Executive Summary
The Senate Select Committee on the Scrutiny of New Taxes (the committee)
tabled its very comprehensive interim report on the carbon tax, The Carbon Tax:
Economic pain for no environmental gain, on Friday, 7 October. On the same
day the
Labor-Green dominated Joint Select Committee on Australia's Clean Energy Future
Legislation (the Joint Committee) also released its report about the carbon tax
legislative package.
This final report of the committee on the carbon pricing plan provides
some further assessments of the government's carbon tax and emissions trading
scheme proposal in the context of issues that have emerged since the reports by
the two committees have been released. This further report draws upon
information that emerged during public discussions and evidence received by the
Senate Supplementary Estimates Committees in the week of 17 October 2011.
Modelling
The committee's inquiry highlighted a number of concerns about
the Treasury's modelling of the government's carbon tax, including:
- the failure to model a scenario where Australia imposes a carbon
tax and its major resource competitors do not;
- the questionable nature of some of the assumptions made by the
Treasury, including that:
- the economy will maintain full employment;
- countries will honour all the pledges made at Cancun even though these
pledges are not legally binding;
- countries will remain on a substantial abatement trajectory even when
those pledges expire; and
- the assumption that some form of generalised global carbon trading is in
place by 2016;
- the failure to model the impact of a carbon tax on specific
regions of Australia; and
- the decision not to release the full models used for public
scrutiny.
Since the tabling of the Interim Report, the Joint Committee
has conducted its inquiry into the draft bills and tabled its Advisory Report,
and Senate Estimates hearings have allowed Committee members to further
question the Minister for Finance and Deregulation, Senator the Hon. Penny
Wong, and Treasury officials, and Australian Bureau of Agricultural and
Resource Economics and Sciences (ABARES) officials about the modelling.
This further information has done nothing to dispel the committee's
initial view that the government has moved with undue haste to implement this
carbon tax.
The government has not allowed sufficient time for the
proper consideration of its legislation, by the public or by the Joint
Committee. As a result, in this committee's view, the Joint Committee failed
to properly examine the draft Bills. Rather, it adopted a "see no evil,
hear no evil, speak no evil" approach to the government's carbon tax.
The committee's Interim Report detailed concerns about the lack
of transparency of the modelling. Information obtained at Estimates hearings
only emphasised that the government has adopted a policy of preventing the
full, independent scrutiny of the modelling. And it is clear, this was a
government decision, not one made by the Treasury, which in other similar
situations has taken steps to ensure its modelling is open to public review.
In response to questions on releasing of the modelling, the government has
dissembled and raised smoke screens in an attempt to avoid the real issue
raised by its decision.
The committee
is of the view that it now has an even stronger basis for making the
recommendations about the modelling that it made in the Interim Report.
The trampling of democracy
The process for the development of the carbon tax has been
deeply flawed. Prior to the 2010 Commonwealth Election the Prime Minister, the
Hon. Julia Gillard MP, and her Deputy Prime Minister and Treasurer, the Hon,
Wayne Swan MP, promised the Australian electorate that there would be no carbon
tax.
After the election, on 24 February 2011, the Prime Minister
announced that there would be a carbon tax. No details were released, with the
electorate having to wait until 10 July 2011 for partial detail and only
incomplete economic modelling. On 13 September 2011, the 19 Bills for the
government’s Clean Energy Future were introduced into the Parliament.
The 19 Bills were then pushed through a truncated Joint
Committee for consideration. Many submissions were ignored and the 19 complex
Bills and around 1100 pages of important law were quickly dealt with. The Joint
Committee was so dominated by the government that not even the convention of an
Opposition deputy chair was respected.
This Inquiry has sought to shine a torch into the dark
places of the government’s carbon tax. By receiving 102 submissions, as well
as visiting regional Australia and conducting 13 public hearings, this committee
has attempted to be a voice for Australians and to ensure proper scrutiny of
the government’s carbon tax. The committee’s process contrasts with the
methods adopted by the government.
In these circumstances, the committee extends its
appreciation to those individuals and organisations that participated in this
inquiry.
The government’s disregard for the democratic process
extends beyond the development of the carbon tax. While its effectiveness is
questionable, it is clear that by giving emissions permits the characteristics
of private property, the government has sought to hinder the repeal of its
legislation by a future parliament.
As mentioned previously, the government has succeeded in
denying the public access to its carbon tax modelling. This has reduced public
scrutiny of what the government has called a major economic transformation for
Australia. Such restrictions have not applied to other major economic reforms.
Issues covered by this report
In this report:
- Chapter 2 highlights further issues with the Treasury’s modelling
that provide an even more compelling case to call into question the
government’s optimistic assessment of the impact of the carbon tax.
