small business is
not the way to go about it.
7. Communities cop the cost
The Government's legislation places a burden on communities
around Australia without adequate, or in some cases any, compensation. These
include farming and other regional communities, the community welfare sector,
and effectively all Australians through an impost on local government.
Copping it at the local level
Local Government councils across Australia expect to suffer
significant cost impacts, including through costs associated with landfill
waste disposal and through reduced capacity of ratepayers to fund council core
DCCEE has addressed thresholds for landfill facilities.
A local government that has a waste facility that exceeds the
threshold—25,000 tonnes—would be liable for that landfill facility. If it had a
facility of more than 10,000 tonnes within a prescribed distance from a large
landfill facility, one greater than 25,000 tonnes, then that facility would
also be liable. Local councils are liable through landfills. They would face
other costs—electricity costs or other fuel costs—but as liable entities they
would be drawn in through their tips.
Councils indicate they are yet to be provided with any
certainty as to what costs associated with landfill will be incurred.
These concerns and ongoing uncertainty were highlighted by
the Council of Mayors (SEQ) which claims to represent a region (South East
Queensland) that is home to three million people, or one in seven Australians.
While waste deposited prior to 1 July 2012 will not be liable
under the proposed pricing mechanisms, it is unclear as to whether waste
deposited each year after this date will be liable for emission for that year
only or on an ongoing basis.
Detail is to be included in the regulations however immediate
clarification on a council's liability is sought as we believe this could have
a significant financial impact on a council. The methodology for determining
landfill gas emissions and wastewater treatment plant methane emissions need to
For example, Ipswich City Council has been advised by waste
contractor Veolia that the landfill price is likely to increase by around $22
per tonne for municipal and $20 per tonne for commercial and industrial waste
from 1 July 2012.
The absence of detail about landfill cost impacts was also
raised by the organisation representing councils nationally, the Australian
Local Government Association, through Chief Executive Adrian Beresford-Wylie.
… it is not entirely clear to us how many landfills and how
many councils will be impacted on by the scheme, since the details of the
scheme have not been worked out. if it is going to cost several hundred
thousand dollars for a council to put in place a system, it is not every
council which will be able to find several hundred thousand dollars to put in
place a flaring system. In terms of the actual number of councils and council
landfills that are going to be covered by any scheme, we do not have the detail
of the scheme at the present time, and I think it is jumping to conclusions to
say that all councils or the majority of councils will be able to ameliorate or
abate their exposure.
Councils and landfill owners have sought a carbon price
moratorium of at least three years:
Council of Mayors (SEQ) supports and reiterates the position
of local government in relation to waste emission liability as outlined in
submissions made by the Australian Local Government Association. It also
refers the committee to submissions on this topic made by the Australian
Landfill Owners Association which calls for a three year moratorium on the
introduction of a carbon price to allow time for local government to clarify
measurement methodology, become familiar with and put in place systems to meet
reporting requirements, and initiate gas collection and flaring where this does
not exist at landfills.
Shoalhaven City Council addressed uncertainty surrounding
landfill, as well as other forecast cost impacts it faces.
We are a largish local government organisation. To give you a
context, our budget is $180 million a year. We service a population of about
100,000 people that grows to 300,000 in the peak of summer. We have been
reporting for some time, and we reckon that our greenhouse gas emissions, as
reported, are around 29,000 tonnes per annum, excluding our landfill. Our
landfill is getting close to 50,000 tonnes in gross emissions per annum. That
is relevant in terms of this 25,000-tonne threshold. However, we do extract gas
from our landfill, and that brings us down to 13,000 tonnes per annum. That is
even more relevant to the 10,000-tonne threshold that we will come to.
I will cut to some of the cost impacts that we have forecast.
We are using the numbers that are around the place and seem not to be disputed
in terms of most of the flow-on costs. We think our energy costs are going to
increase as an indirect cost by something in the order of $285,000 per annum.
We think our fuel costs are going to increase by $9,000 in terms of nontransport
and, in that 2014 scenario, another $25,000 on our heavy vehicles. As an
organisation that does lots of physical work, we have 70-plus vehicles that
will be in that heavy vehicle category. They consume about 350,000 litres a
When we look at our waste operation, the sooner we can get
clarity on what is in and what is out and how we are counting things, the more
helpful it will be. A lot of things are unclear.
Within the constraints imposed by this uncertainty,
Shoalhaven raised a possible amendment to address their circumstance.
… if we were to ask for something to be different, it would
be that issue of the 10,000-tonne threshold within whatever the distance is. We
do not even know what it is, but we are assuming—because of Wollongong and Shellharbour,
who operate big landfills—that we will have a 10,000-tonne threshold instead of
25,000. For us, it would be really helpful if it were just left at 25,000
tonnes. If that 10,000-tonne threshold, which is supposedly to stop people
allegedly moving waste around from one facility to another, were not there from
a legislative point of view then that would be a significant upside for our
council in particular.
The capacity of ratepayers was canvassed by the Australian
Local Government Association.
… many councils look at their ability to raise rates and they
do take account of the capacity of communities to pay. This is the reality. The
community is not an endless sink from which money can be drawn and councils are
acutely aware of the restrictions and limitations on individual communities to
actually pay rates. Those communities and individuals in those communities pay
taxes at the state and the federal level as well.
The ALGA also highlighted research into the expected impact
on ratepayers in Victoria and, by extension, across Australia.
The Municipal Association of Victoria did some figures on
what they considered to be the likely impact on councils from the introduction
of a carbon price. Most councils thought that the increased costs would lead to
a likely need to increase rates by somewhere between one per cent and five per
cent. If we were to extrapolate nationally then we would be talking about costs
somewhere in the order of $300 million.
The likely need to raise council rates was confirmed by the
Assistant General Manager of Shoalhaven City Council, Mr Rob Donaldson.
Mr CHRISTENSEN: There are some things that you as a council
will not be able to change. There will be cost impacts. You are saying that if
those are not being fully compensated, the costs will have to be passed on to
Mr Donaldson: Yes.
Evidence was provided to the committee of the range and
breadth of services and expenditure expected to feel the effects of a carbon
It is fair to say that construction costs do generally go up
by more than CPI. There will no doubt be a cost; but I cannot tell you what the
actual cost is going to be, although it is fair to say that we will probably
bear the same costs that are borne by the state governments with their road
materials as well.
Swimming pools and other civic facilities:
Most of our consumption is in the major civic buildings, the
one or two large leisure centre facilities that have swimming pools, heating
and so on, and our water treatment facilities.
One of our major facilities, the Bay and Basin Leisure
Centre, has a very substantial photovoltaic system and has been looking at
photovoltaic cells and rooftop water-heating mechanisms. Probably between
$200,000 and a quarter of $1 million worth of capital has gone into that. We
think that will take off about five per cent of the energy bill for that
Copping it in the regions
It is clear from the inquiry that businesses in regional
areas fear the consequences of the Government's legislation, and specifically
the costs and ramifications of the carbon tax it would implement.
Capricorn Enterprise is both a Regional Tourism Organisation
and Regional Development Organisation and has a diverse membership making it
well placed to comment on the views of businesses involved in a range of
industries and enterprises.
Our organisation is a membership based organisation. We have
major corporate partners, whether they be mining firms, contractors to mining
companies or service sector industries to the resources sector. Right down
through to small business, we represent retail, health, education, tourism,
agriculture—a whole raft of industries. It would be fair to say that, certainly
in Central Queensland and the area where we live, the general viewpoint of a
lot of businesses is that at the moment they feel they are suffering a lot of
red tape anyway. They feel generally that this is another tax that is going to
affect them. We are, can I say, an apolitical organisation. This is a very
contentious issue up here and we try and be fair and reasonable in our comments
about such issues. But many of our businesses, small right through to large
industry, have expressed quite openly in private and public forums their
concern about this tax.
Among specific and particular concerns to come to the
attention of Capricorn Enterprise are expected impacts on the transport sector,
upon which the vast majority of other businesses rely in some way.
I am getting a lot of representations from transport to say
that the impact on transport will be significant. Rocky's Own Transport, which
are now an intrastate group, have made various representations and have done a
lot of modelling. As I understand it, they are a lead agency in this. I have
only just come from another meeting where they presented. It is transport that
will see an impact that will impact across all sectors. Of course, you have the
energy generators and then you have the mines that actually have emissions. So
it could be a tax that will have a very significant economic impact on Central
Transport is also among several specific concerns to
farmers, as outlined by the WA Farmers Federation, which is opposed to the
WA Farmers Federation does not support the carbon tax proposal.
Our reasons are pretty straightforward. From the evidence that has been given
to us, we believe that financially we will be worse off under a carbon tax. …
Farmers are very much at the end of the line and we believe a lot of the costs
from processing, from retailing and from transport will gravitate back as
increased costs and charges to growers.
Transport issues associated with the carbon tax will hit
regional areas in numerous ways, especially those that impact on aviation,
which is so critical for tourism into regions, as well as regional access to
major centres. Qantas made it clear that the significant costs associated with
aviation will be passed straight through to consumers:
Domestic airlines will be exposed to the full starting carbon
price of $23 per tonne through an increase in aviation fuel excise from July
2012 and will not have access to transitional assistance or compensation
arrangements. It is estimated that the cost impact on the Qantas Group will be
approximately $110-115 million in the financial year 2012/13.
In the context of the significant commercial and structural
challenges facing the global aviation industry, the Qantas Group will be unable
to absorb the additional costs associated with the carbon price. There will be
a full pass-through to customers… 
While transport would be one factor they are worried about,
Australia’s cane farmers expressed their concerns about the impact of the tax
throughout their value chain:
The carbon tax will result in increased and embedded costs in
the sugar production value chain, resulting in a decrease in the profits of
cane farming businesses which have been under extreme pressure over the past
Their concerns were echoed by the National Farmers’
Federation, who emphasised the impact on international competitiveness, a
particularly important issue given the global market many of Australia’s
primary producers operate within:
These costs will erode the competitiveness of the
agricultural industry in the domestic and international markets on which we
depend. As the recent Productivity Commission review highlighted, across the
world, countries are developing climate policies that recognise the importance
of agriculture and deliberately prevent any additional costs being added into
their farmers businesses. 
Organisations representing the horticulture industry or
fruit and vegetable growers point to their high input costs, especially
electricity, and argue the tax will squeeze already tight margins further:
… the cost of electricity will increase substantially despite
the concessions. Growers with on-farm packing sheds and large refrigeration
units, essential for the delivery of fresh and healthy food to market, are
heavy users of electricity. In some cases, electricity consumption can exceed
$20,000 per week. The starting price of $23 per tonne of CO2-e will result in
an increase in electricity costs of approximately 2.5c per kilowatt-hour. For
some growers, the introduction of a carbon price will lead to increases in
electricity costs of up to several thousand dollars per week. Other energy
intensive inputs, such as fertiliser and chemicals, will also increase in cost.
In addition, freight costs will increase from July 2014 when the exemption for
the heavy transport vehicles is removed. 
…many farming enterprises are already battling to be
profitable as the profit margins for growers are very small. Effectively, the
costs of farming inputs have continued to increase yet the average net return
for grower’s produce has increased very, if at all over the past decade. 
Dairy farmers presented similar concerns to those expressed
by the horticulture sector, highlighting modelling to demonstrate their
particular exposure to the price shocks of the new tax:
Importantly dairy farming appears to be more impacted by the
new tax arrangements than even other parts of agriculture. The AFI estimated
dairy farm incomes could fall by 7 - 8% in 2013 under the announced tax package
(an impact almost double that facing other agricultural sectors) ... Based on ABARES
estimates this suggests dairy farmers face an average per farm cost increase of
$1,400 per annum across Australia when the new carbon tax comes into force.
