CARBON TAX: by Peter WestmoreNews Weekly
Power industry warns Canberra against carbon tax
, October 1, 2011
The Australian power industry’s peak body, the National Generators Forum, has warned the Federal Government that its carbon tax will impose massive costs on electricity generators, businesses and consumers, while having little impact on emissions of carbon dioxide (CO2).
The forum represents all sections of the power industry, both government and private. It also covers different forms of power generation: gas and coal-fired plants, as well as hydro-electric plants and wind farms.
In a letter sent to all federal MPs and senators, the power industry forum said it could not support the government’s carbon tax in its present form.
“The plan will produce virtually no change in emissions from the generation sector while imposing huge costs on the community, trade-exposed industries and electricity generators,” it said.
After carefully examining the government’s Clean Energy Future legislation, which introduces the carbon tax, the power industry said this would:
• impose a $40 billion cost on the generation sector, “most of which will be passed on to electricity customers”;
• almost double the wholesale price of electricity to $100/MWh by 2020;
• produce little change in emissions from the generation sector.
It added: “Treasury forecasts that the carbon price will reduce emissions from the sector by only 7 million tonnes (or 3.5 per cent) by 2020. Existing state schemes can deliver similar abatement at much lower cost.”
The power industry also pointed out that the starting price of $23/tonne is “far higher than carbon prices elsewhere in the world”. It said: “As high as it is, the carbon price is still less than half the $60 price required to prompt switching from coal to gas-fired generation, according to Treasury estimates.”
It also pointed out that the scheme would result is a massive shift of capital out of Australia, as power generators were forced to buy “carbon credits” overseas.
“On Treasury figures, there will be a major wealth transfer from Australia with businesses buying 94 million international permits in 2020 at a cost of up to $3.7 billion. This will call into question the capacity of the Government to continue to compensate households and trade exposed industries,” it said.
The power generation industry also said that the narrow scope of the plan (only 62 per cent of Australia’s emissions are captured because of the threshold imposed by the government) imposes a heavy burden on affected generators, and risks seeing expensive abatement in these sectors made meaningless by uncontrolled emissions growth elsewhere.
It urged the Government to reduce the starting price for the carbon tax to align with equivalent international prices, as identified by the Australian Productivity Commission.
“Introduction of complex emissions trading legislation should be deferred until appropriate international action is occurring. The Government should consult the industry on the detailed design of the emissions trading scheme,” it said.
The National Generators Forum also expressed deep misgivings about the Government’s plan to “enshrine in legislation a new unconditional emissions reduction target for 2050”.
It said: “The 80 per cent target has been decided without consultation with the community or industry. The target is not a harmless symbolic gesture: it will force governments to set very challenging emission caps from 2015, with severe effects on industry.”
It called on the Government to reconsider, saying “There is no policy reason for rushing this important legislation through the Parliament.”
At the time of writing, there was no evidence that the Government is listening.
Climate Change Minister Greg Combet, who introduced the extraordinarily complicated 18 carbon tax bills into federal Parliament, has scheduled the vote in the House of Representatives by October 12, and the vote in the Senate by November. (Legislation must pass the House of Representatives before it is introduced into the Senate, where it is supposedly subject to independent review.)
Questioned on the ABC radio AM program on September 13, Combet denied that the Government was railroading the legislation through. He said that “everyone will have an opportunity to speak on the bills. And it’s not as if there hasn’t been an extensive debate and a lot of policy work in the lead up to this.”
Nevertheless, the Government has allowed only two sitting days between the time when the House of Representatives inquiry into the new tax reports on October 4, and the final vote.
Responding to questions about why the Government has restricted debate on the issue, Combet launched a tirade against Opposition leader, Tony Abbott.
He said: “It’s not as if Tony Abbott, for example, hasn’t declared his position. He’s determined to stop it. He’s declared that it doesn’t matter what debate takes place or what further enquiries take place; he doesn’t like the science, doesn’t like the scientists, doesn’t like the economics, doesn’t like the economists, doesn’t like anything much.”