Credits Trader: Many Would Back Repealing Carbon Price

Half the country supports Opposition Leader Tony Abbott's stance that he would overturn the carbon pricing scheme should the coalition with the next election, a news survey shows.

The weekly online Essential Research survey released on Monday shows the prospect of a coalition election win remains clear cut, with only a minor increase in support for Labor recorded in the latest week.

Credits Trader: Many Would Back Repealing Carbon Price

Qld Taxpayers Warned about Carbon Tax

Queensland taxpayers will pay the price for state-owned power generators being devalued by the federal carbon tax, a Senate committee has been warned.

A committee scrutinising the proposed federal tax sat in Brisbane on Monday, where Queensland Resources Council chief Michael Roche argued Australia should not adopt a tax ahead of its international competitors.

The Bligh government has estimated the asset value of state-owned generators will decrease by around $1.7 billion.

Mr Roche said Queenslanders would likely have to prop up the generators after write-downs, although Premier Anna Bligh later told reporters that was a "furphy".

"In the case of government-owned generators, there's only one source of equity and it's the Queensland Treasury, it's the Queensland taxpayer," Mr Roche told the committee.

"Or other programs will be cut to fund the injection into the government-owned generators."

Mr Roche said the carbon tax was expected to comprise up to half of the operating costs of the state-owned generators.

But Labor senator Doug Cameron attacked the ACIL Tasman modelling Mr Roche quoted, saying it had proven unreliable.

The other potential impact on taxpayers was a predicted $1 billion loss in coal royalties to the Queensland government by 2020 due to the premature closure of mines, Mr Roche said.

"I would have thought that the Queensland government would see the risk for their single largest source of revenues outside of grants from the federal government," he said.

But Ms Bligh told reporters the industry had a "very strong future", with almost $60 billion worth of mining applications in the pipeline.

She said federal treasury modelling showed an expected 47 per cent growth by 2020 would only drop to a 45 per cent growth at worst.

"Let's be realistic here, the Queensland coal industry has taken some 40 years to get to where they are now and they expect to increase by almost 50 per cent in the next eight years," she said.

"I think the bigger question frankly is whether the industry itself, with or without changes in federal government regulations, is capable of that sort of expansion."

The committee heard Queensland Chamber of Commerce polling shows the tax will make 10 per cent of the state's small to medium-sized businesses unviable by raising power, transport and supply costs.

"Anybody with a power point, with an engine, with a gantry crane, a mig welder, will pay more for what they do," the chamber's David Goodwin said.

"Right across our economy we feel very, very exposed.

"We're not an economy which sits with a lot of head offices, sitting in buildings, working on computers.

"We are an economy which actually does stuff, and because of that we will be in the eye of the storm."

Senator Cameron ridiculed the chamber for relying on its own surveys rather than Queensland Treasury estimates, which predict strong growth after the recovery from summer's floods and cyclone.

"You're the Tony Abbott of the business community, you're the weathervane, are you?" he said.

Costs of Climate Tax 'Could Drive Farmers From the Land'

Carbon tax costs could push farmers off the land and raise the price of agricultural productivity, a Senate committee has been told.

Sitting in Brisbane, the Senate select committee on the scrutiny of new taxes heard that the Queensland government would forgo $1 billion in royalties in the coming decade because of the tax.

Queensland Farmers Federation chief executive Dan Galligan said the extra costs would put more pressure on farm profits, and called for industry-specific economic modelling.

"The analysis is too broad to give us a clear understanding of how many farmers this will affect to a point where they may well leave the industry," he said. "That may well happen for many farmers -- that loss in profit margins, associated with a number of other issues, will be enough reason for them to leave the farm."

Start of sidebar. Skip to end of sidebar.

End of sidebar. Return to start of sidebar.

Under questioning from Labor senators, Mr Galligan acknowledged the government exemptions on agriculture emissions and fuel were helpful. He said the Coalition's direct-action plan to pay $10 a tonne of soil carbon abatement would be insufficient.

But he said the Gillard government's carbon reduction scheme could have the "perverse effect" of stalling farm productivity because improvements relied on power use, which would be more expensive under the carbon tax.

"The mitigation options under the carbon farming initiatives may in fact further constrain a farmer's ability to increase productivity, which would be their usual mechanism to fight against a reduction in margins," he said.

Also appearing before the Coalition-dominated committee, Queensland Resources Council chief executive Michael Roche said taxpayers could be forced to compensate the $1.7 billion asset writedown in state-owned coal-fired power generators.

He queried why the Bligh government had not highlighted an estimated $1bn in lost coal royalties between 2012 and 2021. "I would have thought the Queensland government would see the risk for their single largest source of revenue outside of grants from the federal government," he said.

But Queensland Premier Anna Bligh said the coal industry had a "very strong future", with almost $60bn worth of mining applications in the pipeline.

Next week, the committee will visit the northern NSW town of Tamworth, in Tony Windsor's federal electorate, before moving to the Queensland coalmining centre of Bowen.

