The world’s biggest oil company has emerged as a surprise supporter of Julia Gillard’s carbon tax and wants it made permanent.
ExxonMobil said a carbon tax was a cheaper and more efficient way of combating climate change than an emissions trading scheme.
Under the Gillard Government’s climate change package, the price of carbon permits big polluters need to buy will be fixed for the first three years of the carbon tax when it is introduced in July.
The fixed price starts at $23 a tonne and increases by the inflation rate plus an extra 2.5 per cent each year. In mid-2015, the carbon tax will switch to an emissions trading scheme, with a floating price for permits set by the market and an overall cap on the amount of carbon dioxide that can be emitted.
Treasury estimates the price of permits in 2015 will be $29 a tonne.
In a submission to the parliamentary inquiry into the Government’s carbon package, ExxonMobil said the price of carbon permits under trading schemes was too volatile and unpredictable, discouraging companies from investing in emissions lowering technology.
“ExxonMobil believes that a well-designed, revenue-neutral carbon tax mechanism would be a more cost-effective alternative for reducing greenhouse gas emissions: when combined with further advances in energy efficiency and new technologies spurred by market innovation, we are confident that a carbon tax could play a significant role in addressing the challenge of greenhouse gas emissions,” the submission said.
Despite its support for a carbon price, ExxonMobil - which owns a quarter share of the huge Gorgon project - warned promised assistance to LNG producers to have 66 per cent of their carbon liability covered still left them at “significant disadvantage against international competition”.
The risks of a floating price were highlighted yesterday after the Business Council of Australia warned the emissions trading scheme could punch a $9 billion hole in the Budget over five years if permits trade much closer to the floor price of $15 a tonne than the $29 forecast by Treasury.
One of the nation’s most respected economists, Professor John Fairbairn, used a public forum in Canberra yesterday to argue that under the carbon tax, businesses would deliver bigger cuts in emissions at much lower cost than even Treasury had estimated.
Professor Fairbairn said under the acid rain emissions trading scheme in the US, businesses had changed their practices rapidly and in ways never envisioned.
He said local businesses would deliver “threefold” on the expected cuts in carbon emissions.
