Senator BIRMINGHAM (South Australia) (18:04): I rise to speak on the Clean Energy Amendment (International Emissions Trading and Other Measures) Bill 2012, which is part of a package of legislation that once again demonstrates—

The ACTING DEPUTY PRESIDENT: Order! Senator Birmingham, I am sorry. Order, please! If you are not participating, could you leave the chamber.

Senator BIRMINGHAM: Senator Feeney and Senator Ludwig are fighting over who gets to hear my speech. It is lovely.

Senator Feeney: And it's me! I lost, so I get to hear it.

Senator BIRMINGHAM: Touching, gentlemen! As I was saying, this package of legislation demonstrates so very, very clearly the absolute policy chaos that lies at the heart of this Labor government. What we see here are significant changes to Labor's carbon tax that is just a few months old. It is just a few months since this carbon tax commenced operation, and the government are already having to rewrite the rules. In doing so, they are in many ways backflipping once again on promises they made in relation to the carbon tax.

We know that the carbon tax is one of the biggest, if not the biggest, backflips in Australian political history. The Prime Minister's famous words were that there would be no carbon tax under a government she led—words put through the shredder immediately after the election when the Prime Minister, in a deal with the Australian Greens, determined that there would be a carbon tax under this government that she leads. Having implemented that carbon tax, having struck deals with the Greens and the crossbenchers to get it through, we now find, months later, that the government is introducing significant changes to the carbon tax. We have heard through the committee process that these changes have been lacking greatly in consultation.

The Australian Industry Greenhouse Network submitted to the Senate inquiry that:

… the ability to comment in detail on the original significant policy changes was limited by the lack of previous consultation and limited explanatory notes, as well as limited time for appropriate and comprehensive analysis of the issues.

The Australian Petroleum Production and Exploration Association highlighted that:

… the consultation process that has given rise to this package of bills has been inadequate.

Again we see policy on the run from this government, legislation on the run from this government—significant flaws that continue to do damage to confidence in the Australian economy and our standing as an investment destination.

What do these bills in particular do? The government will say, no doubt, the highlight measure of these bills is the linkage to Europe—that these bills will provide and facilitate initial linkage for Australia's carbon tax with the European ETS. 'Linkage' is one word for it; 'outsourcing' might be another. 'Handing over of complete control' is really in many ways what is occurring—because it has become clear that this is very much a one-way street. Initially, in fact, it is completely a one-way street. The deal that it is being done to date is solely for Australian companies to be able to buy European permits, but there is no opportunity for investment or activity in the other direction. So it is a one-way street in that regard.

But more significantly, because of the nature of the European scheme and the nature of the deal being struck, we see a situation where effectively the price of the carbon tax in Australia in future will be determined by decisions in Brussels rather than decisions made in Canberra. The price of the Australian carbon tax will be influenced by what happens to the price of the European ETS—directly influenced by what happens in that regard. We had that clearly stated by none other than the secretary of the Department of Climate Change and Energy Efficiency during Senate estimates, who made it very clear. I will quote the question that I asked of Mr Comley:

Senator BIRMINGHAM: If Europe were to take steps that saw them adopt a more ambitious target than they currently have, that would result in a higher carbon price in Europe and therefore a higher carbon price in Australia?

Mr Comley: Other things being equal, that is right.

That is right. If Europe decides to adopt more ambitious targets for emissions reductions it will result in a higher carbon price in Australia. I went on and asked Mr Comley:

Senator BIRMINGHAM: If Europe were to, as they are discussing doing, potentially restrict the number of permits that are available, that would result in a higher carbon price in Europe and all other things being equal, a higher carbon price in Australia?

Mr Comley's response:

That is right.

So: from none other than the secretary of the Department of Climate Change and Energy Efficiency, clear confirmation that the policy decisions taken in Europe, in Brussels, as a result of this linkage will have a direct impact on the rate of the carbon tax, the carbon price, in Australia. That, of course, is well recognised by those who made submissions to the Senate inquiry.

