Keep Politics Out of Emissions Solution

05 May 2009

The Australian Financial Review

By Greig Gailey

President, Business Council of Australia

As the nation moves towards resolving the fate of the federal government’s carbon pollution reduction scheme, we must ensure we understand what it requires of us. Over coming decades – and it will take decades – the CPRS will force Australia to restructure its economy.

No longer will we be able to rely on access to relatively inexpensive energy, including electricity, or on fuels such as petrol and diesel. As Australia puts a price on its emissions, the costs of electricity, transport and products and services – including food supply – will increase. After all, these are the very price signals that are intended to drive changes in people’s behaviours.
It is vital that the CPRS sends its price signals and produces maximum effect for the lowest possible cost. That is no small challenge. Australia is not the first country to introduce an emissions trading scheme. But it will be the first to put in place a scheme that covers about 75 per cent of the economy. It is by far the world’s most comprehensive scheme to date.

The CPRS must take into account the current economic environment and the impact on business and households, as well as set Australia on the long-term path to emissions reduction, maintaining competiveness in the absence of a global response and preserving and fostering economic growth.

This detailed design of the system has substantial implications for Australia’s economy and employment, especially in the immediate term, as well as implications for the reduction of global emissions over the longer term.

But even the best system will be ineffective if it does not provide the confidence that businesses need in order to invest in the infrastructure of a low-emission economy. If investors judge that the CPRS is going to be materially altered if and when government changes hands, they will probably defer or abandon their investment plans.

The impact of the CPRS in the Australian economy is so fundamental and far-reaching that it needs support from both sides.  It is important to remember that both sides of politics possess extensive knowledge and expertise on the design of an effective emissions trading scheme, and on the complex range of issues that must be addressed to make it a success. The CPRS has its origins in work by the previous government, notably in the report in 2007 of the Prime Minister’s Task Group on Emissions Trading.

The combined skills and talents of both the government and Opposition should be harnessed to finalise details of the CPRS and design a practical and workable emissions trading scheme. This is too important an issue for all Australians to have our major political parties seeking political advantage through their deliberations on the draft legislation.

It is for this reason that the Business Council of Australia has called for, and continues to argue for, a bipartisan approach to the development of the CPRS legislation. This may sound naïve, but in fact bipartisan support has been a key ingredient of Australian policy in areas such as monetary policy.

Bipartisan support means using the best ideas available wherever they may come from. The objective is to ensure the scheme meets the interrelated goals of creating a smooth, long-term transition to a low-emissions economy and contributing to reductions in global greenhouse gas emissions.

There are substantial benefits in the government and opposition working together to resolve the outstanding matters and ensuring the scheme does not include the risk of reducing the competiveness of Australia’s industries, deferral of investment or business closures, and employment losses in the early years.

Business and the community want an emissions trading scheme that contributes to the reduction of global greenhouse emissions in a manner that does not cause unnecessary disruptions.

This means avoiding last-minute parliamentary deals, made in the early hours of the morning, made with no time to consider the policy and implementation implications of the compromise, made simply to get the numbers.

A successful Australian CPRS will provide an example to many other nations. To provide that example, we must find the right economics, and we must find it together.



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