Dissenting Report from Government Senators
1.1
The Government believes there is a better way to tackle climate change
than by imposing a $7.6 billion, economy-wide tax that hinders business and
does nothing for the environment.
1.2
That is why the Government is committed to repealing the carbon tax and
implementing the Direct Action Plan. Legislation to repeal the carbon tax was
the first item of business introduced by the Government into the new
Parliament.
1.3
The Government accepts the science of climate change.
1.4
The Government seeks to meet its commitment (a politically bipartisan
commitment) to reduce emissions by 5% below 2000 levels by 2020 with the
implementation of the Direct Action Plan. This policy was endorsed by
Australian voters at the 2013 Federal election in addition to the Government's
commitment to repeal the carbon tax. It is also the Government's intention to
consider further action and targets in 2015 on the basis of comparable real
global action, in particular by major economies and trading partners.
The carbon tax is not reducing Australia's emissions
1.5
The Government's plan is to abolish the carbon tax because it represents
an ever increasing financial burden for no real environmental gain. Under the
carbon tax, Australia's domestic emissions are projected to go up, not down.
1.6
Modelling presented by the Climate Change Authority showed that under
the carbon tax Australia's domestic emissions rise from 590 million tonnes of
carbon dioxide equivalent emissions in 2010 to 620 million tonnes in 2020.
1.7
The Department of the Environment presented evidence showing that there
had been almost no change in domestic emissions in 2012-13 compared with
2011-12, despite carbon tax revenue of $7.6 billion.
1.8
The Government is committed to repealing the carbon tax to reduce costs
for households and business and to pave the way for our Direct Action Plan.
Abolishing the tax will flow through to businesses in the form of lower input
costs and to households through lower energy bills and cheaper household items.
1.9
On average, households will be around $550 better off in 2014-15 than
they would have been with the carbon tax in place. On average household
electricity bills will be $200 lower and gas bills $70 lower.
1.10
The Committee received evidence that highlighted the significant impact
of the carbon tax on the international competitiveness of Australian
industries. The National Farmers Federation, the Business Council of Australia,
the Minerals Council of Australia and the Australian Industry Group support the
repeal of the carbon tax.
The National Farmers Federation does not support the carbon
tax due to the significant flow-on impacts to agriculture (as an uncovered
sector). Therefore, the NFF supports its repeal. (Submission 37)
1.11
The Direct Action Plan with the Emissions Reduction Fund as its
centrepiece will provide incentives rather than penalties to reduce emissions: incentives
for businesses to innovate and invest in new technologies, incentives to
improve the efficiency and productivity of businesses' operations and
incentives to encourage farmers and landholders to store carbon on the land.
1.12
The Emissions Reduction Fund will have an initial allocation of $300
million, $500 million and $750 million over three years, the Fund will
establish a pool of capital to create a market for abatement.
1.13
The Emissions Reduction Fund will not be prescriptive about the source
of potential abatement and will unlock abatement opportunities across the
Australian economy – from businesses, industries and the land sector. These
emissions reductions will be real, genuine and additional to business-as-usual.
1.14
Climateworks provided evidence to the Committee showing a wide range of
possible abatement opportunities, which may be unlocked under the Emissions
Reduction Fund. (Submission 24)
1.15
Potential abatement opportunities include projects to clean up waste
coal mine gas, clean up power stations, capture landfill gas, energy efficiency
improvements in Australian buildings and industrial facilities, reafforestation
of marginal lands, revegetation or improvement of soil carbon.
1.16
To ensure that the repeal of the carbon tax proceeds in an effective and
efficient manner, the Government has consulted extensively on exposure drafts
of the repeal bills, giving stakeholders and businesses the chance to comment
on the details of the repeal process.
