Business and industry fear that the Gillard government’s starting price for carbon tax of $20-$30 a tonne from July 1 next year will lead to a doubling in the cost of carbon when an emissions trading scheme begins in 2015-16.
Despite the early start to a carbon tax, members of the government privately concede Australia cannot meet its target of 5 per cent reductions in greenhouse gas emissions by 2020.
The concession came as the Australian Greens refused to be drawn on revelations in the The Weekend Australian that Julia Gillard intended to ignore their demands to wind back the compensation for the electricity and mining industries when she introduces an interim carbon tax from July 1 next year.
The Labor decision is likely to place intense pressure on the government’s relationship with the Greens, despite its reliance on the minor party to maintain its grip on power.
The government will put a proposal to its multi-party climate change parliamentary committee on Friday that an interim carbon tax be imposed from next year and that no targets or trajectories for greenhouse gas emissions be set.
The climate change strategy is designed to put pressure on the Greens to make “real life” compromises on compensation for carbon-producing industries but also introduce a lower carbon price more than a year before the next election is due.
While industry is expecting an initial carbon tax of about $20 to $25 for every tonne of carbon emissions, cabinet has not yet decided on the final price but is considering options up to $30 a tonne.
Some industry leaders said yesterday they were surprised by the news, while others felt the government had deceived them at the beginning of negotiations.
Business fears the tax will appear low next year but after the federal election, due at the end of 2013, a market-based system of emissions trading, with government-influenced prices, could push it up to $40 or $45 a tonne in 2015-2016.
Climate Change Minister Greg Combet told The Australian yesterday: “There is going to be a lot of speculation about the form and design of a carbon price mechanism this year. I will not be discussing issues under consideration by cabinet or the cabinet process.”
Australian Industry Group chief executive Heather Ridout said business would be seeking more consultation with the government as a “matter of urgency”.
Ms Ridout said she had concerns the business community had been left to discover the plan by reading of it in the newspaper. “If the government has a timetable on it, we would like to know about it,” she said.
Opposition environment spokesman Greg Hunt dubbed the government’s preferred option “ETS mark II”, saying it had changed little from the previous model and would cause a hike in electricity prices. “This is going to cause massive tension between the government and the Greens over any compensation.”
He said business was becoming concerned with the government’s direction on climate change.
But Labor is preparing to counter opposition attacks, and is sensitive to escalating community anger about rising costs, particularly electricity prices.
Labor sources say they will not allow the climate change scheme to be attacked as an impost on power prices and will fight to protect jobs in the climate package.
Kevin Rudd’s dumped Carbon Pollution Reduction Scheme offered electricity generators compensation of $7.3bn over 10 years — $1.5bn for the coal industry and $1.3bn in extra assistance for emissions-intensive sectors exposed to international trade such as cement and aluminium.
Industry compensation remains a sticking point with the Greens, who voted down the CPRS, arguing it gave too much compensation to the coal and power industries and the emissions targets were too low.
Greens leader Bob Brown and climate change spokeswoman Christine Milne yesterday refused to comment on The Weekend Australian’s report, but Greens sources said the party had made clear its opposition to generous compensation for polluting industries, and preferred more investment in clean technologies to shift toward a low-carbon economy. Sources said the party would negotiate through the multi-party climate change committee.
At a climate change conference between industry and Wayne Swan, Mr Combet and Resources Minister Martin Ferguson in Sydney last Friday about the climate change plans, industry leaders asked the ministers for details of the start date for a carbon price and the price. No decision has been taken on a final price but it is understood ministers evaded questions from industry about the potential starting date for a carbon tax.
In his weekly economic note, the Treasurer said yesterday the government had highlighted the need for “early action” with business and industry groups during the conference . “The meeting discussed the economic benefits of a carbon price over other forms of government action, and how a carbon price allows the market to select the lowest-cost methods to reduce pollution,” Mr Swan wrote.
He said Mr Combet had “led a discussion on the design options for a carbon price and the need for early action. I was heartened to see the positive reaction from business leaders, and their strong message that they want to roll up their sleeves and get involved in implementing this reform”.
Climate Institute chief executive John Connor said he was assured by Mr Combet at Friday’s meeting the government was a long way from reaching a decision on a carbon tax plan, let alone presenting it to the multi-party committee. “There is still a lot of water under the bridge in terms of negotiations,” he said.
The Construction, Forestry, Mining and Energy Union’s Tony Maher, who is president of the union’s mining and energy division, was also at Friday’s conference. He said the government’s preferred option was “just speculation”.