Farms involved in irrigated dairying operations are likely to face the highest
cost increase. In some regions this cost increase could be much higher. ABARES
estimates Tasmanian dairy farms have average electricity expenditure in 2011 of
$37,000, suggesting increases for farms in this state of close to $4,000 per
year under the new tax. 
It is clear to Coalition members that, despite the language
from Labor about agriculture being excluded, there will be a significant cost
impact on the agricultural sector, all while potentially positive and
transforming opportunities appear to be overlooked by Labor’s punitive policy,
such the need to:
… lift organic matter management and compost use into
mainstream horticultural and agricultural practices. A key first step is to
quantify soil carbon sequestration benefits from use of external organic
residues as soil amendments. Over 150 leading researchers and practitioners
from Australia delivered this and other messages at the 2011 International
Copping it at the expense of community welfare
UnitingCare Australia is a major player in the community
welfare sector, and well qualified to comment on expected cost impacts.
UnitingCare Australia is the national body for the
UnitingCare network. We deliver social services right across the life
course—for example, children's services, childcare, employment, disability,
housing, emergency relief and financial counselling. We deliver some hospital
service, a lot of aged-care—residential and community—and family services. I
would have missed a heap. Anything you can imagine we are delivering it in a
community somewhere across the country. We have about 1,500 delivery sites and
35,000 staff. … I speak with knowledge about my own network, but I think you
can extrapolate this to the broader community sector. In the same way we are
having a conversation in Australia about trade-exposed industries, I think
there are some exposed parts of the community sector, and they are the parts of
the community sector that rely heavily on electricity, water and fuel. That is
anything residential. Our disability services and our aged-care services use
not just a lot of electricity but a lot of water in a lot of what we do in
caring for and supporting residents. It is not unusual for our services
delivering particularly community based aged care but also other services that
involve lots of driving to be very exposed in terms of petrol prices. This is
in a context where electricity costs are increasing at between 11 and 17 per
cent a year anyway, so our services are being squeezed and there will be a cost
impact on our services.
UnitingCare Australia have highlighted an expected shortfall
between available compensation and expected cost impacts on the many services
In terms of the package, there are two elements that will
impact our services. One is clearly the household compensation package. That
will make a big difference in some of our residential services where there is a
user-pays component, as in residential care. That will make a difference. It
will not make all the difference and we do not anticipate it will close all of
the gap. There is the community funding bucket—I cannot recall what it is
called—of about $300 million from memory that you can apply for.
DCCEE Deputy Secretary Dr Steven Kennedy confirmed to the
inquiry that the $330 million Low Carbon Communities program is the sole avenue
for carbon tax compensation for the charity sector:
Mr CHRISTENSEN: I want to ask about compensation for the
punitive impacts it might have on not-for-profit organisations and charitable
groups. That is all contained in the Low Carbon Communities program; is that
Dr Kennedy: Yes, any direct assistance to those organisations
However, it is also clear from evidence to the inquiry that
seeking access to this centrally administered grants program will add to an
organisation's bureaucratic workload.
Low Carbon Communities is a grants and outlays program.
We spend a disproportionate amount of our time applying for
funding and then acquitting and complying with funding.
Some charitable organisations, such as the Royal Flying
Doctor Service, will face particular imposts as a result of the carbon tax.
While the government has claimed it will compensate them, it will still leave
them reliant on yet another rebate program, with all of the compliance and
paperwork issues that come with that.
On the issue you raised around support for services such as
the Royal Flying Doctor Service and those sorts of issues, at the release of
the legislation the government announced a full stream of the Low Carbon
Communities program. This stream is to be known as the Charities Maritime and
Aviation Support Program. It will offer a rebate for the carbon price impact on
essential maritime and aviation fuels used by organisations such as air and sea
Inevitably, in this space some services will be negatively
affected. Coalition members of the inquiry wonder about the impact on Angel
Flight, as an example, where people donate their own time, planes and fuel to
provide a service to charity. It would seem that these individuals will still
face the full impact of the increase in aviation fuel costs, unless each
volunteer is to be eligible for the rebates announced.
For those where a specific program component is not
established it is clear that a great number of organisations, not just those in
the charitable or welfare sector, will be competing for a limited pool of
Mr CHRISTENSEN: I want to go back to the Low Carbon
Communities program … out of the $330 million, only $200 million will go
towards not-for-profit organisations and local governments. That includes
everything from a local soccer club through to an organisation like Red Cross.
That amounts to something in excess of 600,000 organisations that would be
vying for that fund over a six-year period, after which it would then stop. So
I just wanted to know if your peak bodies have that understanding that this is
a competitive process and there is no guarantee that you are actually going to
get that compensation; and, if you did divide one number by the other, you
would find the compensation would be very low indeed, and it stops in six years
time—five years, actually.
Ms Hatfield Dodds: We are certainly aware of that…
DCCEE provided evidence that the Government expects the
shortfall between available compensation and expected cost impacts on community
organisations – as identified above by UnitingCare Australia – is expected to
be met by members of the community being compensated for the carbon tax to such
a great extent they are going to increase their donations to charities or charities
passing on increased costs to service recipients.
… the general compensation package that goes to individuals
and the way effectively the Treasury models this is they are purchased services
by people, so their income capacity in order to make donations is higher than
it otherwise would be.
Generous though Australians are, Coalition members of this
committee regard with great scepticism the Government's apparent optimism in a
greater reliance on charitable donations to bridge funding gaps created by the
carbon tax or a greater capacity of recipients to pay for services,
particularly given – as canvassed elsewhere in this report – that even with the
Government's compensation, millions of Australian households are still forecast
to be worse off under the carbon tax.
8. Key industries compromised
This section looks at the key concerns expressed by some of
Australia’s key industries, particularly but not exclusively those who are
emissions intensive trade exposed industries, which are likely to be hardest
hit by the carbon tax.
An underlying concern across these industries, and the wider
business community as well as households, is the carbon tax’s impact in driving
up the cost of electricity, especially coal-fired electricity generation. Even
Treasury conceded uncertainty surrounds some of the impacts on this sector:
Senator CORMANN: I refer you to page 3 of the updated
modelling, which says:
Similarly, the modelling does not include the planned closure
of 2,000 MW of electricity generation capacity of the most emission-intensive
power plants, as this requires assumptions about which generators close under
the tender process and when they close.
Given that many of these emissions-intensive power plants
produce very cheap electricity, would the closure of these plants put further
upward pressure on electricity prices?
Ms Quinn: It would depend on the timing of when the
generators were slated for closure and it would depend on how the system
adjusted to putting a price on carbon.
Senator CORMANN: But can you envisage any circumstances where
closure, when it does occur, would not lead to further increases in electricity
Ms Quinn: The electricity market is quite a complex
structure. The price of electricity is set by the price of the marginal
generator, so it would depend.
The Energy Supply Association indicated that their sector
will account for most of the emissions permits market, stating that they will “be
60 per cent of the scheme in its entirety, and we will probably be at least 90
per cent, if not more than that, of the auction market”. From their research the
costs of the carbon tax are significant:
The ACIL Tasman study did find that for coal fired generation
the cost of carbon would be the single biggest input cost. In fact, at a carbon
price of just $25 a tonne, it would increase total operating costs for a coal
fired generator by between 100 per cent.
The committee received substantial evidence about the issues
surrounding energy security and the carbon price, especially regarding the
stranding of assets and lack of compensation for the loss in asset value:
In terms of the implications for energy security we are
concerned about the level of assistance to coal fired generators. There will
not be a single dollar of compensation paid to black coal fired generators
under this scheme. From our perspective that does send a worrying message to
future investors in the electricity supply system.
Government modelling during the CPRS found that over the
first 10 years black coal-fired generators would suffer asset value losses of
$5 billion to $6 billion (real 2008-09 dollars)… The industry calls on the
Government to release the details underpinning the estimates for the reduction
in profitability of coal-fired generators as soon as possible. Figures
presented for losses in profitability under the CPRS and CEF only cover the
first ten years of the scheme, while the profitability of generators will
continue to decline beyond this period as the carbon price increases and
generators are prematurely retired. Asset value losses will require government
owners to inject further equity to their companies while for the private
sector, in addition to the likely equity call, refinancing will be made very
difficult as their commercial fundamentals are challenged. 
… the legislation needs to adequately address the stranding
of coal-fired generation assets. Just eight or nine out of the 31 baseload coal-fired
power stations will receive assistance. These are the power stations that the
community depends on to deliver energy security that we take for granted. Even
fewer will be eligible for closure payments. This could only be rectified by
increasing the quantum of assistance that will be provided to coal-fired
generators and to address the impacts on existing investments and minimise the
costs of future energy requirements.
… not all electricity generators that bear a significant
asset value loss are eligible for the scheme. It is estimated from Treasury
modelling that NSW and Queensland coal-fired generators that will not receive
any compensation could suffer a combined loss of $5-6 billion in asset value. 
Evidence was also presented that the timing of payments
required of electricity generators under this model will likely add to the
price impacts on electricity services, potentially up to 15 per cent for large
I would like to focus on the second issue I mentioned, which
is working capital and permit auction design. Electricity contracting, which is
usually at least three to five years in advance, is a critical feature of the
national electricity market, to manage risk and uncertainty around potentially
volatile spot prices. As carbon units will be a significant cost in energy
production going forward, the energy industry will need to secure prices for
emission permits years before it can commit to sell electricity or gas, both in
the current year and in future years under forward contracts.
As set out in the government's own investment reference group
report, generators will need to hold positions well in excess of $10
billion—more than $4 billion worth of units to comply with current-year
obligations and positions on a further $6 billion worth of units to support
forward electricity contracting. Generators will not have the cash flows to
settle permit contracts years in advance of when they receive their revenues
and when the emission liability actually occurs. Generators may be unable to
lock in a future price for carbon and will be therefore unwilling to continue
to offer fixed-price forward electricity contracts.
ESAA has contracted ACIL Tasman to undertake a quantitative
study of the likely impact of the reduced levels of electricity contracting on
electricity prices, and the results are striking. Even just a five per cent
reduction in electricity contracting could result in at least a 10 per cent
increase in a single year for small end users. That could be up to a 15 per
cent increase for large users. This is the same level of price increase the
Treasury forecasts from the carbon price itself, and we could see that in
addition to the carbon price in just a single year. If contracting were to
unwind further than that, prices could increase by even double or four times
this. The market is also forecast to be significantly more volatile.
Currently, probably about 80 to 85 per cent of energy in the
electricity market is contracted. The reason for that is the spot market can be
quite volatile. So it provides almost a hedge arrangement in the way the
wholesale market operates. We asked them to reduce contracting by five per
cent. Under that scenario, retail electricity prices increased in a single year
by around 10 per cent for small users and about 15 per cent for large users. We
asked them to do that because our view is that if you are forced to pay for
your permits up-front, and certainly the government's proposal through this
legislation is that they will seek their cash up-front and in the door for
permits that are three to five years in advance, generators will have to back
away from some of their electricity contracting because they will not be able
to afford to lock in a price for carbon, which would make them unable to lock
in a price for electricity.
'Compensated forever' does not read well when an $18 billion
impost has added to it a $1.7 billion increase in fuel tax, to make up about
$18 billion, and has subtracted from it $1.3 billion to leave an impost of
$16.9 billion. One has difficulty with the idea that the industry is being
As is canvassed elsewhere in this report, the impact of
electricity prices is all pervasive throughout the economy. This point was
highlighted by the Australian Chamber of Commerce and Industry:
Our members in different sectors, such as plastics and
chemicals, food processing and the metal sector, have actually done our own
work where we actually used the Treasury's electricity price impact, which we
believe is understated, and fed that through our own financial models. It shows
a substantial fall in the profitability of those particular enterprises.