Consultation on the Emissions Reduction Fund is underway
1.17
The Committee received evidence that significant consultation was
underway on the Direct Action Plan
1.18
The Department of the Environment gave evidence that:
...late last year the government released a green paper and
invited submissions. Prior to that green paper, it had released the terms of
reference and also invited submissions to those terms of reference to develop
the green paper and subsequently the white paper. The government received
around 300 submissions to the terms of reference, and it used those in guiding
the putting together of the green paper. (Public Hearing, Canberra, 18th
March 2014)
The minus five per cent target is sufficient
1.19
Australia's emissions reduction target to reduce emissions by five per
cent below 2000 levels by 2020 is significant. This represents an emissions
reduction target of 17 per cent below business as usual levels.
1.20
The committee received submissions supporting the Government's minus
five per cent target and the significant negative impact that the carbon tax
had on businesses.
1.21
The Australian Forest Products Association 'commends the Government on
their determination to maintain the commitment of the previous Government to
unconditionally reduce national GHG emissions by 5 per cent over 2000 levels by
2020.' (Submission 15, page 1)
1.22
The Facility Management Association of Australia 'fully supports the
Australian Government's intent to reduce carbon emissions to levels 5% lower
than 2008 levels by 2020, and as custodians of buildings once constructed,
facility management professionals are key contributors to reducing Australia's
emissions in the built environment.' (Submission 36, Page 1)
1.23
The Committee further notes submissions by the Business Council of
Australia and the Australian Industry Group to the Climate Change Authority
Caps and Targets Review draft report that the minus five per cent target
represent serious action.
1.24
The Business Council of Australia recommends that 'Australia maintain
its current commitment to net emissions of -5% of 2000 levels by 2020 as there
is no evidence to suggest that any of the conditions needed to trigger
consideration of an increase to that commitment have been met and, further, it
is clear that at -5% Australia's commitment more than matches the pledges of
other advanced economies.' (BCA Submission to Climate Change Authority Caps and
Targets Review, Page 2)
1.25
The Australian Industry Group does 'not support any decision on additional
targets at this time.' (BCA Submission to Climate Change Authority Caps and
Targets Review, Page 2)
Significant impact of the carbon tax
1.26
A large number of submissions noted the significant impact of the carbon
tax on Australian industry.
1.27
The Association of Mining and Exploration Companies provided evidence
that:
The burden borne by Australian industry under the previous
Governments Clean Energy package placed Australian mining and exploration
industries at a significant disadvantage to our competitors. For the
exploration and mining industry it was a financial penalty without any
meaningful opportunities to contribute to Australia's response to climate
change. (Submission 74, Page 1)
1.28
The National Farmers Federation 'does not support the carbon tax due to
the significant flow on impacts to agriculture'. (Submission 37, Page 1)
1.29
The Australian Dairy Industry Council 'does not support any carbon tax
or pricing scheme that results in a less competitive position for a
trade-exposed industry such as the dairy industry.' (Submission 11, Page 1)
and:
The risk with carbon pricing is that it could result in
Australia's dairy industry being disadvantaged in the global market compared to
its major dairy competitors. For example, the New Zealand dairy industry is not
subject to the same liabilities under the New Zealand ETS as the Australian
industry is under the Australian carbon tax and ETS. (Submission 11,
Page 2)
1.30
The Australian Forest Products Association 'recognise that following the
September 2013 election the Government was given a clear mandate to remove the
current carbon tax. AFPA strongly supports the removal of the current carbon
tax and encourages the Government to act quickly, as it is in our national
interest that businesses have policy certainty and clarity, as well as a level
playing field with our major trading partners.' (Submission 15, page 1)
1.31
The Cement Industry Federation 'supports climate change policy that does
not expose cement manufacturing operations in Australia to costs not faced by our
competitors in other countries. The Clean Energy Future policy did not address
this issue adequately, with only part of the cement manufacturing production
process being recognised as being emissions intensive and trade exposed. This
is inconsistent with the cement activity definitions of emissions trading
schemes in New Zealand and California where all components of the cement
manufacturing process are included.' (Submission 49, page 2).
