Monday, July 11, 2011

Its the future with no polluter

Given the recent news that former Governor of the Reserve Bank of Australia Bernie Fraser will be the inaugural chairman of the soon to be established Climate Change Authority (CCA), I proffer the above tag line for the official motto1.

Bernie Fraser to head climate change authority
SUN 10 JULY 2011
Prime Minister, Deputy Prime Minister and Treasurer, Minister for Climate Change and Energy Efficiency

The Gillard Government is pleased to announce that it intends to appoint the former Reserve Bank Governor and former Treasury Secretary Bernie Fraser as Chairman of the new Climate Change Authority (CCA).

The CCA is to be established by legislation as an independent body to provide expert advice on key aspects of the carbon pricing mechanism.

When the carbon pricing mechanism moves to a flexible price emissions trading scheme, the Government will put annual caps on the amount of carbon pollution that can be released into the atmosphere by entities covered by the carbon price.

The CCA will play an important role in the governance of the carbon pricing mechanism.

One of the CCA’s responsibilities will be to make recommendations to the Government on future pollution caps under the carbon pricing mechanism.

These recommendations will have regard to, among other matters:

• the Government’s announced medium and long-term carbon pollution targets;

• progress towards emissions reductions;

• the impact of its recommendations on the Australian economy, including on specific industries.

The Government will make final decisions on these pollution caps, based on the recommendations of the CCA.

The CCA will also provide advice on the performance of the carbon price and other climate change initiatives and will track progress towards Australia’s pollution reduction targets.

It will conduct regular public reviews and its reports will be made public.
The headline at The Age is,
$15 billion in tax cuts for low and middle income earners under carbon deal
Phillip Coorey
July 10, 2011 - 6:39PM

Low and middle-income families and singles pensioners and other welfare recipients are the biggest winners from the carbon price while those on generous incomes will bear almost the full brunt with next-to-no assistance.

Unveiled at midday today by the Prime Minister, Julia Gillard, a package of $15 billion in tax cuts and increased benefits mean 4 million households will receive more in compensation that the carbon tax will add to their cost of living.

A further 2 million households will be no worse off by being fully compensated, while another 2 million will receive something.

Of the nation's 8.8 million households, only 700,000 receive nothing.

The scheme will operate as a fixed carbon price of $23 from July 1 next year, and move to a full emissions trading scheme on July 1, 2015, when the market will set the carbon price.

It excludes petrol and is not revenue neutral as first forecast. It will cost the budget $4.2 billion over four years and will erode the forecast $3.5 billion return to surplus in 2012-13 by $530 million.
It's fairly obvious how the Opposition/News Co. is probably going to play this. It will be some variation of economic doomsday-ism rolled up with "the politics of envy" style rhetoric coupled with a frenetic whisking up of the "green socialist agenda" - when The Greens aren't being compared to Fascists, that is.

As Crikey writes, like all such deals, its a compromise. Maybe not the best compromise but it hopefully breaks the inertia and resistance created by the climate denial spin machine.
Carbon tax: the policy and the politics
by Bernard Keane

This is a better package than the CPRS it is so closely modelled on, but not by a lot.

The key problem with the CPRS was that compensation for emissions intensive industries was so great and went for so long that it neutered the price signal...

The same levels of assistance will apply to big polluters again, but this time the Productivity Commission will be on the case to review whether the assistance is justified and there’s an in-built bias toward reduction in assistance to the levels proposed by Ross Garnaut in his updated report if the PC agrees. But big polluters have a guarantee that their assistance won’t be cut until at least 2018, although the PC can start its 2014-15 review early if it believes there are industries making windfall gains from compensation. Which, of course, they will be.

There will also be an independent body to examine the case for accelerating Australia’s laughably unambitious target of 5% by 2020. The Climate Change Authority could become a potent independent source of advice that will pressure future governments inclined to recalcitrance in the key issue of how quickly we proceed with decarbonising the economy.

So two independent sources of pressure on future governments to improve this scheme in its two critical features: how much the price signal is neutered by compensation, and how fast we should be reducing emissions.

The other key advantage over the CPRS is the use of tax cuts aimed at addressing EMTRs for low-income earners. This isn’t merely sensible policy, it’s actually consistent with the government’s own reform efforts so far under Julia Gillard, aimed at increasing workforce participation.
This tax break for 'working families' my also function as a 'pre-emptive' stimulus - given the direction of oil prices and signs that the US and Europe may be in for another bout of GFC.
The bad news is some of the worst polluters will get even more than they got under the CPRS. The coal industry will get a staggering $1.2 billion in handouts, in an outrageous cave-in to the industry that is responsible, more than any other, for Australia’s contribution to global warming. Compensating the coal industry for a carbon price is like compensating the local drug dealer for a crime crackdown.

So how does it stack up against the criteria Crikey suggested last week? Will it be seen as a serious contribution to the cause of an international agreement on climate change? Yes.

This is about as voter-friendly a package as you can get while still doing something about climate change. With tax cuts for low income earners, generous overcompensation for pensions recipients and handouts to rentseekers to mute claims of job losses, the package minimises the potential for scare campaigns and special pleading.

As we all know, this government is so inept it’s likely to botch the selling of the package and leave people convinced they’ll be ruined by it.