Credits Trader: Emotional PM Defends Carbon Tax Plan

The Prime Minister Julia Gillard became emotional today during an address to the National Press Club, on the Government's carbon tax plan. Ms Gillard's voice wavered as she talked about her nature of being a shy, reserved school girl. But she was unwavering in her answer to what she thought of the reporting of her Government's carbon pricing plan

READ ON:

Credits Trader: Emotional PM Defends Carbon Tax Plan

Credits Trader: Emotional PM Defends Carbon Tax Plan

The Prime Minister Julia Gillard became emotional today during an address to the National Press Club, on the Government's carbon tax plan. Ms Gillard's voice wavered as she talked about her nature of being a shy, reserved school girl. But she was unwavering in her answer to what she thought of the reporting of her Government's carbon pricing plan

READ ON:

Credits Trader: Emotional PM Defends Carbon Tax Plan

Carbon trading has its risks including fraud, warn experts

CARBON trading experts say there is potential for fraud in the global market, but checks and balances are improving.

Under the government's carbon pricing plan announced on Sunday, more than half of the emissions abatement to 2020 will come from companies buying it from overseas, at an estimated cost of $3 billion, with the remainder coming from Australian carbon farming and other initiatives.

A new body called the Clean Energy Regulator (CER) will determine companies' carbon price liabilities and operate the national register of emissions units, and work alongside the Climate Change Authority headed by former Reserve Bank chief Bernie Fraser.

Already more than 30 Australian-based brokers and companies, such as the Commonwealth Bank and Origin Energy Electricity, are registered with the CER.

But the fledgling global carbon trade has seen its share of fraud and corruption, with such problems as companies buying into non-existent forests or renewable energy projects that don't get off the ground.

The Australian Federal Police also will have a role in investigating allegations of fraud or corruption.

GreenCollar Group chief James Schultz, who advises companies on carbon trading, told AAP much had been learned in the past decade.

"Rigour is important," he said.

"One of the lessons is the need for the market to understand what they are buying.

"It takes a while to be sophisticated about what is a shonky product - like a tree plantation that doesn't exist - versus something that has been rigorously audited."

While the details of the Australian system were yet to be fully spelled out, he expected it would be consistent with "international norms".

"Audit is an essential part of the process. You need a national standard, which at the moment is the Kyoto protocol," Schultz says.

"The carbon farming initiative is another standard.

"Auditors say: 'Have you adhered to the standard, have you told us the truth?' And if all those things stack up then you now have a climate change benefit."

Nationals senator Barnaby Joyce, who opposes the system, says despite $382 million being spent on a new climate change bureaucracy there were bound to be rorts as $3 billion went overseas on abatement.

"(It's) like those dodgy emails you get from the West African coast, only your government will actually start replying to them with your nation's bank account details," he said.

Taxpayers' money would be "cast like confetti around the world".

But Treasurer Wayne Swan says Australian governance arrangements will be effective.

"We're setting up a whole series of arrangements in our Climate Change Authority to make sure that governance is first class and world class," he said.

Opposition Leader Tony Abbott earlier this month told an industry forum that a "dependable carbon cop" would be needed if the scheme was to have any credibility.

The Australian Federal Police has been examining the issue since an ETS was first raised as a serious proposal four years ago.

Former AFP chief Mick Keelty told a forum at that time that any carbon trading scheme had the potential to be undermined by "corruption or fraud".

In April 2010, AFP deputy commissioner for national security, Peter Drennan, said carbon trading "may in time provide opportunities for organised criminal syndicates to exploit new markets and engage in fraudulent activity".

An AFP spokesman told AAP this week the final design of the scheme's governance was still being developed by the climate change department.

"The AFP has commonwealth responsibilities in relation to the investigation of serious fraud in government programs and in addressing organised crime," the spokesman said.

"It is too early to speculate on any potential criminal risks or the size and impact of any obligations for the AFP.

"However, the AFP will work closely with the relevant agencies ... to address identified risks, enhance the scheme's overall integrity, and manage any law enforcement resourcing impacts."

GreenCollar chief Schultz said carbon trading was becoming like buying any other commodity, but some companies will find that investing in Australian-based abatement projects, such as forests and farms that cut their use of fertilisers, is better than looking overseas.

"Some product is cheaper than others and some has a higher or lower risk profile than others," he said.

"There is significant upside for companies that are able to invest directly into the primary market - companies that create credit, create the project itself as opposed to buying on the secondary market, which is cheaper but has a higher risk."

Schultz said the public could trust the auditing system as "these are the same people who tell you ships won't sink and planes won't fall out of the sky".

"The same level of audit is brought to this, and in fact it is more rigorous," he said.

The public concern was driven largely because in many cases "you are trading something that didn't happen", Schultz says.

"Most of what you are trading is an avoided emission. You are trading something that didn't happen, like stopping deforestation. It's not planting trees but has a great impact," he said.

"By not chopping down a forest that is however many millions of tonnes of CO2 that goes into the atmosphere and that compensates another activity."

Suffocating the Economy One Tax at a Time

If implemented, Julia Gillard's proposed carbon price starting at $23 per tonne will push us closer to economic stagnation.

