Thursday, 29 September 2011

Investors raise doubts on Abbott climate plan

Sydney Morning Herald
24 Sep 2011, Page: 4

INVESTOR analysts have raised serious questions about Tony Abbott's "Direct Action" climate policy, saying it is highly unlikely to achieve Australia's promised greenhouse gas reductions at the Coalition's "capped" $10.5 billion price. The Coalition aims to achieve 60% of Australia's total abatement task through soil carbon at a cost of between $8 and $10 a tonne a price essential for the Coalition to achieve its 10-year budget for the policy of $10.5 billion. In a recent brief, Citigroup told investors "we think the Coalition's assumptions about the potential for soil carbon are far too optimistic".

"Shadow minister Greg Hunt referred us to work and comments by the CSIRO and National Farmers Federation in support of soil carbon potential. Our investigations actually found these organisations to be cautious about predicting volumes and costs,.. We conclude that there is a high degree of uncertainty over both technical and financial aspects of soil carbon", a senior analyst, Elaine Prior, wrote. "We doubt that soil carbon will deliver the abatement levels and low costs assumed by the Coalition, so we think either higher expenditure will be needed or the 5% target (for emissions reductions by 2020) won't be met".

The Citi Investment Research analyst's reservations come as Nathan Fabian, the chief executive of the Investment Group on Climate Change, representing super funds and investment managers with more than $600 billion under management, said he did not believe the Coalition's policy was sustainable. "You cannot meet substantial emission reductions on the government balance sheet,.. the issue we see is that if you pay some companies in the economy to reduce emissions you aren't paying other companies whose emissions could still grow enormously,.. we don't believe a policy based on paying for abatement is a sensible long-term option", he said.

Mr Fabian said he did not believe the carbon price would have a serious financial impact on any companies and suggested some businesses had been exaggerating its impact to get more government compensation. "What companies say in the public domain is probably more to do with how they wish to be treated by government in terms of assistance than their underlying financial position", he told the Senate select committee on climate change. Mr Fabian said his group was also "closely watching" development of the government's proposed clean energy fund.