NICK GRIMM: Australia and the European Union will be linked in what will become the world’s largest carbon market under a deal announced by Climate Change Minister Greg Combet today. Mr Combet said Australia was ditching its earlier plans to impose a floor price on carbon when the current fixed price carbon tax moves to a floating market in July 2015. Instead, he said the Australian market will be linked to the European market where more than 500 million people are covered by carbon trading schemes. That means Australia and the EU’s carbon price will be effectively the same. Australian businesses will be able to buy carbon credits in Europe when the scheme kicks off in 2015.
GREG COMBET: The fact of the matter is that every major economy is tackling climate change and every major emitter has agreed to negotiate new arrangements introducing binding obligations from 2020 to cut emissions and Australia won’t get a free ride in this. We have to ensure that we are tackling climate change in the most economically efficient way and in partnership with our trading partners.
NICK GRIMM: The Climate Change Minister, Greg Combet, and the Federal Opposition says the change comes less than two months after the carbon price scheme got underway. For more, our political editor Lyndal Curtis spoke to Liberal Senator Simon Birmingham.
LYNDAL CURTIS: Simon Birmingham, welcome to ABC News 24.
SIMON BIRMINGHAM: Thanks, Lyndal.
LYNDAL CURTIS: You’ve said any collapse in the rate of the carbon tax has huge implications for government revenue… the Government should come clean about the risks in creating a budget black hole. Instead of the carbon price going up and up and up are you worried now about it going down and down and down?
SIMON BIRMINGHAM: Well, Lyndal, there are multiple risks here and what we see from the Government in today’s announcement is very much a fact of them pulling on different levers to try to get different outcomes. They have in many ways abolished an open trade in Kyoto permits the international permits that allow the Government to achieve its so called ‘lowest cost abatement’ in favour of more exclusive trade with the EU. That is about trying to prop up the carbon price but, at the same time, they’ve pulled out their floor price that had, they’d said, always been integral to this scheme so you’ve got to ask: which is it and why, of course, weren’t all of these factors taken into account before this scheme was put into place?
LYNDAL CURTIS: You’ve raised two issues there and I’ll deal with them separately. You talk about the lower cost permits. Aren’t they, though, the permits that are the most worrying, the ones that are the least credible, and isn’t it the right thing to do, if you want credible businesses buying permits that have credibility to limit the access to those ones?
SIMON BIRMINGHAM: Well, there have been multi-million dollar frauds in the European scheme as well so there are all sorts of concerns about, frankly, any form of carbon trading. You set up these artificial trading schemes and, of course, what happens is people will gain them, people will try to gain advantage through them and people will try to rort them. That’s why this whole notion is, of course, a flawed approach and, of course, we see the fact that, even under the Government’s own modelling, the carbon tax doesn’t achieve emissions abatement in Australia by 2020 our emissions keep going up and yet we’re going to have these billions of dollars being exchanged, in an international sense, in terms of paper transactions, essentially.
LYNDAL CURTIS: You also raise the question of the floor price. Hasn’t the Government, in effect, exchanged a $15 a tonne floor price for… by making the European Union permit cost the floor price of the scheme?
SIMON BIRMINGHAM: Well, the Government is radically changing its proposal less than two months into the operation of the carbon tax so that shows just how poorly thought out it was in the first place and, yes, in effect, it does make that sort of change…
LYNDAL CURTIS: But this is something, wasn’t it, that business… this is something, though, that business was calling for, wasn’t it? Business didn’t like the floor price, did it?
SIMON BIRMINGHAM: Well, business also don’t like the fact that for the next three years, we are paying many multiples in Australia of the European price, so their price is currently running at between 8 and 10 Australian dollars; Australia’s carbon price is 23 Australian dollars so, for the next three years, in a guaranteed sense, we know that Australian industry is paying a vastly higher price than Europeans. What we don’t know, of course, is that, whilst the Government today says it will now have the European price as an effective floor price, just less than two months ago or, in fact, up until today it’s been saying we will have a fixed floor price. What will the Labor Government say in three years’ time? Who knows?
LYNDAL CURTIS: It’s not guaranteed, though, that the European price will stay this low it’s been higher before and there is the chance, isn’t it, that the European price will pick up because European countries are talking about efforts to try and bolster their price?
SIMON BIRMINGHAM: There is very definitely an upside risk and a downside risk here. In terms of the upside risk, it is that, if the price goes up and up, as we have seen the European price go to much higher levels in the past, then Australian industry and Australian consumers will find themselves potentially paying a much higher price. If the price in Europe goes down, then we could find ourselves in the situation of a massive budget black hole so on either side of the equation here we have real risks in place that really aren’t necessary if you found a more sensible approach to tackling carbon emissions than this very complicated tax-and-churn approach of the carbon tax that is just exposing Australian industry to vagaries of a market that has proved to be less than successful, in the European sense, already.
LYNDAL CURTIS: Do you accept that the carbon price that’s been in for two months hasn’t had the damaging the highly damaging effect that the Coalition predicted it would have?
SIMON BIRMINGHAM: The carbon tax makes Australian industry less competitive. Now, it makes it less competitive and that will impact long term investment decisions in this country. It doesn’t mean instantaneously…
LYNDAL CURTIS: But it’s not been the wrecking ball that Mr Abbott predicted, has it?
SIMON BIRMINGHAM: Well, as far as wrecking balls go, you have to see how this plays out in terms of investment decisions in Australia’s future. Many Australian businesses, many Australian households, have not yet even received their first electricity bill under the carbon tax. Many businesses will reassess whether to invest in Australia or overseas and the carbon tax will be a factor in those investment decisions so we have definitely seen, and we pick up on the ground all the time, concerns from businesses and certainly, just in my own surveying of South Australian small businesses about their concerns, the carbon tax comes back right at the top of the list of their concerns about the impact it has on the electricity input costs for their business and just going about day-to-day business factors and that is a genuine concern right across the country.
LYNDAL CURTIS: The changes the Government has announced today could see businesses buying permits from the European Union now. Does that make it harder for you to repeal the carbon price and does that raise the issue that you might have to compensate businesses who buy permits now?
SIMON BIRMINGHAM: Well, businesses who buy permits from the European Union would presumably still be at liberty to sell such permits back into the European Union so it would be a fairly simple transaction and I don’t see that it would create any problems in that sense.
LYNDAL CURTIS: Simon Birmingham, thank you very much for your time.
SIMON BIRMINGHAM: A pleasure, Lyndal, thank you.