It won’t just be coal-fired power generation that will be
hit by the carbon tax, but coal mining itself will also bear the cost. The
importance of coal mining as an export industry was brought to the attention of
Black coal is Australia’s second largest export, (expected to
earn $55 billion in 2011-12) and underpins the security, reliability and
comparative low cost of Australia’s electricity supply. Our industry is a
significant employer with more than 40 000 direct employees and a further 100
000 indirectly employed in companies, many of them SME’s in regional Australia.
However, the inquiry then received extensive evidence
regarding the potential for reduced competitiveness within this key export
Our industry notes that the carbon tax is an $18 billion
impost on the coal industry and it means that the industry ends up paying,
under this particular construct, for about two-thirds of the estimated $25
billion worth of wealth transfer to households, renewables and agriculture. The
specific exclusion of the black coal industry from qualifying for trade exposed
industry status is an unjust and unfair treatment of the coal industry. That in
particular is a fundamental flaw that we see in the bills which the committee
is considering. The primary issue is that the carbon tax will undermine the
industry's international competitiveness and that, whilst it is important to do
things to make a difference, it is important not to do things that do not make
a difference. So to take steps that simply take the country and its wellbeing
backwards does not strike us as a useful way to go forward.
The industry has serious concerns about the efficiency, fairness
and competitiveness impacts of the CEF legislation. The net impact of the
proposed carbon tax will be to crimp coal industry jobs and investment. Because
this is not a cost our coal competitors will face the outcome will have minimal
impact on global emissions as coal production, and the associated jobs, will
simply move offshore. 
The globally competitive nature of the industry was
identified, along with those countries who are key trading competitors to
Australia but do not have a comparable carbon tax in place:
Senator MILNE: Okay, but what about the externality for the
coal industry to be priced? The fugitive emissions are an externality of
coalmining, are they not? Should they not be included in the price?
Mr Pegler: Only if you want to make sure that we give away
the competitive position of Australian coal to other sources in Indonesia,
South Africa, Mongolia, Mozambique, Colombia and so on and so on and so on,
where none of those things are happening.
The industry identified that, despite claims of energy
transformation taking place in other countries, the demand for coal is expect
to be strong and, if Australia loses its competitive position, the export
dollars and emissions (potentially even higher emissions) will shift elsewhere:
Senator CORMANN: Do you expect global demand for coal to
Mr Pegler: No, I do not.
Senator CORMANN: If it does not, as you say, but Australian
coal becomes less competitive internationally because of a carbon price in
Australia, outside an appropriate comprehensive global framework, and if your
competitors overseas take market share from you and if, as you say, global
demand for coal does not reduce, what will that do to global emissions?
Mr Pegler: Under that sort of scenario, it is quite possible
for there to be no impact on global emissions.
Senator CORMANN: How realistic is that scenario?
Mr Pegler: You could say that, if other countries do not take
steps, it will swamp the impact of the things that happen in Australia.
Senator CORMANN: Do you see your competitors around the world
taking steps to impose a carbon tax to a level similar to what is imposed in
Mr Pegler: No, I do not see our competitors around the world
taking on board a structure similar to the one being put forward in Australia.
Senator CORMANN: To summarise—and I only get a short period
of time—if you say to us that global demand for coal will stay the same—
Mr Pegler: Increase, in fact.
Senator CORMANN: Increase, in fact. Global demand for coal
will increase. A price on carbon in Australia outside an appropriately
comprehensive global agreement will make us less competitive—
Mr Pegler: Correct.
Senator CORMANN: than suppliers in other parts of the world.
All we are really doing is shifting emissions to other parts of the world,
arguably, to areas where there will be higher emissions rather than reducing
global emissions. Is that not a fair comment?
Mr Pegler: That is absolutely correct.
Industry argued that research conducted by Treasury for the
Government backed up its claims:
the best single piece of research was done by Treasury. The
2008 modelling exercise projected that the then CPRS would reduce investment in
coalmining by 13 per cent. It was not the Minerals Council or the Coal
Association producing this work; the Australian government Treasury produced an
assessment of the impact on investment in this country by 2020 of a very
comparable model, and the impact was minus 13 per cent. Our figures were
relatively similar, and that translated into 23,000 jobs across various parts
of the minerals-producing and minerals-processing sector in this country.
Unfortunately the 2011 Treasury modelling does not include the table which
assessed the impact on investment by 2020 in particular sectors. That is a
great shame for us.
Suggestions for how this impact could be reduced were made,
but have been ignored by the Gillard Labor Government:
We would have said and will say anyway that we believe that
two simple changes could be made to the proposed law that would have a
significant impact on the trade exposed coal industry and that would also, we
think, have widespread community support. These are: adopting a phased approach
to the auctioning of emission permits for trade exposed industries; and phasing
in the inclusion of coalmine fugitives in step with Australia's coal export
competitors and over a time frame consistent with the development of fugitive
abatement technologies from the current experimental stages to safe, reliable,
deployable equipment and processes at commercial scale.
Coal isn’t the only energy source that will be hit by the
carbon tax. Australia’s LNG industry will also take a hit to their
Australia’s LNG projects face fierce global competition. Australia’s
major LNG competitors include Qatar, Indonesia, Malaysia, Trinidad &
Tobago, Oman, the United Arab Emirates, Egypt, Equatorial Guinea, Nigeria,
Algeria and Brunei. In the future they will include PNG and Russia and could
even include the US, on their back of their enormous shale gas developments in
recent years. In addition to exporting LNG, the one thing they have in common
is that very few are taking any action to put an effective price on carbon and
indeed, many are likely to be at the bottom of the list of countries who will
be taking action in the foreseeable future. All of Australia’s major LNG
competitors have not taken on binding emissions reduction obligations and do
not have policies that place an “effective” carbon price on their LNG
exporters. This means that Australia’s LNG exporters are amongst the most
trade-exposed of all Australian exporters. They cannot pass increased costs on
to consumers and any loss of international competitiveness would benefit Australia’s
international LNG competitors or suppliers of alternative, higher greenhouse
gas emitting, energy sources… the carbon pricing mechanism will apply well in
advance of comparable action being taken by many nations with which the LNG
industry competes. In doing so, it exposes the Australian economy to higher
production costs than those competitor countries that have not implemented
emissions reduction policies. 
LPG producers also expressed their concerns about their
treatment in the legislation proposed, which they say will disadvantage them
compared with more emissions intensive alternatives:
Mr Neilson: You are putting a cost on an industry that is not
warranted and then, at the same time, you are trying to get abatement in these
remote areas, which just does not make sense. You are saying that, if you are
in the city on a natural gas pipeline, all those costs to the consumer are
controlled by the retailer who is doing that work, but if you go outside the
cities into the country areas the marketer or the person who has the supply to
that area has to wear the whole cost. The costs cannot be contained—you have to
pass them on.
Senator BIRMINGHAM: In your submission on the exposure
drafts, you have said clearly that the system proposed for the LPG and its customers
is a tax, not a policy for clean energy. There have been no changes to make you
change your position on that?
Mr Neilson: No.
The minerals, energy and mining sectors have been
instrumental to Australia’s recent economic success. Yet consistently they
argued that the carbon tax aims to damage the very sector which helped to see
Australia through the global financial crisis:
The CEFP will add significant costs to doing business,
including those in the mining and mineral exploration sector and those that
service them, for little or no global environmental gain. The cost will be
borne disproportionately by the mineral exploration and mining sector because
companies will have little opportunity to reduce costs through alternative energy
The Minerals Council of Australia provided particularly
detailed evidence on the proposed treatment of Australian industry under
Labor’s carbon tax compared with experience in other parts of the world,
especially the EU:
If there are 500 big polluters, 100 of them are mining
companies. They will be paying full permit price on all of their emissions. In
Europe an industrial firm which is not considered trade-exposed only has to buy
20 per cent of its permits in the first year. This is in the ninth year of
their scheme. They only have to buy 70 per cent by 2020 and they by all of them
only in 2027 … 72 per cent of European merchandise exports will get assistance;
20 per cent of Australian firms responsible for merchandise exports will get
Many firms who are designated to get trade-exposed assistance
in Australia would be better off in Europe being classified as
non-trade-exposed, because in that first year trade-exposed firms in Australia
on the second tier get 66 per cent of their emissions reimbursed in the form of
free permits. In Europe, you start at up to 100 per cent for trade-exposed
firms and those that are not considered trade exposed buy only 20 per cent of
their permits. Under any of those measures, an Australian firm would be better
off in Europe than they are here. Bear in mind, 43 activities in 25 Australian
sectors receive assistance; 151 sectors in the EU receive assistance. So there
are 125 sectors in Europe that receive assistance that do not get it in
I will speak for our sector: we looked at 13 commodities—top
four producers and-or exporters—and we could not find a single commodity in any
of those countries that was subject to a comparable carbon price. The only one
we could find was coal in Poland, but as John Pegler from the Coal Association
has pointed out, fugitive emissions in Europe are excluded from the coverage of
that scheme. So, inevitably, production will ultimately transfer to lowest cost
producers. That is not an economic proposition that is limited to the minerals
sector. We produce less than 10 per cent of any commodity of the top 10
commodities, so we do not have market power; the world does not owe us a
living. Production can shift from a higher emission carbon-tax-free
destination. That is inevitable if we move ahead with the world's biggest
carbon tax and other countries do not follow.
The Council argued that there was even more reason for
Australia to provide appropriate consideration to its mining sector than there
is in the EU, given the different compositions of our economies:
Mr Pearson: Services clearly play a more important role in
Europe than they do in Australia. Europe has a very different economic
structure. Despite the fact that Europe is less reliant on mining than
manufacturing, the European Union has designated its gold industry as trade
exposed and at risk of carbon leakage. It has a small iron ore business and non
ferrous businesses. Despite the fact that Europe is less reliant than Australia
on minerals and minerals processing, it has gone further to ensure that those
sectors are shielded from global competition, until other countries act. In my
book that is counter intuitive.
Senator CORMANN: Given all of that and given the risk of
shifting emissions to other parts of the world resulting in increased global
emissions, it stands to reason that Australian policymakers should be more
cautious in our approach as to how we structure any carbon pricing regime as
part of a global agreement than they have been in Europe. The risk for us is
higher than the risk for Europe, yet Europe, on the face of it, is way more
cautious given what is proposed here in Australia, when really it should be the
other way around, shouldn't it?
Mr Pearson: I would have thought it made sense for Australia
to at least shape our scheme around the same sorts of protections that the
European scheme has. The European scheme is not perfect but it has certainly
taken much greater care to transition its industry sectors to protect them
until other countries act. According to their climate commissioner, who was
here recently, it has been effective. They have had a carbon market established
since 2005 with minimal tax raised, but the carbon market functions.
Even the CFMEU, whose ignorance of their members concerns is
addressed in section 2 of this report acknowledged that overseas mines which
compete with the employers of their members do not face a carbon tax on their
fugitive emissions, as is proposed under Labor’s plans for Australia.
Again, the risk of not just carbon leakage, but transference
of production to countries with an even higher emissions profile was considered
a real one:
Senator CORMANN: If we indirectly make overseas producers
more competitive than equivalent producers in Australia, is all we are doing
shifting the problem to other parts of the world, arguably into areas where the
problem is going to be bigger than it would have been in Australia?
Mr Pearson: Even some of the coal produced, for example, in
other countries is a higher ash, higher emissions intensive product and so the
impact is twofold.
