Australia Faces Growing Opposition To Carbon Trade Law

James Grubel, PlanetArk 11 Mar 09;

CANBERRA - Australia's government faced new objections to its pioneering carbon trading scheme from both ends of the political opposition on Tuesday, just as it unveiled the legislation it hopes to pass by the middle of this year.

The draft laws contained few changes to what could be the most sweeping cap-and-trade system in the world, including a commitment to cut emissions by 5 percent of 2000 levels by 2020.

Instead, lawmakers from the Greens and the conservative opposition banded together to establish a two-month inquiry, saying they will not support the scheme without major changes.

Greens politicians want tougher targets and conservative opposition parties want the scheme delayed to soften the blow for businesses that will shoulder higher costs during a recession.

"This scheme, in its current form, cannot get through," Opposition spokesman Andrew Robb told reporters.

Under the current legislation, the scheme will be the world's broadest, covering 75 percent of emissions. Around 1,000 of the largest polluters, from transport operators and aluminum makers to gas producers and refineries, will have to pay to pollute.

Some of the permits, each representing a ton of carbon dioxide, will be auctioned and some given away depending on the industry. But the overall aim is to push companies to pollute less over time or face ever rising costs.

Australia's center-left Labor government needs the support of the opposition, or the five Greens and two independents, to pass the carbon trade laws in the Senate, and the new review raises the risk of a significant set-back just as the U.S. government tries to galvanize support in the fight against climate change.

"The negotiation process is going to be fairly convoluted given there are three main parties to participate and, of course, they are pulling in different directions," said ANZ Senior Economist Julie Toth.

"I think the actual trading system will go ahead in some form but I wouldn't be at all surprised to see it delayed by six to 12 months."

Releasing the package of six bills, Climate Change Minister Penny Wong said she was open to talks with opposition and Greens Senators to ensure the laws, which will be introduced to parliament in May, are passed by the end of June in time to meet the government's schedule to start trade from July 2010.

The legislation was largely unchanged from a policy White Paper released three months ago and the draft laws will be open for public comment until April 14.

SENATE BATTLE

"The Government does not have the majority in the Senate and we will talk to senators from all sides," Wong told reporters. "The question that will confront some senators is, 'do you throw away something because you'd rather have everything?'"

Wong said the government wanted the laws passed before a U.N.-backed meeting in the Danish capital in December that will bring together nearly 190 nations to try to seal a broader global framework to cut greenhouse gas emissions.

The Greens want the government to make strong emissions cuts of around 25 percent by 2020, but the conservative opposition, which holds the biggest voting bloc in the Senate, wants delays and more compensation for big business.

The government has said it will back a 15 percent cut if other rich nations commit to similar cuts at Copenhagen.

Australia, the world's biggest coal exporter and a growing supplier of LNG, accounts for 1.5 percent of global carbon emissions but is one of the highest per-capita polluters, with 80 percent of electricity from coal-fired power stations.

The Australian emissions trade scheme will see a large portion of its carbon credits auctioned, unlike EU emissions allowances which are given out free.

Australia's major exporting polluters, including iron ore and aluminum producers BHP Billiton, Alcoa and Rio Tinto, and liquefied natural gas (LNG) producers Chevron and Woodside Petroleum, will get significant exemptions for their emissions.

($1= A$1.58)

(Editing by Michael Perry and David Fogarty)

How Australia Will Ease Costs Of Carbon Trade
James Grubel, PlanetArk 11 Mar 09;

Australia plans to auction carbon permits to 1,000 of the country's biggest companies, covering 75 percent of national greenhouse emissions, under its emissions trading system due to start from July 2010.

Following is a brief description of how much the government expects to raise from selling permits, and how the money will be spent to help ease the costs to business and consumers.

Legislation for the scheme was released on Tuesday.

HOW MUCH WILL IT COST?

The government will allow the market to set the price of carbon, but expects the initial price to be around A$25 ($15.80) per metric ton.

The carbon price will be capped at maximum A$40/tonne, rising at 5 percent a year above inflation, to provide a further safety valve in the early years of the scheme.

WHAT IS THE ECONOMIC IMPACT?

The government says it expects emissions trading to only trim 0.1 percent from average economic growth from 2010 to 2050, with a one off rise to inflation of around 1.1 percent, based on a carbon price of around A$25/tonne.

Average household energy costs will rise A$4 a week for electricity and A$2 a week for gas and other household fuels.

HOW MUCH MONEY WILL BE RAISED?

Based on a permit price of A$25, the government expects to raise around A$11.5 billion in 2010-11, and A$23.5 billion over the two year 2010-11 and 2011-12.

The government says every cent will be spent to help households and business adjust to the cost of the scheme.

HOW WILL THE MONEY BE SPENT?

Over the first two years, A$9.9 billion will go to householders, through higher pensions and welfare payments, targeted assistance, and tax cuts and rebates.

A$4.3 billion will be spent on fuel tax adjustments to householders, agriculture, fishing and heavy road transport businesses, and for liquefied petroleum gas, compressed natural gas and liquefied natural gas users.

A$2.15 billion will go to community organizations, businesses, workers and regions through a special Climate Change Action Fund.

A$7.4 billion worth of carbon permits will be allocated to help strongly affected industries, including the electricity sector and emissions-intensive trade-exposed industries.

HOW WILL MAJOR TRADE-EXPOSED INDUSTRIES BE HELPED?

Assistance is available for coal-fired electricity generators with emissions intensity above 0.86 metric tons of carbon dioxide-equivalent for every megawatt hour of electricity generated.

Major emitting trade-exposed industries (producing 2,000 tons or more of carbon dioxide-equivalent for every A$1 million in revenue) will receive 90 percent of permits for free.

Likely industries to receive 90 percent of free permits are aluminum smelters, cement clinker producers, lime, silicon and iron and steel manufacturers.

Other trade exposed industries, which produce between 1,000 and 1,999 tons of CO2-equivalent for every A$1 million in revenue, are to receive 60 percent of permits for free.

Likey industries to receive 60 percent of free permits are alumina and petrol refiners and LNG producers.

The rate of assistance will be cut by 1.3 percent per year.

($1 = A$1.58)

(Editing by David Fogarty)