Australia revises carbon-trading scheme

Reuters, Tuesday November 24 2009
SYDNEY, Nov 24 (Reuters) - The Australian government revised its plans to cut carbon emissions on Tuesday in order to win majority political support for the reform.
The changes will deliver more compensation to affected industries such as coal and electricity and will see an extra A$1.28 billion ($1.18 billion) in government expenditure on the cap-and-trade scheme, reaching A$7 billion by 2019-2020.
The opposition will decide later on Tuesday whether to support the changes and allow the carbon-trade laws to pass through parliament in a vote scheduled for this week.
COMMENT
ANDREW PEDLER, COAL INDUSTRY ANALYST, WILSON HTM
"It discusses (briefly) the support proposed for a number of industries, but does not discuss the charges under the ETS that are intended to be imposed, that the industries are to receive protection from.
"It is not clear to me, given that thie scheme proposes to protect, or provide a buffer for, carbon emission sources from adverse financial impacts, how this will actually encourage reduction in carbon emissions, the supposed ultimate objective of the exercise."
BOB BROWN, AUSTRALIAN GREENS LEADER AND SENATOR
"Today is a black day for Australia's green future, and we intend to campaign on this all the way to the next election. It's polluters payday in parliament house.
"How did the prime minister keep a straight face. He has taken the (conservative) opposition's policy and the Greens' rhetoric. He is giving billions more of the Australian peoples' money to the big coal miners and coal burners.
"It's a cave-in to the big polluters at the expense of Australia's future, security, its children and its grandchildren."
MARCO STELLA, ENERGY TRADER, NEXT GENERATION
"From our point of view an agreement which results in the introduction of an efficient ETS as soon as possible is a positive outcome. The Australian energy and environmental markets -- not to mention the wider economy -- need a carbon-price signal as quickly as possible."
CONNELL BURKE, HEAD OF AUSTRALIAN POWER TRADING, WESTPAC
"The result for the power sector is very, very good. There was obviously some intense lobbying by a lot of the generators."
"One of the positives is certainty for decisions that need to be made at the moment over several years. The generation commitments being made in the market would have been hamstrung. Forward trading of power markets has been severely limited ... which isn't a great way to send price signals for new investment.
"A couple of the key generators in Victoria have refinance dates coming up in February or October next year, so I think it'll definitely help lending decisions to those generators."
On the market for Clean Development Mechanism (CDM) credits:
"I think the CDM market is very flat over the next few years, indicating it's in pretty good supply-demand balance." "Making an estimate of where carbon will be post-2012 just depends on working out if Europe and the U.S. will be large buyers, because Australia will only be a small part of that global market. People will be using them as a hedge between auctions effectively because the auctions will be staggered."
MARTIJN WILDER, HEAD OF GLOBAL CLIMATE CHANGE TEAM, BAKER & MCKENZIE
"The really key interesting thing is that agricultural offsets are in and that is quite significant. They've actually increased the offsetting which will mean a lot more investment in agricultural offsetting projects, which is more in line with what the U.S. is doing."
"It would seem to give further assistance to households, particularly in relation to electricity pricing and particularly in relation to allowing voluntary action."
RUPERT POSNER, AUSTRALIA DIRECTOR, THE CLIMATE GROUP
"Overall, the most important thing is that we get the legislation passed this week so the prime minister can go to Copenhagen with legislation for the introduction of the emissions trading scheme. We need the momentum before Copenhagen, not after.
"This no doubt makes it easier for some of those large companies, but in the end those costs will be passed on to the consumer one way or the other. It ensures these companies come on board and we get something introduced sooner, not later, and deliver a better economic outcome."
BACKGROUND
- The government wants to set up a cap-and-trade system which is broadly similar to the European scheme in that it would rely on a marketplace to determine the cost of carbon emissions, though the Australian scheme is more broad in its scope.
- The government is committed to an unconditional emissions cut of 5 percent by 2020. This target could be increased to 25 percent if the world agrees to a tough new climate pact to replace the Kyoto Protocol in Copenhagen this December.
- The original scheme failed to pass the upper House of parliament earlier this year, giving Prime Minister Kevin Rudd a possible trigger to call a snap election on the issue if his carbon-trading legislation were to be defeated a second time.
- Rudd has now amended his carbon-trading legislation twice in order to meet the concerns of industry and win over enough opposition lawmakers to secure its passage.
- A second vote on the legislation is scheduled this week.
- Opposition lawmakers and heavy industries, including coal-fired power generators and miners, have lobbied hard for more compensation, arguing the government's proposals threatened to destroy jobs and force businesses to move offshore.
(Reporting by Australian bureaux)