The potential impact on the industry wasn’t only
acknowledged by the industry bodies themselves; the potential reduction in
future jobs in some regions and some parts of the mining industry was also
acknowledged by other witnesses:
The Minerals Council of Australia put out some work with
respect to the emissions trading system which I think was technically very good
work. That was in 2008-09. They have agreed essentially, publicly, with those
projections in the most recent debate and have used a figure of 23,510 job
losses from the mining sector over that 10-year period after which the ETS was
going to operate.
The Law Council of Australia also highlighted the confused
and uneven treatment under the carbon tax of different business ownership
structures, which risks presenting yet another impediment to ongoing investment
in the critical mining sector:
Nearly any mining enterprise in Australia will generally be
set up as an unincorporated joint venture, so you might have three joint
venturers operating together. However, typically they will delegate the
operation of the mine to another party—it could be a joint venturer, it could
be a related party of the joint venturer or it could be a third-party operator.
The point is that under the legislation it will typically be the operator who
assumes 100 per cent of the carbon liability. It is the entity that has to go
out and purchase the carbon units and surrender them. The bill has a provision
under which that operator, with the agreement of three joint venturers, can
actually have the liability transferred from the operator to each of the joint
venturers in proportion to their joint-venture interests, so a 10 per cent
joint venturer would be liable for 10 per cent of the emissions. That does not
apply where the structure adopted is a partnership. Partnerships are also very
common in the energy and mining industries. For example, a number of the power
stations in the Latrobe Valley are actually owned by partnerships, not
unincorporated joint ventures. Therefore, there is a distortion in the
treatment of carbon liability for unincorporated joint ventures and
partnerships, which to all intents and purposes economically speaking are much
The next issue in terms of joint-venture interests is that
the bill does not make it clear where the joint-venture interests change over a
year within the same joint venture how the carbon liability is to be borne by
each of those joint venturers. It is not uncommon to have joint-venture
interests undergo realignment—for example, where one joint venturer defaults,
typically the other joint venturers will pick up that entity's interests. The
bill is unclear as to how the joint venturers calculate their carbon liability
in that case. That would be an area we suggest needs some fine tuning and
The inquiry heard that emerging sectors faced particular challenges
under the carbon tax, such as the magnetite sector:
… we add value in Australia to what are otherwise unsaleable
ore bodies in order to produce a high-value product. We have been in dialogue
with the government on the design of the carbon tax and its predecessor, the
CPRS, for a considerable time but, to be frank, it just seems that that is
falling on deaf ears. Whilst it finally seems that we might be getting some
sort of support, we do not know the form of that. At the moment, as it stands,
our industry looks as though it will get nothing.
Our industry is emerging. It is a growth industry and it
ticks a lot of boxes. On a global basis it reduces CO2 emissions from steel
making, so it is making cleaner steel products using magnetite as feedstock. The
value-adding in Australia is processing poor-quality ore produced to
high-purity concentrate and, whilst we have a lot of energy in Australia, the
net benefits to the globe are proven. The industry also creates long-term jobs
and investment in rural and regional Australia. Many of our projects have a
project life in the decades, if not in the centuries.
Selected MagNet member projects in Western Australia alone
represent an initial capital investment of some $18 billion, an estimated $9.5
billion in annual export revenue, more than 12,000 direct construction jobs and
direct permanent jobs for more than 4 000 Australians. 
The punitive domestic carbon tax is a disincentive to
investment. We are not talking about government handouts; we are talking about
setting policies that avoid perverse outcomes that penalise an important
industry like this. We are developing and have pretty good investment decisions
at the moment, and there is a fair bit of uncertainty around the carbon tax
that is hampering that.
As with the Coal Association, it seems the magnetite
industry have proposed alternatives to government that go some way to
addressing their concerns, which to date the Labor Government appear to have
… what we propose is that there needs to be a separate
activity definition for what we call ultrafine magnetite concentrate. That
would enable some certainty for all of these new projects around the fact that
there would be a provision. Otherwise, we are left to some, frankly, very vague
This is creating uncertainty and is already having an impact
One of our members, Atlas Iron, has gone on the record in
relation to investment uncertainty around its magnetite projects and an
investor who withdrew from negotiations—I believe that was the term that was
used—over both the carbon tax and the minerals resource rent tax and the
uncertainty surrounding those two matters.
And if not rectified soon they believe Australia will lose
the opportunity to capitalise on this emerging industry sector:
We are seeing massive expansion in places like Brazil and
West Africa. We are arguing that there is a kind of a window to get these
capital investment decisions made here in Australia now, bearing in mind that
it takes four to five years to get these projects constructed before they can
export. So, whilst we say there will be more global supply, the critical issue
for Australia is to ensure that there is a pipeline of projects under
construction here so that, when there is extra supply, we will be well and
truly a part of that global market. I think it is pretty clear that the Chinese
steel mills, being such a big percentage of the demand globally, would like to
see greater diversity of supply, and this is Australia's big chance to provide
that diversity of supply, but that is not something that will always be
possible in the future.
It may be more established, but the chemical lime industry
also reported an uncertain future under the carbon tax to the inquiry:
Lime is a very diverse chemical. It is widely used in
manufacturing areas such as steel production, aluminium, paper, water quality,
air quality areas and construction materials. We are a regionally based
industry. We have 20 operating sites in Australia—a lot of plant. Plant is
located for longevity, so 30, 50, 100 years existence. We are capital
intensive, greenhouse intensive, energy intensive and technically intensive.
The treatment of process emissions poses a particular
problem to this and other industries:
Fifty-six per cent of our emissions come from the raw
material that we use to make lime, so we do not have an option as to how we can
reduce those emissions. One of our points today will be about process
emissions. Thirty-nine per cent of the emissions are in the stationary energy
sector, through fuelling kilns in order to produce lime. Four per cent comes
from electricity and about one per cent from transport energy.
Process emissions, which come from the conversion of calcium
carbonate into calcium oxide, therefore emitting carbon dioxide, have no
relationship to energy or energy efficiency. There is nothing we can do
specifically to address those process changes. That is part of the cake mix, if
you like. It would be like trying to take flour out of a cake mix. The industry
therefore sees the impost of a carbon price on those emissions as not being
productive in terms of reducing Australia's greenhouse footprint, contributing
to any of the objectives of this scheme.
Industry argued that these emissions are unavoidable:
Process emissions come from taking the absolute and only raw
material and converting it into the product, and unless someone comes up with
another raw material for making lime there is nothing we can do about the cake
mix. We can do things about energy, and we are doing things about energy—there
is enormous investment in the industry into making energy efficiency—because
that is the element that keeps competitiveness with imports out.
They further highlighted this problem through reference to
the EU scheme:
when it comes to investing in a kiln, we buy that technology
from Europe. I think it is worth noting that after six years or whatever it is
of the European scheme being in place, we are not seeing any new technology in
lime production coming through from Europe. There is nothing that is going to
provide us with a stepped change to our emissions.
Associated with the problems faced by the industry under the
carbon tax, they point to the limited activity definition applied to their
production and therefore the extent of compensation available, as well as the
decaying of that compensation over time:
The lime industry will receive 94.5 per cent. It is across
only the kiln operation, so it does not include the winning and excavation of
material into the process and it does not include any downstream processing of
lime. We still have a degree of debate currently with the department over what
is and is not included. For example, there is one process that we have that we
believe should be part of that calculation for assistance. That is currently
being discussed with the expert advisory panel. The 94.5 per cent will of
course decay at 1.3 per cent during the course of the following years and that
is of serious concern to the industry. We are very much lineball with imports.
It does not take much of an import to actually knock off the industry. What you
need to understand is that you can run a kiln process on or you can turn it
off; there is no in between time. So even if imports take over a portion—10 or
20 per cent of that production—you lose the capacity of the kiln that makes it
economic to continue, so you need to shut the process down, and that will
change the industry significantly.
The administrative requirements of the carbon tax scheme were
also described as “quite taxing”
while other features of the legislation were highlighted as creating great
The CEF is described in 3 stages implemented over 7 years. In
the first stage 3 comprehensive reviews by the Productivity Commission will
influence the CEF’s direction and conditions. This places EITE industry with no
more than 5 years of assistance certainty and even less certainty in the scope
of the overall scheme. The Lime industry is capital intensive and has long
associations with its location and technology. 3 to 5 year horizons are short
term planning insufficient for business investment certainty. The CEF
legislation in draft and without regulations 9 months before the program start
has seriously jeopardised 2012 budgets for the industry and gives no time for
systems to be implemented to manage the complexity and impact of the change. 
We have also struggled with the extensiveness with which the
bill changes the way our accounting methods have to operate, and that means
that we are basically across all areas of the business structure in terms of
change. Given that the regulations for managing this bill are not going to be
through until March next year, this is a great area of uncertainty for our
Unsurprisingly, this causes a significant impact to the lime
industries competitiveness, with the industry already having recent, firsthand
experience of its trade exposure:
Senator CORMANN: With the carbon tax as it is proposed, how
will that position your industry from an international competitiveness point of
Mrs DeGaris: Until December 2009 the industry had always
provided for the needs of Australia's lime market. When in 2009 it looked as if
the CPRS was going to go through we immediately saw an import established in
Western Australia—in your state, Senator Cormann—and that has severely knocked
the industry around in Western Australia. The establishment of imports from the
Thai company came within three months. They came across and did a trade visit
around Western Australia and the Northern Territory and within three months had
established for themselves a footprint for using our own infrastructure to
supply the mining industry and so on. So it was very, very quick.
Senator CORMANN: What is the emissions intensity of your
competitors, to the extent that the carbon tax in Australia makes your
competitors overseas more competitive and helps them take market share away
from your members here in Australia? What is the emissions intensity of your
competitors overseas? Is it possible that emissions would actually end up being
higher rather than lower, assuming that demand for lime and so on would stay
Mrs DeGaris: We have done a study on that, and the Australian
footprint for emissions is lower than our competitors' internationally when
looked at country for country. You can certainly find a plant and compare plant
with plant, but if you look at the country emissions versus the country
emissions we are competitive here in Australia in terms of carbon leakage.
Movement of product to be manufactured overseas would certainly increase the
Senator CORMANN: So, to the extent that overseas competitors
take market share away from you, not only will it result in a reduction in
economic activity in Australia but it will actually lead to an increase in
Mrs DeGaris: Yes.
Experts from the Australian National University agreed that
process emissions needed special treatment to minimise the risk to industries:
That is right. You are picking a product where there is a lot
of process emissions that do not differ a lot between countries. That is a
perfect example of a product where, in the transition to a more uniform
international system of mitigation, you would be putting in place safeguards to
avoid unnecessary or counter-productive relocation of industries.
Lime is of course a key input to the cement industry, which
will equally be hit on all fronts by rising lime and input price rises,
increased transport costs, the carbon tax applying to process emissions and
soaring electricity charges:
The Australian cement industry recognises the threat that
climate change poses to our natural environment. We have been working
diligently on this challenge for well over a decade and have developed and
maintained a verifiable emissions database extending back to 1990. Since that
time the industry has maintained carbon dioxide emissions at 108% of 1990
levels while increasing production by 40% and reduced the carbon intensity of
its product by 24% per tonne.
Based on the current details included in the proposed Clean
Energy Future Package (CEF) … Australian cement manufacturers will be
required to assess whether to produce cement locally, to import clinker for
cement milling in Australia or to import cement. This decision will be made based
on their overall competitive position relative to imports, including their
ability to pay the proposed carbon liability. In the long run cement closures
will occur, thus exporting jobs without changing global emissions unless our
Asian competitors introduce a similar carbon price.