1.32
The committee heard evidence of the significant package of assistance
provided with the carbon tax. The Clean Energy Finance Corporation (CEFC)
outlined it had been given $10 billion to lend to renewable and low emissions
projects which were delivering 3.88 million tonnes of abatement per year.
1.33
$10 billion is similar to Commonwealth expenditure on ageing and aged
care services in 2013-14 ($12.3 bn).[1]
1.34
The CEFC was asked by the Committee to explain why it had chosen to
invest in commercial wind farms which are already supported through the
Renewable Energy Target. In one instance the Committee heard that the CEFC
had provided a loan to an established and commercial wind-farm, the Macarthur
wind farm. Once it received the loan, the wind farm was subsequently sold by
its owner the New Zealand Government for a profit.
1.35
The CEFC was asked a question on notice from Senator Williams on how it
had calculated its claimed 3.88 million tonnes of abatement. The CEFC provided
reference to the CEFC website, but did not provide a detailed breakdown of
emissions reductions by project. The list of projects includes projects already
supported under the Renewable Energy target, the Clean Technology Investment
Program, the Australian Renewable Energy Agency and Low Carbon Australia.
1.36
The CEFC did provide evidence that the abatement did not come from
the established Macarthur wind farm. The Committee noted that the CEFC website
was claiming the Macarthur wind farm is delivering emissions reductions of 1.7
million tonnes of emissions reductions per annum.
High cost of direct action
1.37
The Committee received evidence of the high cost and small emissions
reductions that have occurred under the carbon tax.
1.38
The Department of the Environment indicated that 'The last quarterly
update, which was for the quarter to September 2013, showed that Australia's
greenhouse gas emissions were 542.1 million tonnes. This represents a decline
of 0.3 per cent on the previous year.'
1.39
The Department of the Environment provided evidence that the carbon tax
revenue in 2012-13 was $7.6 billion made up of the carbon tax payments, carbon
tax equivalent payments under the Synthetic Greenhouse Gas levies; and carbon
tax equivalent payments under the fuel arrangements.
Soil Carbon Sequestration
1.40
Carbon Farmers Australia gave evidence that the sequestration of carbon
in the soil can be a major player in carbon abatement:
The first point is that soil carbon is said to be a minor
player with not much potential to contribute to climate action. This is
patently wrong and based on ignorance of the facts. The second point we would
like to make is that permanence—the hundred years rule—which many people
believes rules out any farmer's being involved in carbon sequestration is a
permanent dead end; it is wrong. We are in the process of developing systems
for soil carbon, and we know, based on our daily work, what the potential for
soil carbon is. (Public Hearing, Canberra, 28th February 2014)
1.41
Similarly the CSIRO stated the case for building soil carbon for
agriculture:
By building soil carbon you can increase the capacity of the
soil to hold nutrients, but usually there you are talking about the other
nutrients that would pass through the soil. What often happens is that, as you
build soil carbon, you in fact lock up an increasing proportion of nitrogen—so
the process of adding carbon to soils will lock up nitrogen, sulphur, potassium
into the humus as well. That is not a problem but it does mean that there is a
net nutrient cost in building soils up. But, overall, building soil carbon will
add a lot of benefits through physical properties in what we call cation
exchange—the holding capacity of nutrients in soils—which gives you better
value out of a lot of agricultural practices. (Public Hearing, Canberra, 3rd
March, 2014)
Carbon tax revenue in 2012-13
|
|
Accrual revenue 2012-13 ($m)#
|
Approximate number of liable parties
|
|
Carbon Pricing
Mechanism
|
$6,600
|
348
|
|
Revenue from SGGs
|
$100
|
1, 059
|
|
Revenue from aviation
and non-transport gaseous fuels
|
$200
|
75,000†
|
|
Fuel tax credit
reduction*
|
$700
|
|
Total carbon tax
|
$7,600
|
|
Notes:
# Revenues are rounded to the nearest $100
million.
