Monday, 26 September 2011

State “fudges carbon figures" – Victoria not worst hit

21 Sep 2011, Page: 1

THE Baillieu government's credibility on climate change has been undermined after economic modelling that it commissioned contradicted its own repeated claims that Victoria would be the hardest hit state under a carbon price. The embarrassment was compounded when state Treasurer Kim Wells gave a gaffe-filled media conference, in which he erroneously denied that the state had a legislated goal of cutting greenhouse emissions by 20% this decade.

And despite describing the target as "aspirational, Mr Wells would not say that the government aspired to meet it. A report by consultants Deloitte found projections of Victoria's gross state product were lower under a carbon price than without one but that the state would be less affected by 2030 than Western Australia, Queensland, New South Wales and the nation as a whole.

Questioned over whether he disagreed with the consultants who the government paid to do the report Mr Wells insisted that Victoria would suffer more than WA and Queensland, which were rapidly growing mining states. He said a carbon price would devastate Victorian families and businesses. "We maintain that over the longer period it will hit Victoria the hardest", he said.

The Deloitte modelling found about 35,000 fewer jobs would be created in Victoria by 2015 under a carbon price than if it was not introduced, and that investment would be $6.3 billion or 6.6% lower. It estimated that average income would rise, but be $1050 less than it otherwise would have been in 2015. The Latrobe Valley, Barwon, Geelong and Ballarat were tipped to be among the worst affected areas.

But the modelling did not factor in federal compensation, including $5.5 billion for the owners of coal power plants and $500 million for the steel industry. Nor did it consider the proposed $10 billion Clean Energy Finance Corporation. A separate analysis by ACIL Tasman found 97% of the coal power compensation would go to Victorian plants. In a gruelling media conference, Mr Wells said the Victorian 20% greenhouse target was "aspirational" and "not in legislation". In fact it was included in the Climate Change Act, introduced last year by the Labor government without opposition from the Coalition.

He was also unaware of key differences between Deloitte modelling and an analysis by federal Treasury. Mr Wells claimed there were only two differences between the two sets of modelling the Commonwealth believed there would be a greater drop in real wages, and was more optimistic about the pace of transition to dean energy But in what Deloitte described as a "fundamental difference", the state government figures assumed that Australia would make a deeper cut in emissions on its own soil and buy fewer international permits to meet its target of a 5% cut below 2000 levels by 2020.

It meant it predicted a greater impact on economic production, investment and employment than by Canberra. Deloitte said economic growth would continue to be strong, but found a carbon price would lead to national gross domestic product [GDP] being 22% lower in 2020 than it would have been without a price. In federal Treasury analysis, the difference was 0.3%. Opposition treasury spokesman Tim Holding said Mr Wells's media conference had been "disastrous", and that he had failed to answer even basic questions.

"Mr Wells gave every impression he hadn't even read his own report", he said. "In these challenging economic times, Victoria needs a strong, safe pair of hands, and these certainly don't belong to Kim Wells". The analysis finds 370,000 jobs will be created in Victoria by 2020 under a carbon price, compared with 388,000 if a price is not brought in.

Asked if an estimate of lost jobs growth was meaningful without consideration of the full compensation package, Mr Wells responded by saying he had visited the Alcoa aluminium smelter in Portland on Monday and was concerned it would be affected. Alcoa yesterday issued a statement saying its outlook was positive and it was confident of meeting the challenges of a high Australian dollar and a carbon price. Mr Wells said he did not know how much the report coast. A government spokesman later said it cost $100,000. Prime Minister Julia Gillard said the Deloitte figures were flawed and unreliable.