Emissions Intensive Trade Exposed (EITE) ‘free permits’ for
Australian cement manufacturing are proposed to be limited to clinker
production and will exclude cement milling. As a result, only 86 per cent of
cement CO2 emissions will be covered by ‘free permits’ in July 2012, with the
clinker component declining annually at a rate of 1.3 per cent (known as the
‘carbon productivity factor’).
While the industry can understand the reasoning for a ‘carbon
productivity factor’, the one size fits all approach makes no recognition of
the fact that 50 per cent of the emissions from cement manufacturing cannot
possibly be avoided as they are produced as a result of a chemical process in
changing limestone to first stage of cement production, known as clinker. This
will mean that carbon reductions from the remaining part of the cement
manufacturing process must be found at twice the rate compared to other EITE
Based on current estimates, cement manufacturing net profits
will decline by approximately 22 per cent by 2020 as a result of the Clean
Energy Future Package. 
Again, the industry highlighted the different treatment of
their product in other countries:
No other country’s cement sector will be left exposed as the
Australian cement industry … New Zealand’s cement industry definition
covers both clinker and cement (this will become very important as Australia
changes to an ETS in 2015 with the potential to link schemes through forums
such as the Australian-New Zealand Closer Economic Relations (NZCER) … The
European Union has provided free permits to domestic cement companies
that will protect it from the true impact of a carbon price for many years … The
California Government has halved the decay rate of free permit
allocation for the cement sector (meaning that the level of support over time
is higher for cement compared to all other commodities). 
This again highlights just how far in front Australia is
getting with its carbon pricing scheme compared to any other proposal around
It’s not just mining or heavy industry that will be under
threat thanks to the carbon tax, nor the other industries or groups identified
elsewhere in this report, but large service providers also face the potential
for huge impacts. Bond University claimed in a submission to the inquiry that
it will face significant new costs:
Bond University has estimated the impact of the proposed
carbon tax on the University. It will affect Bond both directly and indirectly.
It will directly affect Bond when we exceed the threshold (which we expect will
be in 2012/13), approximately costing initially between $650,000 and $760,000
in direct costs at the price of $23 per tonne. In addition Bond will be
affected by the indirect costs which include the increases in electricity,
travel and wages which we estimate will cost an additional total of $1.3
million, leaving Bond with a total impact on the bottom line of $2 million per
Bond’s expenditure comprises around 0.7% of sector
expenditure. If we were to scale up Bond’s estimated proposed carbon tax impact
of $2 million per year to the sector level, this means we would have a sector
wide impact of the proposed carbon tax in the range of $200-300 million. 
Bond University identified two options it would have to
consider if these costs of the carbon tax materialise over the coming years:
either increase revenue by raising fees or reduce costs through a reduction of
Both, ultimately, have a negative impact on students.
It seems that wherever anyone turns, the carbon tax will
have an impact.
9. Crippling competitiveness
Industry assistance neither adequate nor guaranteed
Labor has made much of their own claims that assistance for
industry will preserve competitiveness and protect jobs. Those whose
businesses will be directly affected are not convinced:
The fixed carbon prices within the policy are unnecessarily
high and disruptive, and are out of step with current international carbon
prices … The grants package for manufacturers, while welcome, does not address
the up-front cost impact that businesses will face before energy efficiency and
emissions reduction projects can bear fruit. These transitional impacts are
severe in some cases, particularly where industries fall short of the
thresholds for the Jobs and Competitiveness Program (JCP)… 
Alarmingly for the small number of businesses who have been
promised some assistance so as to partially offset the impact of the carbon tax
on their viability of competitiveness it seems that such assistance is far from
guaranteed and is actually dependent on the political priorities of the
government of the day. In a move which can only add to uncertainty for
business, the Department of Climate Change and Energy Efficiency has confirmed
that industry assistance may have to be traded reduced if government promises
of continued consumer assistance are to be met from within the budget:
Senator BIRMINGHAM: Can the fiscal impact of keeping
compensation measures to households up with the adjustments in the carbon price
be met purely from within the government's revenue stream from the sale of
Mr Comley: It depends what happens with other elements of the
package. I do not think I could go into a hypothetical discussion of what may
or may not change in the second half of the decade or beyond.
Senator BIRMINGHAM: So to meet it within the government's
income stream you may have to reduce industry assistance further to be able to
pay for household compensation?
Mr Comley: Not necessarily, except for those elements of
industry assistance that have already been preannounced will cease. For
example, there is the Energy Security Fund effectively over six years that will
cease and will no longer be a call on funds after the first five-year period, but
there could be other elements of the package that change over that time frame.
Senator BIRMINGHAM: In terms of the work you have done as to
what could happen beyond the forward estimates, you are relying upon the
expiration of programs that have been announced to date to fund by any means
the upkeep of household compensation?
Mr Comley: Not necessarily. I just pointed to one that is
actually quite significant—in the order of $1 billion a year—and programmed to
end because it is a one-off transitional assistance fund. How a government
would deal with any assistance beyond that period would be more speculative.
This uncertainty for industry is exacerbated by a number of
the mechanisms contained within the carbon tax bills:
The extensive, almost continuous review processes create a
large degree of uncertainty and risk. This does not provide industry with certainty
regarding policy direction to allow for investment in lower emissions
technologies. The current proposal creates further uncertainty and transfers
the risk to industry because it can be reasonably foreseen that there may be
delays or complexity in the Productivity Commission assessing any comparable
price on carbon being placed on foreign competitors. 
Leaving clause 156(3) as currently drafted dilutes what has
been communicated as a certain part of the policy, to something that is simply
a possibility. This forces the emissions-intensive trade exposed sector to
carry all the risk; including for Government delays, difficulties in assessing
other countries’ policies and changes in interpretation. This is not
reasonable, particularly given that all those factors are outside the control
of the emissions-intensive trade-exposed sector. It should be noted that this
is more than a simple hypothetical scenario. Given the current state of
international progress in implementing carbon costs, it is highly likely that
in 2015 many industries will be facing the situation that less than 70% of
their competitors are paying a comparable carbon cost. 
For trade-exposed industry, the Jobs and Competitiveness
Program (JCP) introduces a range of new uncertainties that may restrict
investment in abatement and new production… It is proposed that the
Productivity Commission will review the JCP three times in five years between
2014 and 2018. The PC has the scope to recommend a complete recasting of the
JCP scheme and radical changes to the treatment of individual activities, the
prospect of which is likely to undermine the business case for any investment
in emission reduction in JCP industries in the next five years. 
Others already know that the so-called assistance they may
receive is likely to decline and be eroded over time, regardless of how
emissions intensive or trade exposed their industry remains into the future:
This limited and declining assistance fails to secure the
ongoing competitiveness of Australian LNG. It also fails to recognise that the
exposure of Australian LNG does not decline gradually year on year; rather it
is linked to Australia‟s
LNG competitors adopting similar carbon costs.
Some sectors fear that although they may not meet the
original definitions required to receive assistance the failure to do so may
see them become increasingly exposed very quickly:
Other sectors may become increasingly trade exposed, in part
as a result of carbon pricing and should be eligible for assistance when this
occurs. Therefore the CEF needs to address sector specific needs rather than
arbitrary cut-offs. The insulation industry is a case in point. CSR’s
insulation business, Bradford Insulation is trade exposed but because the CEF
does not address sector specific needs and includes arbitrary cut-offs, this
business will receive no transitional assistance. 
While in the short term the Government is committed to
providing some assistance to some industries, the unavoidable fact remains that
many businesses will not receive any compensation while their competitors face
no similar or comparable cost on emissions incurred as a result of doing normal
… when we look at our trade competitors—not our trade
partners but our trade competitors: countries such as Brazil, Canada, South
Africa and, to some extent, the USA—we cannot see any movement by them towards
an international agreement. Our fundamental view is that if we move
unilaterally and not in concert with, in particular, our trade competitors,
then we are going to be at a substantial economic disadvantage.
With competitors not facing a carbon cost, businesses know
that they are going to take a hit to their competitiveness on international
markets and jobs. The already struggling manufacturing sector will particularly
be under threat:
Mr Evans: You can hardly see that a tax would make us more
competitive. In the economic circumstances in Australia at the moment, we are
seeing job shedding in manufacturing. We have lost 100,000 jobs over the last
one to two years. There are now under one million people employed directly in
manufacturing. A carbon tax will only contribute to the loss of jobs in that
Senator CORMANN: Treasury modelling shows a reduction in real
wages compared to business as usual. How realistic is it that unions and
employees across Australia will accept a reduction in real wages while facing
increases in the cost of living as a result of the carbon tax?
Mr Evans: We find it very hard to understand why union
leadership would be promoting a carbon tax, because it is unambiguously bad for
Australian jobs and it is unambiguously bad for their members. So we are in a
position where it is left to the business community to stand up for their
employees and their workforces in terms of trying to promote the
competitiveness of those businesses and security of employment.
With the high Australian dollar, global financial markets in
turmoil and the risk of another downturn many witnesses and submitters argued
that this is the worst possible time to be adding another burden on Australian
businesses, especially one not faced by competitors. They argue that it is just
making a difficult situation worse:
… only last week we released the ACCI-Westpac Survey of
Industrial Trends—at 50 years, the oldest business survey in Australia right
now. It surveys the circumstances of manufacturers. From that survey it is
clear that the overwhelming view of respondents is that business and consumer
confidence is at a low level—the lowest it has been since the GFC. They are
concerned about international circumstances, but one of the other responses was
that they are very concerned about the domestic situation as well. Without
prompting they mentioned that the carbon tax was having a negative impact on
confidence in their business and contributing substantially to uncertainty.
These are manufacturers—the most exposed people to the carbon tax. They can see
that not only will they have higher energy prices but many of their imports
will go up in price as well. That uncertainty is plaguing them at the moment.
Our concern is why you would want to impose an additional tax on top of all the
other competitive pressures that they are facing at the moment.
The high A$ is already hurting our exports and this tax will
make it even more difficult for many of these businesses to continue to export.
The loss of exports will in many cases reduce production volumes and so
increase unit production standard costs with the inevitable result that many
businesses will no longer be able to compete and be forced to close their doors
and throw hard working Australians out of work into a job market of diminishing
Even advocates of the carbon tax bills, such as the Investor
Group on Climate Change, accepted that if Australia undertaking actions that
increase the disparity of returns between Australia and overseas that will
influence investment decisions. 
Other witnesses also felt strongly that the lack of similar global action will
cost Australian business dearly and will make Australia a less attractive
investment location, depriving future generations of economic opportunities:
… the issue is not that we as the magnetite industry are
opposed to being part of a global carbon trading system—in fact, far from it
because of the clear benefits in life cycle that come from our product.
However, at the moment, because this tax is being imposed unilaterally in
Australia that has the unintended consequence of reducing the amount of capital
that is going to come to Australia to develop this industry…
There was also concern that the Government is demonstrating
a fundamental lack of understanding of the Australian economy and our role in
the global supply chain:
I think that we have to understand for what purpose our
emissions are being generated. Thirty-three per cent of Australia's emissions
are embedded in our exports. In other words, other countries have said, 'We do
not have the resources endowment or the land to produce beef, gold, nickel,
coal or iron ore but Australia does. So we will subcontract you, Australia, to
produce those goods.' Through the act of subcontracting Australia to do it,
their emissions are lower, because they do not have to produce all of those
products within their national boundaries. So, in the world division of labour,
Australia performs that task. We have a comparative advantage do so. That is
why, as I said, 33 per cent of our emissions are embodied in exports. The
comparable figure in the United States is about eight per cent.