* This is an expenditure reduction, not a revenue
measure. Treasury estimates.
† Approximate number of payers is not additive as
entities paying via the Carbon Price Mechanism or SGGs may also be affected by
the fuel tax credit reduction.
World Carbon Taxes
1.42
The Department of the Environment also provided information on carbon
taxes and emissions trading scheme in operation in a number of jurisdictions,
including:
-
the European Union;
-
the Regional Greenhouse Gas Initiative market (United States)
-
California;
-
Chinese pilot emissions trading schemes; and
-
New Zealand.
1.43
The information showed that the Australian carbon tax is the highest and
has the broadest national coverage.
Comparison of international emissions trading
units
|
Emissions Trading
Schemes (ETSs) in operation
|
|
Scheme
|
Currency
|
Price
|
As at:
|
AUD equivalent as at
19 Mar 2014
|
|
Australian Carbon
Pricing Mechanism
|
AUD
|
24.15
|
19-Mar-14
|
24.15
|
|
New Zealand ETS (NZETS)
|
NZD
|
3.00
|
14-Mar-14
|
2.83
|
|
European Union ETS
(EUETS)
|
EUR
|
5.72
|
18-Mar-14
|
8.72
|
|
Californian ETS
|
USD
|
11.48
|
19-Feb-14
|
12.57
|
|
Regional Greenhouse Gas
initiative (RGGI)
|
USD
|
4.00
|
5-Mar-14
|
4.38
|
|
China - Shenzen Pilot
ETS
|
RMB
|
80
|
27-Nov-13
|
14.15
|
|
China - Shanghai Pilot
ETS
|
RMB
|
28
|
27-Nov-13
|
4.95
|
|
China - Beijing Pilot
ETS
|
RMB
|
50
|
28-Nov-13
|
8.84
|
|
China - Guangdong Pilot
ETS
|
RMB
|
60
|
20-Jan-14
|
10.61
|
|
China - Tianjin Pilot
ETS
|
RMB
|
26 to 28
|
26-Dec-13
|
4.60 to 4.95
|
|
Sources:
|
|
|
|
|
|
Australian
CPM
|
Clean
Energy Act 2011
|
|
NZ ETS
|
PointCarbon,
14 March 2014 reporting of the lowest NZETS price in seven months.
|
|
|
(www.pointcarbon.com/news/reutersnews/1.4502381)
|
|
EUETS
|
PointCarbon,
EUETS spot price at 18 March 2014. (www.pointcarbon.com/)
|
|
California
ETS
|
Californian
Air Resources Board, February 2014 auction clearing price.
|
|
|
(http://www.arb.ca.gov/cc/capandtrade/auction/february-2014/results.pdf)
|
|
RGGI
|
RGGI, 5
March auction clearing price.
(www.rggi.org/docs/Auctions/23/PR030714_Auction23.pdf)
|
|
Shenzen
Pilot ETS
|
Reuters, 28
November 2013 reporting of price at market close.
|
|
|
(www.reuters.com/article/2013/11/28/us-china-carbon-beijing-idUSBRE9AR07C20131128)
|
|
Shanghai
Pilot ETS
|
Reuters, 28
November 2013 reporting of price at market close.
|
|
|
(www.reuters.com/article/2013/11/28/us-china-carbon-beijing-idUSBRE9AR07C20131128)
|
|
Beijing
Pilot ETS
|
Reuters, 28
November 2013 reporting of trades of 40,000 permits.
|
|
|
(www.reuters.com/article/2013/11/28/us-china-carbon-beijing-idUSBRE9AR07C20131128)
|
|
Guangdong
Pilot ETS
|
PointCarbon,
20 January 2014 reporting of 28 companies purchasing
|
|
over 3
million permits at auction at the suggested price of 60 RMB.
