The extraordinary generosity of the Government’s proposed emissions trading scheme to big polluters, revealed in a report commissioned by the Australian Conservation Foundation, raises questions about both the design of the scheme and its likely effectiveness in motivating companies to reduce their emissions.

The report, by Innovest, got a run in the Sydney Morning Herald, the Canberra Times and The Oz but will attract nothing like the promotion that the Business Council of Australia’s risible warnings about industry closure received.

Innovest calculated the benefit to industry of the Green Paper’s proposed allocation of free permits to emissions-intensive trade-exposed industries and assistance to strongly affected industries like coal-fired electricity generators, based on a carbon price of $20 a tonne.

It found that the aluminium industry would receive over $1b worth of assistance, including $825 to the aluminium smelting industry. Aluminium and alumina was one of the sectors dealt with in BCA’s report, which concluded half of the industries it examined would be forced to close or face savage cuts in revenue.

If black coal mining is included — which it might be if coal prices fall and revenue diminishes to 2001-02 levels — it will receive more than $1.5b in assistance.

Moreover, large transnationals stand to rake in the bulk of the assistance. Rio Tinto, Alcoa, Norsk Hydro, and Marubeni and Mitsubishi from Japan will be the biggest beneficiaries of free permits; if black coal is included, BHP-Billiton, Xstrata and Anglo-American will reap hundreds of millions of dollars in assistance.

The ACF points out that “the top ten recipients of assistance earned a combined $115 billion in operating profits in their most recent reporting years.”

But it gets better.

The promised assistance for the power industry — in the form of cash rather than permits — was also modelled by Innovest. Due to Government ownership of power industry assets in several states, the NSW, Qld and WA Governments will obtain nearly 60% of that assistance, to the estimated value of over half a billion dollars. The other power industry beneficiaries are UK, Hong Kong, Japanese and US power companies. In fact, only 14% of power industry assistance will go to Australian firms.

Given the states’ history of ripping huge dividends out of utilities, what are the chances that this motherlode of taxpayer assistance won’t go straight into State revenue, minimising the incentive for utilities to invest in low-emission generation capacity? And would anyone trust the NSW Government with an extra $300m?

The report clinches the case for switching the focus of assistance from cash and permit handouts to targeted investment. If the Government is determined to give an enormous handout to the biggest polluters, it should at least aim it at new investment that will yield energy efficiencies and lower emissions, rather than offering a handover of hundreds of millions of taxpayer dollars.

The ACF has done well to start counterpunching against the disinformation and shonky reports coming from rentseeking industries.

What’s the bet, however, that the mainstream media somehow can’t find the same space or profile for it?

Peter Fray

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