The effect of that is to exaggerate Australia's emissions per
capita and to artificially lower the emissions per capita in the country of
purchase. Belgium has lower emissions because it imports Australian beef, which
emits methane. Counting emissions by where they are produced is a far inferior
option to counting emissions where they are consumed. We would be much better
off if the international and national debates focused on that and not on this
very artificial 'Australia is bad because it performs a task for others.'
…the scheme will inevitably hinder investment and jobs growth
in Australia without meaningfully reducing global carbon emissions. It will
undermine Australia's international competitiveness and hurt the nation's
export-competing industries. 
Even with regard to the interaction of this new tax with
other parts of the tax system the carbon tax appears to have been ill thought
out, with the Law Council of Australia suggesting that:
… the Package requires amendment [regarding] the taxation
treatment of those who hold emission units. Those provisions create tax
liability for holders of units in ways which contradict the fundamental
principles underpinning the income tax and GST legislation, in that they, among
Tax the increase in value of an emission unit over a year,
when it has not been sold or otherwise disposed of, and
Treat the moving of international units into Australia, where
ownership does not change, as a sale for CGT purposes.
(a) is no different from taxing the owners of shares on the
ASX on the increase in value of the shares each year. Such a provision applied
to shares would see the owners having to pay tax each year the shares increased
in value, even if they never sold the shares.
(b) Appears intended to penalise those who seek to bring
international units to Australia to satisfy their liability and act as a
deterrent to doing so.
Both types of provision appear to have as their objective
allowing the government to profit from the increase in value of units held by
industry. Not only will the government receive the initial price of a unit when
sold or auctioned, but it will also participate (at the expense of the holder
of the unit) in any subsequent increase in value of the unit.
The irony is that if the unit increases in value, then so too
must the quantum of liability it has been acquired to satisfy so there is no
net gain to the holder of the unit – but he or she will nonetheless be taxed on
the notional increase in value of both the unit and the liability. 
Despite what the Labor Government clearly thinks,
Australians aren’t fools. Vast numbers of the thousands of submissions
unpublished by this inquiry highlighted the crippling competitiveness the
carbon tax could have on the competitiveness of Australian businesses and
industry. Australians know this tax is bad for business and reducing the
competitiveness of business is bad for all Australians:
I am opposed to the carbon tax as I believe it will have an
adverse effect on Australian industry and the people in the long run...
This tax will render Australian business uncompetitive and
destroy our economy, it will create terrible suffering for those already
struggling with day to day expenses and could also lead to bankruptcy.
There will be no way our Companies (such as mining, aluminium
and coal) can compete in this already fiercely competitive world.
The increased cost of electricity flows through to everyday
life and will reduce Australia's competitiveness to compete with the rest of
the world. History shows that no country has created adequate growth by
increasing costs above its competitors.
Please reject this tax as it … will have an incredible
negative influence on our economy, jobs, cost of living, the building industry
[steel, concrete, glass, aluminium, etc.] manufacturing, farming. Why should we
have a tax that gives an advantage to the rest of the world produces over
Imposing greater costs on Australian businesses at this time
of global economic fragility will make it harder for businesses to commit to
new expansions, giving our competitors overseas a greater advantage in all
The new carbon dioxide tax … will harm Australian jobs, will
damage our exports and industry, and will unnecessarily put even more burden on
I am concerned as to the internationally competitiveness of
Australia’s business and the impact of the proposed carbon tax on that
We currently have an advantage with some of our exports,
however this will soon disappear once the carbon tax is introduced and our
competitor nations move in on our markets, simply due to the stupid measures of
a government which does not have a clue on how to handle any issue.
The proposed tax is the highest in the world and while
something may need to be done re climate change we in Australia are a small
fish in a big world and with the world economy in such a fragile state we
should be looking to keep our own economy as strong as possible and not send
millions or even billions of dollars overseas with carbon credits. If our coal
producers and others have to pay another tax then some may become not viable
but that will not stop coal from somewhere else being used instead.
Many businesses just will not survive and cannot compete
against other countries. Small business is struggling now paying high tax and
other compulsory expenses - there's not much profit left over, and in many
businesses they will not be able to cope.
It is hard for Australia to remain competitive on an
international level but by its introduction this tax would lead to a more
uneven "playing field" making us less competitive and reducing
Many more people who took the time to contact this inquiry
made it clear that they understand the link between global competitiveness and
jobs, specifically expressing their concerns about the impact this tax on
It will have no impact on the environment but will have
severe ramifications for industry, families and jobs.
A carbon tax will increase costs to our exporters and make us
internationally uncompetitive. As a result unemployment will be adversely
Australian produce & products will be replaced by imports
and Australian people will lose our jobs as we cannot remain competitive. Producing
these products overseas will consume the same energy with similar carbon
dioxide and in many of these countries there are much greater pollution issues
into the atmosphere, waterways and deforestation.
I am opposed to the proposed Carbon Tax because it will rob
ordinary Australians like me of our jobs and livelihood. It is a damaging tax
and will make Australia even less competitive than it already is in this
increasingly globalised world.
This … is driving up the cost of electricity and
manufacturing and generally driving up the cost of business which is making us
uncompetitive. It must stop as this will end many jobs.
I am currently working on a project for Woodside Petroleum
which requires steel sections to support pipe spools carrying natural gas. Both
the spools and steelwork are becoming harder and harder to source. Why? Because
the mills in Wollongong have become so uncertain about their future they have
laid off the very people who make it. Now when my only option is to import
steel (ore mined here and exported to be value added overseas) for use on an
Australian project for domestic gas use I start to worry. And it won't get any
better. The proposed tax … will make conditions extremely difficult for many
Other Australians expressed their worries that the way in
which the carbon tax will particularly drive up the price of electricity will,
as a result of the pervasive nature of the costs for this near universal input
cost, reduce competitiveness of business across the board:
… it seems it is the intention of the legislation that Australian
energy will no longer be cheap. This will devastate the Australian economy and
make its situation completely non-competitive with relation to other countries.
Only New Zealand and Europe are pressing ahead with this sort of tax. New
Zealand has plenty of hydro electricity as an offsetting factor while Europe
has nuclear energy. Australia alone is almost entirely dependent on fossil
It is ludicrous to impose the world’s highest tax on Carbon
Dioxide on an economy that will … erode our international competitiveness. Australia’s
competitive advantages have always rested on the relatively cheap energy that
abounds in this country. … It is because of this competitive advantage that we
have been able to maintain high wages in the Australian economy competing with
low wage countries. If the cost of energy is artificially raised by this
government action then it is easy to see the competitive result on the economy.
Everyone in the country will suffer despite the compensation offered because
there are automatic rises in the level of tax. This course is a recipe for
economic ruin. We should be playing to our economic strengths instead of trying
with all our might to destroy our economic advantage. You can be sure no other
nation is as willing to destroy their economy as we seem to be.
Australians appreciate that jobs and investment are already
under threat in the manufacturing sector, which has been in decline for years.
Many Australians are worried that a carbon tax will simply accelerate this
decline, costing more jobs, closing more business and shutting down this
I do not believe that Australia should have a tax on carbon. It
will make us uncompetitive to the rest of the world and we are already
struggling to with our manufacturing industries. Why penalise ourselves with
nothing being achieved to reduce carbon dioxide in the atmosphere. Only paper
shuffling with handouts and a huge bureaucracy to manage it.
The Carbon Tax/ETS will make our international manufacturing
and mining products more expensive and uncompetitive, especially when there are
other sources of supply readily available from our competitors, such as Canada,
China, the US and Brazil. … Bluescope Steel have stated that pricing carbon
risks killing off Australian manufacturing by sending steel production offshore
to either Asia or North America and what hypocrisy that we should not be
allowed to use cheap coal fire power when we ship it off to China and India for
them to burn!
It will destroy manufacturing and create massive job losses
on a scale that will never be offset by any job creations in the so called
“green economy”. Price increases on virtually every commodity and service will
create massive hardship for the majority despite the claims by the Government
of tax cuts and compensation.
We are already seriously disadvantaged by the value of the
Australian dollar against major currencies. Following so closely behind the GFC
and the effects this event has had on business within our country, the
potential for business to stay competitive on world markets and shoulder an
additional tax which it may not be able to pass on is a dangerous policy
indeed. The loss of manufacturing businesses within this country is already at
alarming proportions. Do we have to further burden those that are left by
imposing yet another cost.
The tax will … place Australia at a serious disadvantage in
economic terms with other trading nations and damage our manufacturing
It won’t just be manufacturing jobs that the carbon tax
sends offshore, Australians are also concerned that a range of carbon and
energy intensive industries will become uncompetitive and move to countries
where there is no carbon tax:
Adding expense to Australian goods and services will clearly
reduce our international competitiveness and lead to work being outsourced to
I object to the tax because it is extremely detrimental to
the Australian economy. It will impose the highest carbon price in the world,
compromising the competitiveness of Australia’s export and import competing
sectors without environmental benefit. The government’s own Productivity
Commission has reported that without comparable measures in competitor
countries, that could merely shift output and emissions to our commercial
High emitting industries will not cease production but merely
transfer to other countries that do not require an equivalent tax or level of
tax on carbon dioxide. Therefore a unilateral tax will have minimal effect on
world pollution but will drive Australian manufacturing jobs off shore to other
I do support a cleaner energy future but for Australia to
introduce a carbon tax starting at $23 a tonne is much too high and will force
industry to move their operations overseas where they can pollute as much as
they like or they will close down.
As a resident of Geelong and a past manager of a company that
supplies to the aluminium industry the effect of a carbon tax on the city will
be catastrophic to industry and employment for Geelong. Alcoa will just close
the Point Henry plant and start up again in Asia have they have done in the
United States with the closure of many Alcoa plants. Geelong survives on Alcoa,
Ford and the Shell refineries, and these three have already in place clean
filter systems at their plants, that are far superior to anything that will be
in place in Asia. They are already doing their part to make Australia a cleaner
country without this totally unnecessary tax which will hurt families in
Geelong and the rest of Australia.
Indeed one submission quoted former Minister for Climate
Change, Senator Penny Wong, expressing just this concern in a speech to the AIG
luncheon on 6th February 2008:
The introduction of a carbon price ahead of effective
international action can lead to perverse incentives for such industries to
relocate or source production offshore” and “There is no point in imposing a
carbon price domestically which results in emissions and production
transferring internationally for no environmental gain.
Senator Wong is correct in this instance and many
Australians agree with her that with no effective international action,
Australia shouldn’t be going it alone:
Can you explain how the added cost of this new carbon dioxide
tax is going to allow Australia to compete economically with the world markets
on a level playing field when no other country, including USA is going to
introduce such a high tax?
Why would we wish to place extra costs and burdens on the
economy when the impact of this carbon tax will be so minuscule in world terms,
and during times when the rest of the developed world is retreating from such
carbon tax impositions.
It will destroy our international competitiveness, cause many
firms and businesses to go broke, and destroy an enormous number of jobs in
many sectors. To go this way, when our trading partners do not, is patently
Most countries are not entertaining such a taxation proposal
mainly because of the obvious negative economic implications. Considering the
current global financial meltdown, introduction of a Carbon Tax is both
irresponsible and inane. It will place Australia at risk economically and
Why are we being penalised while countries like China, India
and the USA are forging ahead WITHOUT a tax.
Why are we leading the world in this? Let us see what the US,
China and India do before we disadvantage our industries even further.
