The fundamental question about the Government’s ETS is whether it will work. If the scheme will not provide the right signals and incentives for a shift to a low-carbon economy, then doing nothing or doing something else is the better option, because an ETS will inflict costs on businesses and households.

New work commissioned by the Australian Conservation Foundation suggests the Government’s ETS will provide virtually no price signals for Australia’s largest polluters.

Last year the ACF asked Innovest to assess how much large polluters were receiving from the Government’s proposed ETS via free permits. Innovest (now part of RiskMetrics) has updated its calculations each time the Government has amended its scheme in favour of polluters. The latest figures receive plenty of coverage in the press today.

This time, however, RiskMetrics has also looked at exactly how much the biggest polluting industries would have to pay for emissions permits — in short, what sort of price signal they would face.

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During what was to be the first year of the scheme, of course, they now face no signal at all as it has been delayed. In the first year of the revised scheme, the aluminium smelting industry will face a total net permit obligation of $23m. In 2012-13, when we move to an actual emissions trading scheme, it will face an obligation of $82m. Alumina refining will face an initial permit obligation of $57m, rising to $171m in 2012-13.

In 2007, the aluminium and alumina industry produced over $11b in export revenue. It is responsible for 9% of Australia’s greenhouse emissions by itself.

The cement industry does even better. It faces a bill of $4m in 2011-12 and $14m the following year. In 2008, the industry generated turnover of just under $2b, and 1.4% of the nation’s emissions.

Steel: $6m, then $23m, for an industry with $21b turnover and just under 4% of emissions.

Woodside’s Don Voelte called the recent amendments “lipstick on a pig”. Some pig. The whole LNG industry faces a bill of $41m in the scheme’s first year — more than $200m less than it would have paid under the previous iteration of the scheme. Woodside itself, courtesy of Voelte’s incessant whingeing and the lobbying efforts of the APPEA, has gone from getting nothing under the Government’s Green Paper to getting $64m worth of handouts in 2012-13.

Note, by the way, that the biggest polluting industry of all, the cattle industry, which accounts for 11% of emissions, won’t be in the scheme until 2015 at the earliest either.

Get the feeling we’re running out of candidates to actually do something substantial about climate change?

It provides a fascinating contrast with the Government’s treatment of the coal industry, which it has steadfastly refused to include as an emissions-intensive, trade-exposed industry. The Government claims that coal is below the lower threshold for inclusion as an EITE (1000 tCO2/$m revenue. Industry figures show an average emissions intensity of more than 1300 t/$m, comfortably in the range that would qualify it for 60% (initially 66%) assistance. An industry-commissioned reported by ACIL Tasman says the coal industry faces total cost increases from the ETS of over $1b a year.

Even assuming the normal bias inherent in industry-commissioned studies, it is clear that the Government’s decision to single out coal for political, rather than economic, reasons will be extraordinarily costly for that industry when other big polluters — who generate perhaps 15% of the country’s emissions — will face a negligible price signal, one smaller than a foreign exchange fluctuation or a major industrial dispute.

Given the Greens’ success in Perth on the weekend, it is a decision unlikely to be reversed by the Government. Coal, however deserving or undeserving, gets to be the scapegoat for a Government with one eye on its left flank.