LNG a winner but coal, airlines lose

Australian
Tuesday 16/12/2008 Page: 6

THE liquefied natural gas sector has won key concessions from Kevin Rudd in his white paper, but coalmines and airlines have lost their battle for a place in his compensation scheme. Canberra has also dug deep for an extra $750 million over five years to help the coal industry adjust to its reforms, on top of the $1.4 billion to support energy efficiency measures flagged in The Australian yesterday. The climate change plan responds to pressure from the LNG sector, which had been angered by its earlier omission from the list of industries and energy sources up for compensation in the Government's green paper.

The Government listed LNG production as one of an estimated 40 industries likely to be issued free carbon permits, and ranked natural gas alongside electricity in the formulas to be used to decide permit allocations. Australian Petroleum Production and Exploration Association chief executive Belinda Robertson said yesterday that the Government had taken "positive and responsible steps" to acknowledge the status of the country's natural gas resources as a cleaner energy source than coal".

"There is no doubt the cost to the LNG industry, as outlined in the white paper, is less than it would have been under the green paper," she said. One of the sector's biggest players, Chevron Australia, had earlier warned that the green paper proposals would added hundreds of millions of dollars to the costs of its Gorgon, Wheatstone and North West Shelf projects. The Government yesterday sought to pacify business by dramatically expanding the number entitled to free permits and allowing that assistance to rise over time.

The changes mean about 45% of permits by 2020 will be issued free to big greenhouse polluters that compete internationally, compared with about 30% under the green paper proposal. And they will be asked for smaller annual gains in greenhouse gas efficiency in%age terms than the rest of the economy. Australian Conservation Foundation executive director Don Henry warned that the Government was funding a new era of "pollution protectionism".

Australian Coal Association executive director Ralph Hillman said that coal, as the country's largest single export, clearly should have fallen into the preferential "emissions intensive trade exposed" category. It would provide certainty and transparency for future investment in the industry," he said. Mr Rudd promised up to $750 million from a new Climate Change Action Fund to help coalmines cut their methane emissions and adapt to the new carbon pricing regime. But Mr Hillman said that while the pledge went some way towards recognising the plight of coalminers, the scheme would still threaten the industry if overseas competitors escaped similar carbon imposts.

Domestic airlines warned of potential price hikes and loss of competitiveness, after their bid to secure compensation from the Government failed. Road transport has the promise of excise relief to cushion higher fuel prices, but aviation does not. Qantas chief executive Alan Joyce said Australian aviation and tourism would be "trade exposed" if international airlines and destinations were not subject to carbon pricing regimes. "International destinations could become more competitive as the price of domestic fares and holiday packages increases," Mr Joyce said.