Qantas made clear their views, saying:

Of concern to Qantas is that the EU will have the ability to artificially control the price of carbon in Australia and the impact on Australian industries through the EU carbon price.

Qantas were not the only ones. The Cement Industry Federation also highlighted the fact that:

… it appears Australia has very little say over any major scheme changes that are contemplated by the European Union.


The CIF is concerned that Australia's future scheme design, the setting of caps and the inclusion of allowable offsets, may be unduly influenced by the European Union …

So we see very, very clearly that what is highlighted as a hallmark feature of this legislative package—the EU linkage—in fact will leave us in a situation where Australia's control of the destiny of our carbon tax is limited because the European scheme will have a direct impact on the rate of that carbon tax.

We also see that it has had an impact on policy at international climate change negotiations. The Climate Institute appeared before the Senate inquiry and, in very prescient evidence, Mr Erwin Jackson from the Climate Institute said:

… our [Australia's] posture on the Kyoto protocol over the next few months will be important.

Why did he think it would be important? He thought it would be important because:

We have an agreement with the European Commission but that needs to be ratified by member states in terms of a mandate to negotiate a treaty. If Australia is not playing ball in Doha and not playing ball in Kyoto, that will have an impact on how European member states view the negotiation of the links between the two schemes …

What Mr Jackson is suggesting is that it would be necessary, in terms of playing ball on Kyoto—namely, a second commitment period for the Kyoto protocol—that European member states would see it as a condition for the negotiation of a treaty, for Australia to indeed take those steps, despite some of the preconditions that the government had previously set out for doing so. Miraculously, what happened in the last couple of weeks? Mr Jackson's predictions came true and the government has given the green light to that second commitment period, just as Mr Jackson predicted we would do, so as to allow and facilitate the approval of those European member states for the negotiation of the treaty.

So already we have seen that this deal is impacting on policy decisions in Australia. Already we have seen that this government is changing its policy approach to a second commitment period under Kyoto in response to the deal that it has signed with Europe. That is before we get to the point where, of course, we will see the higher prices or the influence of Europe set the rate in terms of Australia's carbon tax.

It is not just the influence that is of concern; it is also whether that influence comes from a scheme in which one can have confidence—whether there is integrity in that scheme. Extensive evidence was given by the University of Queensland. We heard from representatives of the University—Professor Paul Frijters and other academics—that there are real concerns about the integrity of the EU scheme. He talked about the verification approaches undertaken and, in doing so, highlighted that there was no uniform mechanism for the verification of what people report under the EU ETS. We know that in Australia we have had a greenhouse emissions reporting scheme in place for many years, predating the carbon tax. But in Europe they have a verifier that looks at the documentation provided. According to the witnesses from the University of Queensland, the verifier is supposed to do spot checks—but as yet there is no operational peer-review mechanism for these verifiers and hence there is a strong possibility that people choose the verifiers that go easy on them. That is, of course, an unverifiable statement in itself—precisely because there is no peer-review mechanism as yet. 'It is a murky world of verifiers,' was the evidence that we heard.

They claimed to have gone through some of the actual documents which verifiers have to send in and there was a lot of room for interpretation, or manoeuvring, in what we saw; there was a lot of room to manoeuvre on what you actually counted as the fuel that went into a company. Then there is the fact that there are different applications in place across European member states as to how their ETS works. Again, the University of Queensland highlighted that the incentives to, as it were, penalise your own companies are very limited within the European Union. These were some of their main concerns about why it is that we cannot have confidence in the nature of that European scheme.

The Institute of Chartered Accountants in Australia also highlighted concerns and indicated that in the EU emissions trading scheme there had recently been various instances of integrity issues around registry security and fraud. Then there are the issues not just of integrity but of how Europeans may deal with what is being seen as a problem of overallowance and overallocation. Again, the University of Queensland noted the potential for Australia to find itself in a situation where Australian companies are buying spare permits from the European Union without anything at all happening to overall carbon emissions—highlighting the futility and potential pointlessness of this exercise.

