As more details of the Government’s ETS are revealed, its sheer awfulness becomes more apparent. Anyone committed to reducing or even slowing the growth of Australia’s carbon emissions will find it extremely difficult to support this complex mechanism to transfer wealth from low polluters to high polluters.

Yesterday Penny Wong realised the Government’s guidelines for the all-important assessment of which polluters gets free permits, and how many. Between now and May, industries will have to submit data to justify their claims to be emissions-intensive and trade-exposed, so that Wong can add their industries to the ETS regulations in June. It will be a busy three months for carbon auditors (yes there is such an occupation — who said addressing climate change would cost jobs?) across the country.

In other contexts, remember, this would be called protectionism — heavy carbon emitters are being subsidised, on the basis that everyone else in the world subsidises their emitters. As the Australian Conservation Foundation has demonstrated, much of this protection will in fact go to foreign companies

The guidelines make clear just how low the hurdle is being set for polluters who want to get some of the free-permit action. A number of sectors are not required to provide data, but will move straight to a formal assessment process in which the Government has assumed they will qualify for protection. Many of the loudest whingers of recent months are on that list — the aluminium industry, LNG producers, paper producers, petrol refiners — but there’s a surprise inclusion: ethanol and methanol producers.

We know from the NSW Greens that biofuels production, on the admission of the producers themselves, is certainly emissions-intensive. Production from the plants required to meet the NSW Government’s 10% biofuels mandate will increase NSW’s net greenhouse emissions by at least 1.5% and probably more. But trade-exposed? Given the Howard Government’s punitive excise on ethanol imports imposed in 2002, the notion that Manildra, the dominant biofuels producer in Australia, faces trade competition of any kind is absurd.

Martin Ferguson’s department — well known for its eager acceptance of climate change — is currently reviewing the ethanol excise arrangements, and in an ideal world the inclusion of ethanol on Wong’s list would be a subtle signal that the Government is about to end the Howard Government’s protection. Given Manildra contributed over $200,000 in donations to federal Labor alone in 2007-08, that outcome might not be certain.

That’s OK, though, because the White Paper set a low bar for the definition of trade-exposed at 10% in a single year in the recent past — even if you control 89.9% of a market, if the rest of your competition is foreign, you get access to free permits. The guidelines go further and provide that, even if your industry doesn’t meet the 10% threshold, if you can show that a foreign producer could enter your market without great difficulty, then you’re in.

Don’t get your hopes up that this will be a transparent process. In a remarkable nod-and-wink to industry, the guidelines assure businesses that, while the Department of Climate Change has to comply with requirements such as FOI and the need to produce evidence to Parliamentary committees, if they specify that the information is commercial-in-confidence and its disclosure would harm their business, it’ll be kept in-house. The only disclosure of data will be in aggregated form, which will prevent any external parties from checking the validity of the data submitted, which could be done even without the identities of individual firms being revealed.

Moreover, it won’t be bureaucrats who make the decision about whether industries meet the EITE requirements. The Government itself will make the decision — presumably in Cabinet, which is beyond the reach of FOI and other transparency processes — on the advice of a hand-picked “advisory panel” that will advise the Government on whether the assessment process was fair. The membership of the panel has not been revealed. As if the Government hasn’t set the bar low enough, it has left itself wriggle room to include any industries that it might feel have a special case for protection, or are too important to alienate.

All this paper chasing is going to produce more emissions than will ever be prevented under this ineffectual reward scheme for polluters.

Peter Fray

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