Still, by targeting assistance at the steel industry, the coal industry and the coal-reliant electricity sector, Labor is keeping one eye on its heartland, even if it will have trouble with the road transport industry (which is still getting a good deal under road pricing arrangements). The government wants to extend a carbon price to heavy vehicles in 2014 but this has not been agreed by the Multi-Party Committee on Climate Change (read, the independents).

And the package relies far more heavily than the CPRS did on tax cuts to deliver compensation, giving the government a potent selling point — two, actually, because the lift in the tax-free threshold will be over two years.
There are some very generous concessions.
Big polluters get $9.2b assistance
Business Age, 10th July

The federal government will provide $9.2 billion in assistance to support jobs and industries affected by the introduction of a carbon price.

The government released its long-awaited carbon price package on today, announcing an initial $23 carbon price that will be paid by around 500 big top polluters.

Over the first three years $9.2 billion of the revenue raised will be used for assistance by way of free carbon permits to manufacturers that generate over 80 per cent of emissions.

For manufacturing industries like aluminium smelting, steel making, flat glass making, zinc smelting, and most pulp and paper manufacturers, they will receive 94.5 per cent of industry average carbon costs.

Lower polluters, such as plastics and chemical manufacturing, tissue paper manufacturing and ethanol production will be eligible for permits to cover 66 per cent of carbon costs.

Liquefied natural gas projects will receive 50 per cent assistance. The steel industry will receive $300 million in assistance to encourage investment and innovation to assist in the transformation to a low-carbon economy.

The coal sector will receive a $1.3 billion package to support jobs during the move to clean energy.

The government said most small businesses will not be materially affected by the carbon price, but will benefit from an extension in the small business instant asset write-off threshold to $6500.
And landholders will also see some financial benefits.
Farmers to reap $1bn windfall
The Australian, July 10.

FARMERS who plant trees and store carbon in their soil will share in $1 billion in carbon tax receipts under the package to be unveiled tomorrow.

Canberra will recruit country Australia to its cause by buying credits from landholders who make carbon savings or allowing them to sell those credits to polluters to cover their carbon bills.

It will also reinvest carbon tax revenue in land research and management programs, including funding for outreach officers and training for farmers who want to take part in the scheme.

Greens deputy leader Christine Milne yesterday said the deal struck by her party would end the "political interference" at cabinet and ministerial level in renewable energy funding programs.

"We're going to see now real support, consistent secure support for research and development, and demonstration and commercialisation projects," she said.

Mr Oakeshott said the latest bargain with the government offered landholders "significantly more" than was on the table under Labor's earlier carbon pollution reduction scheme.
Which should help prevent some farmers from joining or voting for silly front groups like The Climate Skeptics2, who also seem to want to revive the "Tilt Australia" campaign.

It only took a few hours.
Tony Abbott slams 'veiled socialism'
TONY Abbott has accused Julia Gillard of using her carbon tax plan as a cover for a redistribution of wealth, savaging the new policy as "socialism masquerading as environmentalism".

The Opposition Leader also insisted the package would cost jobs, demanding the Prime Minister visit factory floors and mines to face workers whose jobs he said she had put at risk.

"We're against this," Mr Abbott said. "This is a bad tax. It can't be fixed. It has to be fought."
SURELY Tony Abbott didn't mean to let his Climate Change Denial Disorder (CCDD)come to the fore, again ... he needs to be prescribed some RealityneTM.
Mr Abbott said. "This is a bad tax based on a lie."

Meanwhile, elsewhere in The Australian, others are looking to the business upside.

Biggest single investment ever made in renewable energy

The Australian, July 11, 2011

The Clean Energy Finance Corporation will start operating in 2013-14 with more than double the seed capital of its overseas counterpart, Britain's $4.5bn Green Investment Bank.

And green power projects -- excluding nuclear, biofuels from native forest woodwaste, and carbon capture and storage -- will take up at least half the fund's capital, after lobbying by the Greens.

Greens deputy leader Christine Milne said the dedicated funding represented the biggest single investment in renewable energy Australia has ever made.

"With a legislatively guaranteed stream of funding outside the budget, no future government will be able to undermine it without changing the legislation," she said.

The fund, which will be independent of government and run by a board of banking, investment management, clean energy and technology experts, aims to partner with business to maximise investment in the sector.

The government believes $20bn will be spent on renewable energy projects in Australia in the next decade and $100bn by 2050. "Treasury modelling shows that with a carbon price, energy from the renewables sector is projected to account for around 40 per cent of our electricity generation by 2050, a significant increase from its current level of around 10 per cent," it said yesterday.

Professor McKibbin was concerned by the scale of the package's subsidies for renewables.

"We know from the Productivity Comission report that that is a very high cost way of reducing carbon per unit . . . it has to be done in a way that is very carefully managed," he said.

"I would prefer that the carbon price system itself generates enough incentives."

1. Bernie Fraser achieved some celebrity in Australia for his role in promoting superannuation funds with the tag line "It's the super of the future", uttered in a distinctive monotone.
2. I've already linked to The Australian, I refuse to have links to two sites from the dark side in one post ;-).


Robin Johnson's Economics Web Page said...

Its always pleasing to see what careers ex-All Blacks like Bernie Frazer have.

Meryem said...

I hope these environment saving measures will yield some results for the local community. And thereafter adopted by other countries as a model program.