|
|
|
(www.pointcarbon.com/aboutus/pressroom/pressreleases/1.3782935)
|
|
Tianjin
Pilot ETS
|
Reuters, 26
December 2013 reporting of five trades for a total of 45,000 permits.
|
|
|
(www.reuters.com/article/2013/12/26/china-tianjin-carbon-idUSL3N0K50AS20131226)
|
|
|
|
|
|
|
|
Emissions Trading
Schemes (ETSs) in operation[2]
The design features of
individual schemes are subject to change.
|
|
Scheme
|
Coverage
|
Free allocation
|
|
Australian Carbon
Pricing Mechanism
|
67 per cent of national
emissions
|
Free allocation of
either 66 per cent or
94.5 per cent of permits for Emissions-Intensive Trade-Exposed (EITE)
industries depending on emissions intensity.
|
|
348 directly liable
entities are covered by the CPM, of which 57 received assistance in 2012-13.
|
|
New Zealand ETS (NZETS)
|
53 per cent
|
Free
allocation of either 60 per cent or 90 per cent of permits for
Emissions-Intensive Trade-Exposed (EITE) industries depending on emissions
intensity.
|
|
221 mandatory entities
|
|
2 880 total entities
|
|
European Union ETS
(EUETS)
|
45 per cent
|
Electricity sector: full auctioning.
Manufacturing sector: some free allocation based on industry benchmarks.
|
|
>11, 000
installations
|
|
Californian ETS
|
36 per cent
|
In the second compliance
period
(2015-2017) industrial facilities receive free allowances for transition
assistance and to prevent leakage, based on emissions intensity and
trade-exposure.
|
|
350 entities
representing 600 facilities
|
|
Regional Greenhouse Gas
initiative (RGGI)
|
22 per cent
168 facilities
|
Negligible – 94 per cent
of 2013 allowances are auctioned.
|
|
China - Shenzen Pilot
ETS
|
38 per cent
|
Allowances are
distributed for free based on sector-specific carbon intensity benchmarks.
Proposal to move to full auctioning over time.
|
|
635 companies and 197
public buildings
|
|
China - Shanghai Pilot
ETS
|
60 per cent
|
One-off free allocation
for 2013–2015 based on 2009–2011 emissions considering company growth.
Benchmarking will be used for the energy sector, airlines, ports and
airports. Auctioning will be considered.
|
|
Approximately 200 companies
|
|
China - Beijing Pilot
ETS
|
42 per cent
|
Free allocation based on
2009–2012 emissions and considering sector development. For new entrants,
free allocation will be based on sector-specific benchmarks.
|
|
Approximately 490
entities
|
|
China - Guangdong Pilot
ETS
|
55 per cent
|
Mainly grandfathering
(97% in the first two years of operation, 90% in 2015) based on historical
emissions (2010–2012), taking account of the characteristics of the sectors.
The remaining allowances will be auctioned.
|
|
Approximately 200
companies
|
|
China - Tianjin Pilot
ETS
|
60 per cent
|
Free allowances are
expected to be distributed mainly based on historical emissions for existing
entities and on benchmarks for new entrants. Auctioning may also be used.