There are differences that exist as well. The European Union scheme, for all that it is held up as the grand design, does not capture such things as fugitive emissions, unlike the Australian scheme. The Australian Coal Association argued that in the EU the majority of permits have been, and continue to be, allocated without charge to the traded sector during a lengthy transitional period. The linkage with the EU ETS highlights the disadvantage imposed on Australian producers.

This legislation does not just link to the EU. It also provides for the abolition of the floor price that was in the carbon tax initially passed by this government. Why did they have a floor price in their legislation? According to Ms Gillard on 13 September 2011, the floor price:

… will limit market volatility and reduce risk for businesses as they gain experience in having the market set the carbon price.

As recently as August this year, Mr Combet argued that they were 'committed to the arrangements we have legislated'—commitments that I am sure Senator Milne thought would hold true. Time and time again the government restated its commitment to the floor price. They argued that it would provide confidence. In July this year Mr Combet said:

We've put in place a floor price and a price cap to provide some confidence over the first few years about the potential variability of the price.

Again, Mr Combet on the floor price:

This will reduce risks for businesses as they gain experience in having a market set the carbon price.

In this place, Senator Wong said:

It is the case that our policy does include a price floor which acts as a safety valve for investors in low-emissions technology by establishing a minimum price for the first few years of a flexible price period.

So much for safety valves; so much for the reduction in risk; and so much for the need for extra confidence that the government argued required this floor price. Within a few months the government has been all too happy to abolish it. Once again, it is an example of this government advocating and arguing for one thing and doing completely the opposite. That is what we have seen here; that is what we have seen throughout the carbon tax debate. And this is just another example.

Even advocates for some of these changes such as the Climate Institute have argued against the abolition of the floor price and highlighted again to the Senate inquiry some of what they thought were the beneficial effects of having a floor price. The coalition is not defending the existence of a floor price. Frankly, on this side we do not believe there should be a carbon tax at all. But we highlight that it was the government that put in place a floor price, started a carbon tax in July of this year and has now ditched that floor price it said was so necessary for certainty.

Despite all of these changes—the abolition of the floor price, the link to the EU and so on—what has been remarkable is that the government has provided absolutely no updated modelling and no evidence of what they expect the forward revenue of the carbon tax to be. It is still based on modelling that is now years old.

Again, we have seen that those who may actually give some serious thought to these matters are not willing to stand by that modelling. Mr Comley, the secretary of the Department of Climate Change and Energy Efficiency, indicated again during Senate estimates that he had no confidence in what the modelling suggests the carbon tax will be in the years to come. When asked whether he stood by the idea that it would be at $29 when the fixed price period ends, the best we could get from Mr Comley was:

I do not think the current market estimate is implausible.

When asked whether Senator Milne's prediction of a $50 carbon price could come true, Mr Comley said:

It is true … that in the recent past the European Union allowances did trade up to $50. … In the sense that European Union units have traded at that price so is it completely conceivable, it is not completely inconceivable.

So it could be $29 per tonne; it could be $50 per tonne. There are those who argue it could be less. The Climate Institute argued:

What can be predicted with confidence is that based on the proposed linkage and limits, Australian carbon prices in 2020 will likely be substantially higher than the recent forecasts …

That is what the Climate Institute told the Senate inquiry—'substantially higher than the recent forecasts'. So Labor's carbon tax, with its spread of costs across the economy that are already forecast to keep going up, according to the Climate Institute, will, in 2020, as a result of the changes in this legislation, be significantly higher than is forecast.

This legislation also makes a lie of government promises that they are interested in achieving lowest cost abatement. Why? Because it imposes a 12½ per cent quota on what is alleged to be the lowest cost abatement—the CDMs, the Kyoto carbon units. So, on those areas where the government have said, 'We're all about getting, through international linkage, the lowest cost abatement result,' they are now suddenly saying, 'But you can only do that for 12½ per cent'—another measure that was roundly condemned by a range of submitters to the Senate inquiry.

Whether it is in debates about lowest cost abatement, floor prices or the like, we see once again through this legislation a government in chaos, changing this big policy just after a few months, and doing the opposite in so many instances of that which they promised.