… the major emitters of carbon dioxide in the world, namely
China and the USA have stated that they have no intention of introducing
similar legislation in the near or medium future. This legislation will place
an unfair burden on our economy and make us less competitive in the world
market and have a negative effect on our economy. It will increase inflation,
increase unemployment and increase the cost of living. This will adversely
affect all Australians but especially those who are in the lower socio-economic
While the rest of the world is tottering at the brink of
another recession and countries are becoming isolationist and protective of
their industries and economies, the Australian government sees fit to subject
Australia and the Australian economy to this un-mandated, regressive,
inflationary and simply unnecessary tax.
The Australian economy will be damaged relative to the rest
of the world at a time when economic uncertainty means that most other
economies will not act in concert with regard to climate change strategies.
Whilst a believer that the world community has contributed to
climate change, I am absolutely against Australia setting out alone to put a
price on carbon; to do so in advance of the major world economies having set in
place nationally co-ordinated carbon management policies, we will be severely
undermining our national interest and competitiveness within international
A Carbon Tax at this time will severely damage our economy at
a time when most countries in the world are suffering economically and we are
only not suffering because of the Resources boom. Our manufacturing and retail
sectors are really struggling to survive. … Many industries are shedding jobs
and manufacturers will move off shore as they will not be able to compete
against cheap Asian labour. These countries do not have a Carbon Tax nor intend
to implement one.
It is clear that this carbon tax will impose a significant
burden on Australian industry which our competitors do not face. It will be
detrimental to competitiveness and there is no escaping that this will reduce
profitability and cost jobs in small and large businesses alike, sending jobs,
investment and emissions offshore leaving only a misplaced sense of green pride
10. Fuel + fridges = more than 500
Summary of findings
The Government continues to mislead Australians about the
extent of impact of its carbon pricing mechanism or carbon tax through
suggestions the impact will be restricted to around 500 companies who are the
largest emitters of greenhouse gases.
It is clear from evidence provided to this inquiry that cost
impacts will be borne indirectly by all Australians through costs being passed
on, most notably as a result of increased power and transport costs, as
discussed elsewhere in this minority report.
However, it is also clear from evidence provided that the
number of companies directly affected will be far, far greater than the stated
500 as a result alone of both changed fuel rebate and excise arrangements and
an 'equivalent carbon price' applied by this legislative package to synthetic
greenhouse gases used in refrigerants.
The Government has frequently claimed that around 500
companies (or entities) will be directly liable under the carbon pricing
mechanism introduced by this legislative package, including throughout the
Prime Minister's second reading speech on 13 September 2011. This was
confirmed in evidence provided to this inquiry.
Mrs GASH: I cannot seem to find anywhere exactly how many
companies are actually going to be paying the carbon tax. I hear various
reports. Can somebody clarify it for me?
Mr Comley: I will let Dr Kennedy answer in a second. The
government has said that around 500 are intended to be covered. It is important
to make it clear that it is not as though the bill targets a number of
companies; it sets a threshold of a certain number of emissions before you come
into the system. So things like how the economy changes over time will impact
on the number of people in the system. The current estimate is around 500.
Dr Kennedy: Of the around 500 business that we expect to be
covered under the carbon-pricing mechanism—these are businesses that will have
to acquit a liability, if you like, under that mechanism and, as we were
discussing earlier with Mr Windsor, there is an effective carbon price also
being applied through the fuel tax arrangements—around 60 businesses are
primarily involved in electricity generation, around 100 in coal or other
mining, around 40 are natural gas retailers, around 60 are primarily involved
in industrial processes such as cement, chemicals and metal processing, around
50 operate in a range of other fossil fuel intensive sectors and around 190
operate in the waste disposal sector.
The number of facilities or sites that will be subject to
this liability remains unclear, with the Government failing to answer the
following question, taken on notice, seeking this information.
Senator BIRMINGHAM: Back to Mrs Gash's 500 companies and the
facilities and sites covered within that, is there an estimate of the total
number of facilities or sites that are picked up and trip the threshold within
the 500 companies?
Mr Comley: We will have to take that one on notice.
Evidence provided to the inquiry, however, makes it clear
that the number of businesses directly affected will be far greater than 500 as
a result of two changes in particular – changes to fuel rebates and excise
arrangements, both in these bills and forecast by the Government in 2014, and a
carbon tax equivalent applied to synthetic greenhouse gases used as
refrigerants. Additionally, all businesses will suffer directly increased
costs of electricity and transport.
DCCEE made clear that a carbon price will apply to all
off-road use of fuel.
Dr Kennedy: On the off-road use of liquid fuels, there is an
effective carbon price to be applied. In the case of aviation, it will be
applied through excise adjustments. In the case of other fuels, fuel offset
changes will apply an effective carbon price to off-road use of those fuels.
Coalition members sought clarity surrounding just which
industry uses would be affected
Senator CORMANN: I am keen to get from you a list of all the
things that you envisage for off-road fuel use which will have an effective
carbon price imposed on them through this legislation, whether it is by
implication or by explicit inclusion.
Mr Gallagher: Other than those exempted industries, all other
industries will be impacted.
Senator CORMANN: Such as?
Mr Gallagher: Mining, construction—
Ms Quinn: Rail, shipping, aviation—
Senator CORMANN: So, on notice, you are going to give us an
exhaustive list of everything that you envisage—
Mr Gallagher: Yes.
The list provided is:
Electricity, gas, water and waste
Accommodation and food services;
Transport, postal and
Information media and
Financial and insurance services;
Rental, hiring and real estate
Professional, scientific and
Administrative and support
Public administration and safety;
Education and training;
Health care and social;
Arts and recreation services; and
Other services and other (but noting
that agriculture, forestry and fishing industries are excluded in the
AMEC were among submitters who identified the discrepancy
between the stated and actual impacts:
Fuel credit reduction will capture many small to medium
companies that are not in the Government’s “Top 500 Polluters” group because
they will be effectively paying a carbon tax. 
This was likely to have a significant negative impact on
future investment in an industry of major importance to the Australian economy.
Proposed phased reductions in the diesel fuel credit from
6.21 c/L to 6.858 c/L (in 2014-2015) and thereafter additional six monthly
adjustments, is a significant investment disincentive for mineral exploration
and mining companies that are funding operations from limited equity. 
The extent of the hit through fuel tax to businesses across
a range of sectors was canvassed by the Minerals Council of Australia:
The second aspect of the carbon tax proposal I want to talk
about is the fact that it will not be limited to 500 big polluters. The new
fuel tax legislation provides, in the government's own words, an effective
carbon price on business through the fuel tax system. That will raise, on our
estimates, about $16 billion by 2020. There is no threshold on the use of fuel
before that tax cuts in … there are 60,000 firms in this country that will be
paying 6c a litre extra on fuel from 1 July 2012. That is 22,000 in
construction, 5,350 in manufacturing, 1,500 in mining, thousands of tourism
operators, and several hospitals and large healthcare providers. We look
forward to the government acknowledging that there is a direct cost from this
scheme not on 500 big polluters but on more than 60,000 businesses, from the
very smallest to the largest.
The Australian Trucking Association (ATA) gave evidence
regarding the extent of the impact to their operators of the changes,
especially the Labor Government’s planned future changes to heavy on road
The ATA and its members have welcomed the industry’s two year
exemption from carbon pricing. The ATA considers the trucking industry should
be permanently exempt, because … Trucking businesses are
predominately small businesses … the planned changes to the fuel tax
credits system will impose an effective carbon price on every one of
Australia’s 47,000 trucking businesses. 85 per cent of these businesses are
small businesses with fewer than five employees. They are no different to the
other small businesses that are permanently exempt from the carbon price,
except they happen to operate trucks weighing more than 4.5 tonnes. 
The ATA believes operators will mostly have to absorb these
Mrs GASH: Having a number of these small businesses in my
area, how difficult will this be in your view for these small businesses to
pass on this carbon tax?
Mr St Clair: Exceptionally difficult, and it has been proven
over the last few years as fuel prices have fluctuated. We have certainly seen
them come down over the last five years, but prior to that most operators where
possible were able to put in place fuel levies for their customers. We have
found it is increasingly difficult, in the advice given to us by operators
across Australia, being able to pass those costs on now. That is making it very
difficult for those who operate not only in the cities but also in regional,
rural and remote Australia to be able to claw back those costs.
Mrs GASH: Is it not just the carbon tax, are you also talking
about administration costs?
Mr St Clair: It will be a whole gamut of costs. At the end of
the day we are a service industry. We sell our products which are servicing a
nation that likes to shift a lot of freight over long distances as efficiently
and effectively as they can. When you consider that 80 per cent of the freight
happens around the metropolitan areas of the cities and less than a third of
the freight is interstate—the balance is intrastate—you have got an enormous
amount of small business operators that are subcontracting for the larger
logistics companies in Australia.
The ATA further suggests that the planned inclusion from
2014-15 of on-road fuel should not proceed.
Senator BIRMINGHAM: Mr St Clair, the Treasury modelling that
was released just last week updated the government's policy scenarios, and
The Government policy scenario
includes an effective carbon price on fuel used by heavy on-road transport from
Accordingly, it is the industry's expectation that government
policy is emphatically to proceed down that path, isn't it?
Mr St Clair: It is. Any submission we have made following our
policy development, as far as our council is concerned, is that we think we
should be exempt. And we think we should be exempt from any future tax because
we are embracing the new technologies, the new, cleaner engines and cleaner
fuels as they become available, providing they cover those three criteria.
Senator BIRMINGHAM: I am sure there are good intentions for
the environment in there, but in the end, if you boil it down, there is already
a significant cost pressure for industry to be extremely efficient, isn't
Mr St Clair: There is, as the price of fuel goes up.
The industry cites significant environmental gains made
already through developments achieved without having been driven by the claimed
incentive of a carbon price.
The ATA’s recent environmental credentials report shows the
industry’s greenhouse gas emissions fell 35 per cent per billion tonne
kilometres between 1990 and 2011, as a result of improvements in engine
technology and the use of safer trucks with greater capacity. 
Extent of fuel impacts
The horticultural industry has given evidence about the
impact on them of increased fuel costs under this legislation.
…the introduction of the proposed Fuel Tax Legislation will
place further pressure upon existing farm profit margins through increases in
the cost of electricity (a major cost for on-farm irrigation and packing shed
operations which has already seen 10% increase recently), fertilizer, fuel and
crop protectants .
Refrigerants Australia has provided evidence about the
equivalent carbon price, or carbon tax equivalent, to be applied to synthetic
greenhouse gases that are largely used as refrigerants:
The tax is to be implemented under the existing Ozone
Protection and Synthetic Greenhouse Gas Management Act 1989 (OPSGGMA) … The
tax will be levied at the following levels:
2012-13: $23 per tonne CO2e
2013-14: $24.15 per tonne CO2e
2014-15: $25.40 per tonne CO2e
After 1 July 2015, the carbon price will be the benchmark average
Industry estimates indicate that this tax will raise in
excess of $270 million in 2012.
This figure is a multiple of the current industry turnover,
and represents a price increase ion (sic) these substances of 300% to 500%.
Refrigerants Australia has provided information to Coalition
members of the committee that 929 entities are currently licensed under the
OPSGGMA and will effectively pay the carbon tax. Of these 929 additional
entities, Refrigerants Australia says 70 per cent would be classified as small
to medium enterprises.
Coalition members of the committee are astonished at this
credible suggestion that the number of entities to be directly hit by this
legislative package is on this basis alone approximately three times the number
peddled by the Government. That, of course, if before the tens of thousands of
businesses facing higher fuel costs are included.
11. Farcical inquiry shows contempt
Process abused from the beginning
The establishment of this Joint Select Committee, and the
rejection of Coalition moves to refer this legislation to the usual,
portfolio-specific Senate Standing Committees, represents a significant
departure from usual practice.
