While Malcolm Turnbull is in a world of pain on emissions trading, some of the Government’s more political decisions in what has been an entirely political process of constructing its ETS may yet come back to bite it.

Crikey understands, as we anticipated last week, that the Climate sub-committee of Cabinet met yesterday and agreed to extend compensation to the coal industry to $1.5b, but the Government is sitting on the announcement.

This is about 8% of the permit costs the industry will incur, and falls far short of the compensation that other emissions-intensive, trade-exposed industries will receive. The LNG industry, for example, whinged its way to 60% of compensation after the release of the Green Paper this time last year.

The exclusion of coal was a political decision, designed to give the faintest of green tinges to an ETS heavy on handouts to big polluters. The ostensible reason is that many coal mines don’t reach the emissions intensity threshold set for EITEs. But a number of mines do, and they won’t get the handouts that other big polluters will receive.

Industry sources maintain that job losses will not be confined to the notional losses occasioned by lower-than-expected growth rates in the sector — that there are currently some mines that are marginal and “gassy” and which, according to their owners, will close because of the ETS. The sector more broadly will also shift toward lower-emission mines. The mining of Victorian coal, for example, is less “gassy” than Queensland or Illawarra coal (with the complicating factor that Victorian coal is more emissions-intensive when burnt, but that’s not the coal industry’s problem under the ETS).

To which the appropriate response is — well, that’s how an ETS is supposed to work, surely?

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This is where the Government’s refusal to acknowledge the employment impacts of the ETS borders on outright deception. As things stand, the coal industry has been singled out as the only industry, along with electricity generation, where the ETS will operate as it is supposed to — shifting investment away from emissions-intensive industry toward others.

But the Government has persistently refused to acknowledge such employment impacts — particularly given they will mostly occur in Labor seats. Kevin Rudd made a point of announcing 50,000 (count ‘em) “new Green jobs” today as a sort of corrective to criticisms that the ETS would cause job losses. But there has never been some simple honesty from the Government that the point of the ETS is to cause job losses in some sectors and growth in others — and they won’t necessarily be in the same regions, or require the same skills, as the jobs that have been lost.

The Opposition is guilty of the same lack of candour but since they’re in Opposition, they get a pass. Governments have responsibilities to the community in the policies they pursue.

There’s another issue on which the Government is being less than forthcoming. John Breusch focuses on it today in a very good article in the AFR: the ETS will be structured to generate more revenue each year than will be directed to compensation, if permit prices rise, and because permits for subsequent years will also be available for purchase. While this isn’t necessarily a windfall — revenue for future years’ permits will need to be directed to compensation in future years — is does mean the notion that ETS revenue is fully-allocated isn’t necessarily the case. And at the very least the Government will earn substantial revenue managing a couple of billion dollars’ worth of revenue from future years.

The fact that the Government has been able to find an additional $750m for coal suggests this is the case.

In its politics-induced rush to legislate the scheme, the Government is leaving some significant questions unanswered.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey

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