- Chapter 3 draws together a state-of-play on selected overseas
emissions trading schemes and highlights events that have undermined these
schemes and demonstrates potential risks that could derail Australia’s attempts
to source emissions abatement from overseas.
- Chapter 4 provides further evidence to support the view that the
government cannot be relied upon to ensure effective implementations of its
policies. The fundamental building block of the government’s planned emissions
trading scheme, the carbon unit, is to be personal property but the exact legal
standing of that property is contested. While the government’s efforts in this
respect seem likely to be unsuccessful, it is clear that its intention is to
undermine the scope future governments have to repeal this legislation without
incurring massive compensation claims.
- Chapter 5 outlines the myriad of new regulators and agencies that
are part of the new green bureaucracy. These new bodies represent a further
risk to the Commonwealth Budget.
- Chapter 6 catalogues the extensive efforts and associated costs
undertaken by the government that have failed to sustain, yet alone build,
support for its carbon tax, which the Prime Minister had promised would not be
imposed.
This report draws upon evidence obtained by the Joint
Committee as well as information in the public domain and important insights
gained during the Supplementary Budget estimates process of the week of 17
October 2011.
Recommendations of the Final Report
Recommendation 1
The committee recommends that the carbon tax be opposed by
the Parliament.
Recommendation 2
The committee recommends that, should the government remain
committed to proceeding with the carbon tax, before any vote the Senate should
demand that:
- the
government release all of its modelling, including the actual models, datasets
and specification used by the Treasury, to allow third party review; and
- the
government establish an Independent Expert Panel to review its modelling
approach and framework.
Recommendation 3
The committee recommends that if the government proceeds
with its carbon tax, that the relevant regulator be sufficiently resourced to
minimise the risk of fraud or other undesirable activities that might undermine
the integrity of the Australian carbon permits.
Recommendation 4
The committee recommends that the government carefully
consider the risks and benefits from linking to foreign carbon markets and that
comprehensive safeguards be put in place to minimise the risk to Australian
purchasers of foreign carbon abatement units.
Recommendation 5
In the event that the government proceeds with the carbon
tax, the committee recommends that clause 103 of the Clean Energy Bill 2011 be
amended to ensure that a property right does not attach to permits and to make
it clear that permits can be altered, repealed or revoked at any time without
that amounting to an acquisition of property.
Recommendation 6
If the Clean Energy Future legislative package is passed by
the Parliament, the committee recommends that the Senate review the conduct of
relevant regulators.
Recommendation 7
If the Clean Energy Future legislative package is passed by
the Parliament, the committee recommends that the Senate review the cost to the
Budget of the Clean Energy Finance Corporation and the Australian Renewable
Energy Agency given that between them they will be responsible for $13 billion
of expenditure.
Recommendation 8
The committee calls upon the government to carefully
consider further expenditure on its so-called community education for the
carbon tax and suspend further unnecessary advertising if the government's legislation
passes the Parliament.
Recommendations of the Interim Report
Recommendation 1
It is the committee's view that the carbon tax should be
opposed and the legislation defeated in the Parliament as:
-
there is no electoral mandate for the carbon tax;
-
the modelling that supports it is based on a number of highly
contestable assumptions;
-
it is likely to undermine Australian businesses' ability to
compete in the global economy;
-
it will have significant adverse effects on particular sectors
and regions, with a particularly disproportionate impact on regional Australia;
-
the effect of the policy on the cost of living, and on jobs is
likely to be higher than the government's current estimates indicate;
-
there is considerable evidence that the carbon tax will not
result in any real environmental gain, despite imposing a significant cost on
the economy over the next thirty years.
The committee recommends that the
carbon tax be opposed by the Parliament.
Recommendation 2
The
committee recommends, that if the Parliament believes that it should proceed
with the carbon tax, any provisions in the legislation designed to bind future
governments seeking to prevent them from amending or rescinding the scheme be
removed.
Recommendation 3
The committee recommends that, if the Parliament believes
that it should proceed with the carbon tax, it does so once current global
economic circumstances have improved and there is a legally binding global
agreement on tackling climate change.
Recommendation 4
The committee recommends that, should the government remain
committed to proceeding with its carbon tax, before any vote the Senate should
demand that the:
- government
release all of its modelling, including the actual models, datasets and
specifications used by the Treasury, to allow third party review;
- government
establish an Independent Expert Panel to review its modelling approach and
framework;
- Productivity
Commission be asked to undertake a cost-benefit analysis of the proposed carbon
tax;
- legislation
should be amended to ensure that any increase in the tax or lowering of the
emissions cap be made a disallowable instrument and to ensure that carbon
permits are not private property.
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