By Katie Lahey
Business Council of Australia
An unlikely political consensus has been delivered following the announcement by Prime Minister John Howard last weekend that the federal government would put in place an Australian ‘cap-and-trade’ emissions trading scheme by no later than 2012.
How Australia responds to climate change is one of the most politically charged debates in many years, and only recently it seemed unlikely there would be any agreement on the basic principles between the major political parties and the states and territories.
Yet amid the politics of climate change there is now consensus across all political parties that a market-based, national emissions trading scheme needs to be a key part of any Australian effort to reduce greenhouse gases over the long term.
While there will continue to be debate over coming months about the specifics of the emissions trading scheme, the consensus that we need such a system has provided some certainty that Australia will reduce emissions over the long term while protecting our economic prosperity.
But if we have a national emissions trading system it will be important, as the Prime Minister’s task group recommended, for all of the federal and state-based emissions reduction policies and programs that are inconsistent with a national approach to be wound up.
Governments should not be ‘picking winners’ in prescribing how to achieve emissions reductions, but allowing the market to determine how to achieve these reductions within the trading framework set for it.
It should no longer be necessary, for example, for the states and territories to prescribe a particular energy mix to achieve reductions, such as Premier Peter Beattie did at the weekend by pledging to require 18 per cent of the state’s power to be generated by natural gas and 10 per cent from renewable sources by 2020. We should not, nevertheless, ignore the good work the states and territories have already achieved in designing their own emissions reduction schemes, although the national scheme will be more comprehensive.
The Business Council of Australia in April released its Strategic Framework for Emissions Reduction – effectively the council’s climate change policy – which proposed a cap-and-trade emissions reduction scheme because this model provides a more effective tool to drive emissions reduction at a lower cost to the community and business than a carbon tax or industry regulation would.
Specifically, there is greater certainty you can achieve the required emissions reduction due to the use of the cap on emissions levels, whereas a carbon tax provides no guaranteed reduction and regulation is unlikely to achieve reduction at the lowest cost.
The BCA therefore strongly supports the cap-and-trade scheme outlined in the Task Group on Emissions Trading report, and adopted on the weekend by the Prime Minister.
The scheme meets the test outlined in our reform standards document, Policy That Counts, released in April.
The BCA reform standards are designed to assess the policies of the major parties against a single basic objective – will they contribute to passing on prosperity in Australia or erode it.
The government’s policy meets the reform standards test the council outlined in that it achieves a balance between protecting our economic strengths while achieving sustainable cuts in greenhouse gas emissions at industry and community levels.
It will achieve the four key goals of reducing emissions relative to business-as-usual, achieving the lowest cost emissions reduction, protecting trade-exposed enterprises until there is a level playing field globally, and increasing investment certainty.
So, while there may still be debate on the specifics of establishing Australia’s emissions trading scheme, we should not lose the opportunity presented by this rare political consensus to implement the scheme in a timely way.
One of the key factors in making Australia’s emissions trading scheme a success is the co operation of the states and territories to work with the federal government to wind up or rationalise their schemes that conflict with a truly national approach.