If you were frustrated by Penny Wong’s smug evasion on 4 Corners last night about when and why the Government has caved in to big polluters while developing its White Paper, that’s okay. The “why” was tortuously extracted by the Greens at Estimates the week before last.
Christine Milne diligently pursued the issue with Wong and her officials. In particular, why, when the Government’s own modelling of the ETS conducted by Treasury had demonstrated there would be minimal “leakage” of either jobs or carbon, was the Government bending over backwards to reward big polluters with 60% or 90% of their permits free?
Climate Change Deputy Secretary Blair Comley — previously a senior Treasury economist — admitted the point when he said “if you only had one of those objectives and it was purely a carbon leakage objective, then, other things being equal, you would have less generous assistance than is provided under the policy.”
So why was the Government more generous? Wong summarised the issue best when she replied, “We did take into account the Treasury modelling, which has a range of assumptions in it, as you know. We also took into account the consultation that was engaged with between different sectors of industry as well as the community and the government about the impact of the scheme.”
In short, the shift to extend handouts to big polluters, thereby neutering the ETS, was undertaken in response to “the consultation that was engaged with between different sectors of industry as well as the community and the government”. Hands up anyone in the “community” who was consulted. Anyone?
That much we guessed. But officials from the Department of Climate, under questioning from Senator Milne, went further and explained the basis for the Government’s change.
Milne: What I am hearing from you is that there is no real data there at all to support your argument that they deserve up to 90% on the basis of leakage.
Comley replied: I think the argument that industry is only raising the carbon leakage argument is not the experience I have had in consultations. It is both the carbon leakage and the question of the level of profitability for particular firms.
So let’s be clear: the Government’s rationale for amending its already-generous ETS so that it rewarded big polluters was not to prevent the loss of jobs and emissions overseas, but to ensure the profitability of big polluters.
As the Australian Conservation Foundation has shown via a study conducted by Innovest, the biggest beneficiaries of this approach will be Rio Tinto (Australia/UK), Bluescope Steel, Alcoa (US), Norsk Hydro (Norway), Alumina Ltd, BP (UK), Shell (UK/Netherlands), Onesteel, CSR, Chevron (US) and a number of other multinationals and large local companies. They’ll share around $1.5b in free permits.
UK, Hong Kong and Japanese power companies and the NSW and Queensland Governments will also reap more than $2b from the electricity sector adjustment arrangements. By 2015, nearly half of assistance to emissions-intensive, trade-exposed industries will be flowing offshore to multinational companies based in the US, UK and Europe.
The biggest risk of the Government’s approach is not carbon leakage or jobs leakage but profit leakage.
With luck these issues will be pursued by the Senate inquiry agreed between the Greens and the Coalition last night. The terms of reference are still to be finalised by the respective party rooms this morning but will go beyond the Wayne Swan-initiated TOR that the Coalition, in a Malcolm Turnbull smartarse moment, originally wanted to exactly copy. The Coalition’s own inquiry, by Centre for International Economics’s David Pearce, has been delayed a fortnight after Pearce was flooded with submissions inspired by the Swan shenanigans. The report is due with the Coalition within a week, and will be released with a Coalition response after that.
That will keep a lid on the issue within Coalition ranks for the moment, but it will have to come off at some point.