Summaries - Australian Financial Review
14 February 2011, Page: 55
Prime Minister Julia Gillard should not entertain the idea of compensating the industries responsible for major carbon emissions, and thus steer clear of the main problems with Kevin Rudd's Carbon Pollution Reduction Scheme, which would have cost the government $20 billion to give industries carbon permits. The idea of compensating polluters contradicts the reasoning behind establishing a carbon price in the first place, namely to create an incentive for businesses to shift away from high emitting practices.
Mr Rudd was hamstrung by the impending global financial crisis and the Liberal opposition, who's support he needed to pass the bill, but Ms Gillard has no such problems. The axing of the Cash for Clunkers scheme and the Green Car Innovation Fund are to be commended, because they would not have led to a change in behaviour, and for the same reason industry concessions on carbon emissions should be scrapped as well.
The Grattan Institute researched the impact of a carbon price of $35 per tonne last year, focusing on seven industries: steel, cement, coal, liquefied natural gas (LNG), aluminium smelting and refining and oil refining, which together produce 20% of Australia's carbon emissions. The research found that even with a carbon price, LNG and coal would continue to make profits and there was little risk to jobs, but would the incentive to move to low emission mines would be removed.
The aluminium and oil refining industries may be forced off shore, but this was likely to happen anyway, while a carbon rebate to exporters would possibly be necessary to protect the cement and steel industries. Ms Gillard has likened her reforms to those of Hawke and Keating, but to be as effective she must be prepared to make tough decisions that could result in the loss of 10,000 jobs in aluminium and oil.
Compensation for such industries would result in the cost falling on the consumer through higher transport and electricity prices. Ms Gillard needs to avoid falling into the traps implicit in the original Carbon Pollution Reduction Scheme, which Ross Garnaut said was born out of the worst policymaking process on a big issue in Australian history.
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