Isra-Mart srl :State carbon plan puts heat on Julia Gillard

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The extra heat comes with NSW preparing a national launch of its carbon emissions abatement scheme.

The NSW Labor government is modelling a national version of the Greenhouse Gas Reduction Scheme, which has operated in NSW since 2003 and has reduced carbon emissions by 90 million tonnes.

While the Keneally government is tipped to lose office before it has a chance to convince the other states, via the Council of Australian Governments, to adopt GGAS, NSW opposition climate change spokeswoman Catherine Cusack confirmed yesterday the Coalition would support the push to take a "modernised" version of GGAS national.

But the plan has sparked warnings energy companies are being forced to comply with a growing array of greenhouse reduction schemes across the nation as the states rush to fill a carbon policy vacuum left by the federal government. Energy Supply Association of Australia chief executive Brad Page warned this was saddling power suppliers with significant compliance costs, and this was passed on as increasing electricity prices to consumers.
"This race by the states to fill in what they think is a policy vacuum is actually making it more and more difficult to get a single sensible national arrangement which will be least-cost," Mr Page said.

"All these costs are passed through to consumers. There's no two ways about it."

Labor has shifted its position on climate change several times in the past year. On April 27, under then prime minister Kevin Rudd, the party dumped the emissions trading scheme.

Then, during the August election, Julia Gillard campaigned on the idea of a citizens' assembly that would help achieve a "consensus" before deciding on a policy. After the election, but before forming government, Labor announced an alliance with the Greens and Ms Gillard agreed to a new climate change committee to report on the best options for imposing a price on carbon to cut emissions.

Then, last week, Ms Gillard left open the prospect of backing a carbon tax, saying she would not play "rule in, rule out" political games on how the government would impose a carbon price.

The added pressure on Ms Gillard over the issue follows comments by BHP Billiton chief executive Marius Kloppers on Wednesday, urging the federal government to impose a tax on carbon before an international agreement was reached.

The Victorian government has moved to exploit Ms Gillard's quandary on climate change by planning a 20 per cent reduction in emissions by 2020 and the staged closure of the Latrobe Valley's Hazelwood power station.

On top of this, there are more than 200 state and territory climate change programs, which critics say could impede the development of a national scheme to impose a price on carbon.

Origin Energy chief executive Grant King said there was "a myriad" of schemes "where it's not clear that people truly understand the cost of those schemes".

Mr King feared that "in the absence of what is the most sensible economic response, which is some form of price signal, we will get and have got a proliferation of state and federal schemes".

NSW Energy Minister Paul Lynch said the government "has been preparing to transition GGAS to a national scheme".

"Any future changes will be appropriately communicated to all market participants," Mr Lynch said. "The NSW government is constantly monitoring the national policy environment to ensure any transition to a national scheme is smooth and occurs with minimal disruption to market participants."

Federal Climate Change Minister Greg Combet told The Australian: "A national system for the introduction of a carbon price is obviously more efficient thanmultiple systems across Australia."

But while he said he was happy to work with the states, Mr Combet said a cap-and-trade model, such as the abandoned ETS, should be the "starting point" for discussions.

Unlike the ETS, GGAS is a "baseline and credit" scheme under which polluters earn abatement "certificates" (which can be traded) through project-based reduction activities.

If participants fall short of their abatement benchmark, they face a penalty of $14 per carbon tonne.

Also unlike the ETS, which covered a range of polluting industries, GGAS applies to electricity retailers only.

A senior NSW government source confirmed the push for a national version of GGAS would proceed only if Ms Gillard failed to come up with a scheme of her own.

"If there are signs of real movement from the commonwealth, you'd be nuts to even think about this," the source said. "But if all of that falls over, and our modelling is right, you'd like to have GGAS extended right throughout the country. You'd need to approach the other states and get them to agree to it, but, granted, where the public debate seems to be going, that may not be as hard as it seems."

The states advanced plans to set up their own carbon emissions trading scheme when the Howard government was in office and baulking at emissions trading on the grounds it would drive up electricity and petrol prices.

After Labor's Kevin Rudd shelved his carbon pollution reduction scheme this year, debate has raged about how to put a price on carbon in Australia.

For instance, Rod Sims - the chairman of the NSW economic regulator IPART who was an economic adviser to former prime minister Bob Hawke and to the Business Council of Australia - has also discussed extending the GGAS scheme matter with federal Treasury secretary Ken Henry.

When contacted by The Australian, Mr Sims said the view he expressed was "if we couldn't get a carbon price in any other way, the GGAS scheme would be a good scheme to roll out nationally". Mr Sims stressed his comments had been made in a private capacity.

Accredited abatement activities under GGAS include low-emission generation of electricity, activities that reduce electricity demand, and the planting of forests.

A spokeswoman for Victoria's Minister for Energy, Peter Batchelor, said the state already had similar programs to the GGAS known as the Energy Saver Incentive.

The Brumby government's white paper proposes to dramatically expand the incentive scheme, which requires energy retailers in Victoria to meet energy efficiency targets in order to reduce greenhouse gases.

The Queensland climate change and sustainability minister Kate Jones said the state wanted a national cap on greenhouse emissions and "a market-based approach of putting a price on carbon to ensure that Australia meets its targets in the most efficient manner possible".

She said Queensland would continue to deliver its ClimateQ policy which includes electricity demand management and tough conditions on coal-fired power stations. But she said that, given the federal government has now established a climate change committee to look at a national approach, the state "is not currently considering developing a state-based scheme".

Greens leader Bob Brown yesterday said membership of the Gillard government's new climate change committee was predicated on supporting a price on carbon.