The Australian Parliament must reconsider its approach to the Clean Energy Future legislation and act in the long-term national economic interest.
Parliament must amend the legislation to include specific safeguards so Australia acts in tandem with other major emitting nations over time and adjustments can be made to keep Australia competitive in case of economic shocks.
The legislation without the safeguards proposed by the Business Council of Australia is neither workable nor responsible and is a flawed approach to pricing greenhouse gas emissions. The council has advocated for a multifaceted approach including an internationally linkable emissions trading scheme where Australia acts in tandem with other nations.
The council’s analysis demonstrates the legislation is based on optimistic assumptions in the Treasury modelling that have not been stress tested and there is not the flexibility to adjust the approach to maintain competitiveness.
With a starting price of $23 a tonne rising to $25.40 in the first year, far ahead of the current effective world price, the legislation imposes a hard start on Australian industries that cannot be offset by action to reduce emissions overseas.
It is not economically sensible for Australia to see industries that would be competitive under an effective global carbon price forced into premature decline. Essential safeguards include:
- a low starting price in the fixed price period reflecting the international price
- guaranteed passage of the Steel Transformation Plan Bill 2011
- improvements to the arrangements for trade-exposed industries to ensure they do not face additional costs their competitors do not face
- replacement of the 2050 emissions reduction target with a clause which states parliament must agree future targets subject to independent evaluation and community consultation
- amendments to the objects of the Act to make clear the policy intention of the legislation including addressing competitiveness risks
- ensuring the legislation makes clear that the industry sectors covered by the legislation will only contribute their proportion of the emissions reduction caps
- amendments to address the working capital issues for electricity generators.
The parliament should recognise the pressures many industry sectors are currently facing and include the safeguards necessary to protect Australia’s competitiveness. Without these safeguards the legislation is a risk to the Australian economy.
The Australian Industry Group and the Business Council of Australia wrote to all members of the Australian Parliament on 13 October 2011 urging them to act in Australia’s long-term economic interest and amend the Clean Energy Future legislation to include essential safeguards to protect Australia’s competitiveness. Read that letter here.