Taxpayers 'deserve carbon revenue'

Weekend Australian
Saturday 22/3/2008 Page: 7

EMISSIONS trading will trigger a new round of tax reform as the Rudd Government finds ways of refunding billions of carbon-tax dollars to the economy. The Government's adviser on climate change policy, Ross Garnaut, has signalled major restructuring of the tax system to return up to $20 billion a year in new income from the auctioning of emission permits from 2010. In his latest discussion paper on the reform, Professor Garnaut has flagged six candidates for direct compensation from the permit revenue.

Topping the list are low income households, followed by communities in hard-hit regions such as the Latrobe and Hunter valleys, where coal-fired power provides the economic lifeblood. Significantly, the Garnaut review says compensation cannot be justified, on environmental or economic grounds, for the companies behind Australia's $40 billion coal-tired power industry.

Professor Garnaut wants subsidies for the development of new energy technologies and for energy-intense and trade exposed industries such as aluminum and steel. However, the Australian Industry Greenhouse Network warned yesterday of rocketing electricity prices and blackouts if the review's recommendations are adopted, saying the recommendations reflect a lack of understanding of the domestic energy market and the international regimes.

Professor Garnaut said that, beyond specific sectors, the Government should determine the best way of equitably refunding carbon permit revenue to taxpayers, rather than spend it on new government programs. "There is no good reason why the size of government should become bigger as a result of this reform," Professor Garnaut said.

"I think the attitudes of ordinary Australians are going to be affected by how the revenue from the permits is spent. If a substantial part of the revenue is used in ways to ease the adjustment of the new scheme, then that will affect the acceptability of it." The review has recommended in-principle integration with other trading schemes, full banking and borrowing of permits, the inclusion of offset schemes from forestry, and the creation of four levels of increasingly aggressive cuts to greenhouse gases from 2012, with government shifting to tougher methods as international negotiations develop.

Professor Garnaut told The Weekend Australian he would recommend a comprehensive review at the end of 2011 to iron out any teething problems ahead of embarking on much deeper cuts to emissions after 2012. He warned that the Government's Mandatory Renewable Energy Target would push up the price of electricity and might need to be phased out quickly.

Climate Institute Australia Policy director Erwin Jackson said the potential to reform the tax system from emissions trading created a double dividend for the economy. "The revenues can be used not only to help communities through better public transport and energy efficiency but also through a review of the tax system, ensuring we blunt the cost of emissions trading on ordinary households," he said.