Additional Comments by Senator Nick Xenophon
I have long supported that Australia must act on climate
change; that the risks involved in doing nothing are too great.
However, it is crucial that the scheme is credibly
internationally and sustainable domestically.
Therefore, the question should not be whether Australian
should take action on climate change, but what model should Australia adopt and
which scheme will best ensure that true environmental benefits are achieved
without damaging Australia's economy or disadvantaging local industries.
After all, imposing large adjustment costs on the economy
with no prospect of incremental global abatement gain is simply not an
efficient economic proposition.
I have long advocated for an intensity-based scheme, as
proposed by Frontier Economics, whereby emitters are penalised for emissions
above a set standard and rewarded if their emissions intensity is below the set
This approach preserves the same intention the Government
has to reduce Australia's emissions but would not unnecessarily raise tax
revenue (or prices to consumers) in the same way the proposed carbon tax will
or the proposed emissions trading scheme that will follow it.
Indeed, pre-existing taxes already create economic
distortions that discourage investment, consumption and labour. When a carbon
price/tax is imposed in addition to these existing taxes, the resulting
economic costs are multiplicative, not additive.
The Government's current proposal will result in projected
domestic emissions 18% above 2000 levels by 2020, rather than the 5 percent
below 2000 levels as advocated for in the Government's previous CPRS
legislation which was twice rejected by the Senate.
Furthermore, I believe an even higher abatement target can
be pursued under an intensity based scheme due to the economic cost savings and
because the scheme will result in lower energy price rises, which will make the
low carbon transition more acceptable to consumers.
Under an intensity-based approach, baselines across sectors
and activities in an economy would be set at the level that achieves the
desired emissions level; any producer emitting more than the baseline has to
acquire permits in excess of the baseline, and any producer emitting below the
baseline is allowed to create and sell permits to those who need to buy
The scheme works by simultaneously penalising higher
emitters (just as occurs under a 'cap and trade' scheme) and rewarding lower
emitters. In simple terms, the scheme is a 'carrots' and 'sticks' approach.
Importantly, through such a scheme, the overall price impact
is reduced because the costs are confined to the proportion of emissions about
the set baselines.
In line with this, I proposed the following amendments to
the Exposure Draft of the Clean Energy Legislation which I believe would
achieve a higher abatement target and reduce the amount of revenue churn within
* Increase target reduction emissions to 10 percent less
than 2000 levels by 2020.
This target is achievable, based
on modelling by Frontier Economics in August 2009, commissioned by myself and
The Hon Malcolm Turnbull MP. Australia should be aiming for real reductions and
this can be achieved through some of the following proposals.
* Establish a Clean Energy Standard
Under such a scheme, the
electricity generation sector will be incentivised to reduce emissions. By
allocating a number of free units each year, and using a formula to reduce the
number of permits issued under a benchmark for each year until 2030, this will
encourage the electricity sector to reduce their emissions without
substantially increasing energy prices to consumers.
* Establish a National Energy Efficiency Scheme
White certificates schemes are
successfully operating in Australia and are also common in Europe. The
inclusion of a national white certificates scheme as part of the Government's
proposal would promote and recognise those who are introducing commercial and
domestic efficiency measures. This would lower compliance costs for electricity
retailers already facing multiple energy efficiency schemes across different
states and would further support an increased emissions reduction target.
* Recognise voluntary action
It is important that the
Government recognise and provide incentives for voluntary action, without
reducing the obligations of emitters. Voluntary action by the Commonwealth,
States and Territories, by local government bodies, other entities or
individuals to reduce or offset greenhouse gas emissions, which is not
otherwise accounted for under the scheme, should be rewarded.
* Require greater compliance by EITE businesses
EITE businesses should be
required to demonstrate that they are both economically viable and
environmentally responsible so to be eligible to continue to receive
However, I ultimately cannot support the Government's Clean
Energy Legislative package as I do not believe it is an effective or
economically responsible approach to reducing carbon pollution.
An intensity-based scheme would achieve a more ambitious
carbon emissions reduction target and would be more attractive in managing
adjustment concerns because the scheme has lower cost properties.
This would be desirable from an environmental perspective
and in terms of sending a more credible signal internationally.
Further, while I believe that it is important that this
Parliament debate ways to reduce Australia's carbon emissions, and it seems
inevitable that the Clean Energy Legislative package will be passed with the
support of the Greens, I do not believe the legislation should be implemented
until a Federal Election has been called and a mandate obtained for the
introduction of such policies.
Independent Senator for South Australia
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