If the Government wanted to make the 159 million tonnes saving in 2020 it seeks, it would not attempt to do this with a domestic tax. According to the Government's Securing a Clean Future report, half of the saved emissions are domestically derived.

If the price is $30 per tonne this will involve an annual cost of $2.385 billion incurred in overseas buying. The cost of achieving the emission reduction locally if the price is $30 per tonne is incurred on all the remaining emissions (336 million tonnes). That comes to $10.08 billion. This begs the question that since carbon dioxide is the same the world over why not buy all our emissions overseas? At $30 per tonne, 159 megatonnes of emissions costs $4.77 billion, which is far less costly than striving to do it with the mix of local ($10.08 billion) plus overseas ($2.385 billion) giving a total of $12.465 billion.

Even without a carbon tax, Australia's energy price regulator has reported an expected increase of 30 per cent in electricity prices over the next three years, largely due to higher 'poles and wires' costs. For New South Wales, the state's pricing tribunal has announced a 17 per cent electricity increase for next year, a third of which is for "green schemes".

Against this backdrop last month's Productivity Commission (PC) report, Carbon Emission Policies in Key Economies examined over 1,000 abatement reduction schemes across eight countries. These are overwhelmingly focused on electricity, and the PC converted them into carbon tax equivalents.

The PC's analysis illustrates that taxes are high and substantial abatement is taking place in the European Union (EU). In Germany and the UK carbon dioxide emission programs bring increases of 12-17 per cent in electricity prices (though the recent slump in the EU carbon price will reduce this considerably).

For Australia and New Zealand the emission control programs currently bring electricity price increases of 1-2 per cent, while in China, US, Japan and South Korea the effect is negligible. And Australia's main scheme, the 20 per cent Renewable Energy Target, is only just gearing up to cost levels that by 2020 will be perhaps tenfold those of today.

Australia's trading rivals are among the 170-odd other countries which the PC did not examine. In fact, exporters of fuel and raw materials in Canada, South Africa, Brazil, Indonesia, India and the Middle East face negligible carbon abatement costs and already have tax advantages over Australia's exporters. Carbon taxes figured prominently in the Canadian Liberal Party's platform in that country's recent election and the party suffered its worst defeat in a century.

Although no country has a carbon tax, the PC's material demonstrates that cap-and-trade market mechanisms offer cheaper means of bringing about abatement than specified regulatory measures like renewable programs. Thus Germany's costs under the European Union's cap-and-trade carbon tax were about $20 per tonne of CO2 (for shifting from coal to gas) but costs under specific measures requiring wind and solar use on average $137 per tonne.

Australia's schemes involving feed-in tariffs for small scale renewable systems come at a CO2 price of up to $425 per tonne. Wind farms cost $37-69 per tonne.

The PC estimates that a carbon tax set at $9 per tonne could replace all existing Australian measures and notes that a tax is less inefficient than 'direct action' approaches favoured by the Opposition.

However, the current abatement measures requiring renewables are also direct action approaches and the Government wants these to be retained alongside a carbon tax. Moreover, it is negotiating for another direct action proposal, involving closure of Victoria's Hazelwood power station. That closure could reduce emissions by 3 per cent but only in the unlikely event that the station's output is not replaced by output from other fossil fuel sources.

The Productivity Commission estimated the cost of Australian emission reduction programs at $473-694 million in terms of total subsidy equivalent. But this excludes direct government subsidies. The Department of Climate Change and Energy Efficiency (DCCEE) provides an "A to Z" of (Commonwealth) Government initiatives. Ranging from Advanced Electricity Storage Technologies to the World Bank Clean Technology Fund, these comprise 93 separate programs. DCCEE put Australia's budget expenditures on abatement measures totalled $1.069 billion in 2009/10. The Government's package budgets for $4.2 billion in 2014/15 in the Clean Energy Finance Corporation and other supports for green energy and conservation.

In addition to excluding direct budgetary spending in estimating Australia's carbon tax rate, the PC also does not count the effects of a range of standards. A previous commission report had put the annual costs of greenhouse abatement measures embodied in the national five/six-star building standards at $3 billion a year.

Clearly Australia outlays much more than the $473-694 million the PC used to estimate Australia's greenhouse abatement costs. Our expenditures are much higher than those of our competitors and the carbon tax would further increase the baggage we have to carry.

The outcome would be a spiralling down of our living standards relative to those of other resource rich countries.

But the carbon tax is only the latest blow. To restore the nation's competitiveness, a future Coalition government must both revoke any carbon tax that is introduced and purge the economy-killing measures that have been gathering moss over the past few years.

To start this ball rolling, the O'Farrell Government is calling for the repeal of the Commonwealth's 20 per cent Renewable Energy Target. And the Nationals Senator Ron Boswell has made similar moves in the Coalition party room by seeking to have support for the target reviewed by a policy committee.

With his 'direct action' approach Tony Abbott expects to achieve the Government 5 per cent reduction in emissions but at a lower cost than a carbon tax involves. That is implausibly optimistic. But more significantly he has announced a review of policies for 2015, an action which foreshadows an unwinding of the green juggernaut.

Alan Moran is the Director, Deregulation at the Institute of Public Affairs.