|
|
114 entities
|
|
|
|
|
|
|
|
Support for Incentives rather than penalties
1.44
The committee received support for the use of incentives rather than
taxes to achieve Australia's emissions reductions goals
1.45
The Nursery & Garden Industry Australia indicated:
The Government's Direct Action Plan commits the Government to
the planting of an additional 20 million trees by 2020 in a bid to deliver
greenhouse gas emission reductions. (Submission 8, Page 3)
1.46
And:
Carbon mitigation is but one element of incorporating trees
in the landscape and the co-benefits of planting trees in urban areas are
substantial. These relate to trees reducing air and water pollution, effective
storm water and run off management; increasing aesthetics, reducing crime,
increasing property values, and mitigating heat-islands. (Submission 8, Page 6)
1.47
The Australian Dairy Industry Council highlighted:
The Emissions Reduction Fund (ERF), if appropriately designed
with realistic benchmark prices per tonne of CO2e, could offer the industry an
opportunity to contribute substantially to reducing Australia's target of 5%
reduction on emissions levels by 2020. The ERF at the same time could improve
the dairy industry's profitability and international competitiveness by
reducing the substantial energy costs for manufacturers and on farm (ranging
from $20 to $100 a day per farm). (Submission 11, page 2)
1.48
The Australian Forest Products Association 'has identified a range of
domestic activities that could potentially contribute up to 30 million tonnes
of emissions abatement over the next 5 to 10 years.' (Submission 15, Page 3)
1.49
The Facility Management Association of Australia provided evidence that:
By encouraging facilities management industry investment the
ERF scheme will be better placed to deliver real world, workable outcomes
beyond 'business as usual', which will directly contributed to a reduction in
emissions from the build environment. (Submission 36, Page 3)
1.50
And:
Cost effective abatement initiatives that FMs can implement
and that offer the bets return on investment include: improvements in building
operations, improvements in maintenance, building commissioning and tuning,
behavioural change and upgrading projects. (Submission 36, Page 3)
1.51
The Green Building Council of Australia submission highlighted that:
Retrofitting existing buildings such as offices, shopping
centres, public buildings and hospitals remains one of the most cost-effective
abatement opportunities, using technologies and practices that are available
now. (Submission 35 , Page 2 ) and –
1.52
And:
The GBCA believes that a well-designed ERF can play a
significant role in reducing carbon emissions, but if Australia is to take
advantage of the many emissions reduction opportunities that exist in the built
environment and across the economy, the ERF must be one part of a range of
complementary measures.' (Submission 35, Page 2)
1.53
Climateworks Australia indicated that:
If well designed and sufficiently resourced, the proposed
Emissions Reduction Fund could effectively target opportunities that are not
expected to occur without additional incentives yet are large in volume,
technologically proven and can be captured at reasonable cost.
(Submission 24, page 2)
1.54
Origin Energy 'believes that there are a number of excellent
opportunities in the energy sector that would benefit from access to the ERF.
Some of the opportunities we support include: GreenPower, Smart technologies,
Cogeneration/Trigeneration and Electric vehicles.' (Submission 45, Page 2)
1.55
The Cement Industry Federation provided evidence that:
'There are significant opportunities for the Australian
cement industry to further reduce CO2 emissions, especially through future
amendments to the cement standard to allow increased mineral additions and via
further adoption of alternative fuels to reduce thermal emissions.' (Submission
49, Page 7).
Recommendations
Recommendation 1
1.56
Government Senators recommend the carbon tax is repealed and replaced
with the Emissions Reduction Fund.
Recommendation 2
1.57
Government Senators note that the minus five per cent emissions
reduction is significant and represents emissions reduction of 17 per cent
below businesses as usual in 2020. Government Senators further note that
Australia's emissions reduction target is an international commitment which is
lodged with the United Nations Framework Convention on Climate Change.
Recommendation 3
1.58
Government Senators recommend that Australia should consider its
emissions reduction target and further action in 2015 on the basis of
comparable real global action, particular by major economies and trading
partners.
Recommendation 4
1.59
Government Senators note that removing the carbon tax will reduce cost
of living of Australian households and business input costs. The Government Senators
note that without the carbon tax in place, assistance mechanisms and carbon tax
bureaucracy is not needed and should be removed.
Recommendation 5
1.60
Government Senators note that a review of the Renewable Energy Target is
legislated to be undertaken in 2014. The Government is currently progressing this
review.
Recommendation 6
1.61
Government Senators do not support further inquiries into the Emissions
Reduction Fund and Carbon Farming Initiative.
Senator John Williams Senator
Anne Ruston
Deputy Chair Senator
for South Australia
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