Australia’s biggest polluters will enjoy vast windfall gains under the compromise offered by the government to extract support from Malcolm Turnbull for the passage of its CPRS.

As expected, big polluters, the coal mining industry and electricity generators will all receive additional and extended compensation that will inflicted more than three-quarters of a billion dollars on the Budget between now and 2020.

However, the bulk of the additional compensation will be taken from households, with a transfer of nearly $6 billion from households to polluters out to 2020.

The core elements of the compromise are:

  • an extra $1.3 billion to emissions-intensive, trade-exposed industries to 2020 by the retention of the “global recession buffer” beyond five years, thereby making permanent what was intended to be a temporary measure, for a problem that never materialised.
  • A free, unexplained handout of more than  $600 million to the LNG industry to 2020.
  • A $150 million assistance package for the food processing industry, to which the coalition had sought to give EITE status.
  • An assistance package for the coal industry to cost an extra $1.5 billion to 2020, involving 60% free permits for “gassy” coal mines with high levels of fugitive emissions
  • An extension of assistance to electricity generators from five years to 10, providing an increase of 75% in the number of free permits generators will receive  and costing over $3 billion, coupled with measures to address “systemic” risks in the sector through additional assistance, including through loan guarantees (currently uncosted).  This is intended to address the sector’s oft-repeated concerns that it can’t rollover large debt currently due to “sovereign risk”.  There will also be some trivial incentives to encourage investment in low-emissions technology.
  • Assistance for large and medium businesses with increased electricity costs, costing $1.1 billion
  • Some new measures to pretend voluntary action will count toward abatement targets.
  • Agriculture permanently exempt but with the capacity to generate offsets from 2011.

The total cost of the compromise package $1.1 billion over Forward Estimates and $6.5 billion to 2020.  Compensation for households will be reduced by $910 million over FEs and $5.8 billion to 2020.  The fuel excise offset remains in place. This is a table of what it will cost the Budget.



The government’s compromise package is more or less as expected — a lot of extra money for big polluters such as the LNG industry, electricity generators, and coal miners, funded by households.  In effect it is a giant switch of assistance from households to business, with the intention of ensuring electricity prices don’t rise by that much in the first place.  Electricity generators have done very well, with a 75% increase in assistance and the possibility of loan guarantees and other props for their aged, polluting facilities, but it is still far, far short of the tripling of assistance they have been demanding, with the threat of turning out the lights if they didn’t get it.  Coal miners will not be entirely happy either, but the “gassiest” mines will now get 60% of their permits free.

It also covers nearly all of the bases identified by the coalition, including help for the food processing industry.  It doesn’t go near the quantum of assistance at the heart of the coalition’s demands, but it goes a damn long way towards it — which is why Malcolm Turnbull is currently trying to convince his party room to accept the deal.

As for the environmental impact, well, forget about that.  The CPRS in yesterday’s form would have done nothing to curb Australia’s emissions, and this won’t either.  That, of course, is not the point.  Just be pleased it’s only ripping $770 million out of taxpayers’ hands over the next 10  years and handing it to the dirtiest whingers in the country.

This has been the worst policy process in Australian history, and it is likely to climax with the Labor and Liberal parties agreeing to hand over still vaster sums to rent-seekers, opportunists and blackmailers.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey