Devil in Detail of Getting ETS Right

17 July 2008

The Age

By Greig Gailey
Business Council of Australia

The release of the federal government’s green paper on emissions trading options marks the beginning of one of the most important debates that we will have in Australia this decade.

The consultation period in the months ahead will be the conversation Australia needs to have about how we respond to climate change and the cost we are willing to bear to do so.

The green paper provides the options and issues being considered by the government as it formulates the eventual design of an emissions trading scheme. The aim, of course, is to have draft legislation finalised by early to mid-next year.

The green paper marks the first clear indication of possible directions Australia might take towards a lower emissions future and it is only now that a more precise assessment can be made about the impacts of different scenarios or options on the economy, and therefore what the detail of the final scheme design should be.

On this basis, the green paper is an important starting point in Australia’s response to climate change. The devil, of course, remains in the detail.

The complexity involved in aiming to achieve the twin objectives of reducing emissions and sustaining growth is significant in itself. It is made more so by the absence of a global response and the need to link the scheme to actions by other nations. While the government has made it clear it intends to put in place an emissions trading scheme by 2010, it will be important that the scheme design acknowledges the relative positions of other countries in responding to climate change and the impact this has on the competitive position of Australian businesses.

Obviously the debate has moved on from whether we should reduce global emissions, but there is much left to discuss in terms of what cost Australia is prepared to bear domestically to best contribute to global emissions reductions.

The Business Council of Australia view remains that Australia must put in place a system that supports economic growth and provides an environment for businesses to invest in a lower-emissions future, otherwise our emissions reduction goals will not be met.

As we move through the next few months, the objective of the BCA will be to ensure the eventual design of the emissions trading scheme:

Addresses competitiveness and carbon leakage issues related to industries that are trade-exposed and emissions-intensive (TEEIs).

Ensures the potential for growth in the TEEIs industries in coming decades is not eroded in the absence of a global price.

Ensures the ongoing reliability of electricity supply by managing the impacts of an emissions trading scheme on electricity costs and investment decisions.

As the green paper proposes, we should include as many industry sectors and gases as possible. International offsets must be considered, and the impact on carbon leakage and competitiveness of trade-exposed, emissions-intensive industries in the absence of a global response is of critical importance. Investment in electricity supplies for the future remains a fundamental issue requiring a response as an Australian emissions trading scheme is implemented.

We need to take a multifaceted approach to reducing emissions through continued investment in the research and development of low-emission technologies, increasing the use of existing and emerging low-emission and renewable energy sources, and ensuring greater energy efficiency across all sections of the economy.

The green paper considers these issues and provides the basis for discussions. But it is what emerges in the detail of the government’s scheme design that will determine whether we meet the greenhouse challenge or whether we get it wrong by failing to acknowledge economic realities in our striving for an eventual environmental goal.

Without doubt, the introduction of a national emissions trading scheme will be the most significant policy decision the government makes. Now we must ensure we get the details right. 



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