The Senate's own website states:
As a house of review, the Senate subjects legislation to
additional scrutiny. Each bill that comes before the Senate is examined by the
Scrutiny of Bills Committee … The Selection of Bills Committee considers all
bills before the Senate to identify any which are complex or controversial or
which senators have indicated warrant further examination by a standing
committee … Bills are usually referred to a legislative and general purpose
standing committee which has responsibility for that particular portfolio area.
This legislation is certainly sufficiently complex and
controversial to warrant referral to these committees but, extraordinarily, the
Scrutiny of Bills Committee – dominated by the Labor-Greens proponents of this
legislation – rejected Coalition moves to have it so referred.
This committee – the Joint Select Committee on Australia's
Clean Energy Future Legislation – was similarly dominated by the Labor-Greens
proponents of the very legislation into which it was established to inquire.
Using their majority, the Labor and Greens members scrapped
parliamentary convention for a Government-nominated Chair to be offset by an
Opposition-nominated Deputy Chair. That is, having elected Labor MP Anna Burke
to chair the inquiry, the Labor and Greens members together with an Independent
supporter of the legislation voted 8 to 5 to install Greens Senator Christine
Milne, rather than a Coalition Opposition member, as Deputy Chair.
Given Senator Milne is not only a proponent but was a key
architect of Labor’s carbon tax, her appointment makes a mockery of any claims
this inquiry has been undertaking an honest assessment of the 19 carbon tax
Repeating past mistakes
The Gillard Government, by establishing and consenting only
to a farcically brief inquiry into substantial legislation of great consequence,
has repeated mistakes of the former Coalition Government that Labor Senators
once criticised when in Opposition.
The following statements are from the Opposition Senators'
Report from the 2005 Senate inquiry into the Workplace Relations Amendment
(Work Choices) Bill 2005 but are just as applicable to this inquiry.
It is outrageous that only one week was allowed for the
committee to receive submissions … To make matters worse, hearings were
scheduled in the week following the closing date for submissions, which did not
allow enough time for the committee to properly consider the more than 5000
In placing an unreasonable limit on the time for this
inquiry, the Government has shown its disregard for the important scrutiny role
performed by the Senate and its committees. It has shown no interest in taking
this inquiry to the people and involving them in the work of the committee.
Once criticised, now endorsed
Coalition members of this committee understand the former
Coalition Government made some mistakes for which it was criticised and
ultimately punished at the ballot box in 2007. We are astonished that Labor
members are now accepting of procedure they once criticised.
It is all the more surprising that the Chair has actually
sought to publicly associate this inquiry's proceedings with this past inquiry
so criticised by Labor at the time:
We are having an in depth inquiry into the legislation. It
exactly mirrors what was done when the Howard Government introduced the Work
Choices legislation and I think we'll get a thorough inquiry into the bills. …
Parliamentary committees have a responsibility to scrutinise bills and we are
not going to shy away from the Parliamentary responsibilities to scrutinise
bills, so we will go through the process in a thorough manner, exactly how the
Howard Government introduced the Work Choices legislation.
Clearly, the approach advocated by Ms Burke and claimed
without foundation to be 'thorough' (c.f. this minority report's criticism of
the inquiry's conduct) was strongly criticised by Labor in 2005. We
acknowledge these past criticisms and similarly strongly criticise the
Labor-Greens approach now. While we have learned from our mistakes, Labor now
endorses and repeats them.
The comparison with the treatment of the Work Choices
legislation is not entirely apt, however, in that the Work Choices legislation
was a single bill amending a single Act, whereas this is a package of 19 bills
creating new and significant Acts – including the implementation of several new
taxes and charges, not least of which is the carbon tax, and the establishment
of several new agencies – and amending several other existing Acts but also
with further legislation already foreshadowed as discussed below. If a more
thorough and considered inquiry was warranted into the Work Choices
legislation, it is only more warranted into this sweeping legislative package.
Limited time, most submissions not accepted
This Joint Select Committee – dominated by the Labor and
Greens proponents of the legislation into which it is inquiring – allowed just
a week for the committee to receive submissions, determining at its first
meeting on Thursday 15 September that it would advertise for the first time on
Saturday 17 September 2011 but with a closing date for submissions of Thursday
22 September 2011.
Hearings for this inquiry were scheduled in the week
following the closing date of submissions, which did not allow the committee to
properly consider the more than 4,500 submissions it received. In fact, the
Labor-Greens dominated committee opted not to accept the vast majority of
submissions and merely received them as 'correspondence', despite unsuccessful
Coalition attempts to extend both the deadline for making submissions and the
time allowed for the committee to report.
This volume of correspondence demonstrates the level of
engagement and the depth of feeling Australians have in relation to the
Government's policy approach on this issue, but which Labor and the Greens have
effectively sought to silence as far as this inquiry is concerned.
The Coalition, in contrast, seeks to give voice to these
Australians through this minority report. As detailed, to some degree
throughout this report, but still constituting just a small sample of the
thousands seeking to have input, those making submissions not accepted by the
committee made many valid points and have valid concerns that are not being
addressed by this Labor-Greens dominated committee.
The Coalition believes the volume of correspondence, and
breadth of issues of concern including some specific to particular regions,
warranted further inquiry hearings and for some to be held outside of Canberra,
Sydney and Melbourne. Coalition members wrote to the Chair to this effect,
proposing hearings be held in at least one of Mackay in Queensland, the
Illawarra region of New South Wales or Perth in Western Australia. The
committee held hearings in none of these areas, or anywhere but Canberra,
Sydney and Melbourne, again at least partly due to the short timeframe imposed
Notwithstanding our concerns about the political timeframes
and limitations placed on the inquiry, Coalition members participating wish to
express our thanks to the secretariat staff who delivered professional
assistance to all members of the committee against all the pressures applied to
Past inquiries no substitute
It is disingenuous of the majority committee to suggest that
past inquiries into the science of climate change and climate change mitigation
policy in some way obviate the
need for a thorough inquiry into this legislative package; they don't. This
would be the case even without bills that deal with measures the Government has
sought to introduce as part of single (though as yet incomplete, as discussed
below) legislative package that includes not only carbon pricing measures but
also taxation and so called ‘compensation’ or industry assistance measures.
This farcical 'shotgun' abbreviated committee inquiry is the
only Parliamentary committee inquiry into these 19 bills.
Some – but not all – of these 19 bills were released for the
first time, as 13 draft exposure bills only, on 28 July 2011. Even the
majority report acknowledges that, as a result of this exposure draft
consultation by DCCEE, the bills were amended to take account of concerns
raised with DCCEE about their content. This is only further cause, rather than
less, for proper Parliamentary scrutiny of and inquiry into this new and
already subsequently amended legislation.
Such was the short timeframe allowed for submissions that
this committee took the extraordinary measure of effectively accepting
submissions made outside of the normal parliamentary committee scrutiny
process, through DCCEE's consultation on its exposure draft legislative package
of 13 bills.
Even then, and despite DCCEE's consultation closing on 22
August 2011 and an undertaking to this committee to post submissions online no
later than 19 September 2011, submissions received by DCCEE were only made
publicly available – including to this committee – on its website from 20
September 2011, the day before the committee inquiry's first public hearing.
Even given the limited time afforded, many organisations and
even some individuals did manage to prepare submissions containing detailed
commentary and/or specific recommendations relating to the legislation's
content. These include the Energy Supply Association of Australia, the
National Lime Association of Australia, Australian Petroleum Production and Exploration
Association Limited, the Association of Mining and Exploration Companies,
Bundaberg Fruit and Vegetable Growers Co-operative Limited, The Climate
Institute, WWF-Australia, Origin Energy Limited, the Australian Aluminium
Council, AGL Energy Limited, the Cement Industry Federation, the Australian
Industry Greenhouse Network, Mr Paul Rodgers, the Australian Network of
Environmental Defenders Offices, Mrs K Hartmann, the Magnetite Network, the Law
Council of Australia and the National Farmers' Federation.
The majority of those making such detailed and pertinent
submissions were never called to appear at an inquiry hearing, and
overwhelmingly the specific suggested amendments have not even been canvassed
in the majority report presented by the Labor-Green proponents of the
Some of the commentary and recommendations relating to the
legislation, and ignored by the majority, is addressed herein below.
The Government publicly committed for its Treasury modelling
of a carbon price to be publicly released, both upon completion of a scheme's
design and upon release of the legislative package.
… when we've designed the scheme we will produce the
… when we release the package we’ll also release modelling
that will have price projections at different scenarios.
Despite these promises to release it when the Bills were
released, the Treasurer publicly drip feeding aspects of it days before the
first hearing of the committee and numerous calls for it to be released in a
timely way, updated Treasury modelling reflecting the actual starting price of
$23/tonne and other key elements of this package was released only on the
morning of the first hearings into this inquiry, just minutes prior.
Its late release meant Committee members were unable to
consider meaningfully the updated Treasury modelling prior to questioning
Treasury officials who were among those appearing at the first hearing and who
therefore had to be subsequently recalled to a later hearing.
Massive legislative reform
As canvassed above, the legislative package subject to this
inquiry is 19 bills constituting more than 1100 pages of new legislation. Yet
even these 19 bills are already known not to constitute the entire legislative
package proposed by the Government, as made clear in an inquiry hearing by
DCCEE Secretary Blair Comley.
Senator BIRMINGHAM: Do the 19 bills before us constitute the
entire legislative package?
Mr Comley: No. Well, in terms of the package that was
announced as part of the Clean Energy Future there is a bill that will be
forthcoming on the Clean Energy Finance Corporation and there is also a bill
that will be forthcoming on ARENA, the Australian Renewable Energy Agency.
Senator BIRMINGHAM: When will those two bills be forthcoming?
Mr Comley: It is still to be determined.
Many submitters join the Coalition in expressing their
dismay at the timelines provided to participate in this inquiry and make a
AMEC also expresses its complete dissatisfaction in the
manner in which this step-change legislation has been introduced. The timelines
throughout the legislative consultation process have been extremely short,
which has not allowed AMEC and its members any reasonable time to properly
consider the finer detail of the legislation. 
BFVG is also disappointed in the amount of time granted (six
days including a weekend) by Government to provide submissions in regards to
the proposed suite of legislation (approximately 1100 pages) under the banner
of Carbon Tax. BFVG would have thought that such an important suite of
legislation deserved a longer time to enable both industries affected and the
general community to provide in-depth submissions and encourage worthwhile
Labor’s carbon tax is the wrong policy, for the wrong
country at the wrong time:
In the theoretical world, the penalty system has a lot of
merit. In the context of Australia, with the market structures that it has, in
our view the penalty system is precisely the wrong way to go … In the economic
reality of the business world that we deal with day to day, the right policy
has to be a blend of stick and carrot. This policy is all stick and not enough
To date, ETS mechanisms have proven only partially effective
in encouraging reductions in greenhouse gas (GHG) emissions. This is due to the
unpredictability and volatility they inherently create in the price of carbon,
which discourages the significant, long-term investments in energy efficiency
and low carbon technologies required to materially impact GHG emissions levels.
I find it impossible to support this current legislation. It
does not make sense. It is economically damaging. It is an exercise in
futility. A better way is possible and it is a great shame, going to the point,
that better ways were not explored.
Coalition members restate our belief that creating a giant
new bureaucracy with costs approaching $400 million over the forward estimates
so as to impose a multi-billion dollar new tax that will drive up the costs of
everything in Australia but will not drive down Australia’s emissions is
clearly the wrong approach.
We believe there is a better way and recommend that the
bills not be passed.
Senator Simon Birmingham
Senator Mathias Cormann
Mr George Christensen, MP
Ms Joanna Gash, MP
Mr Tony Smith, MP