Isra-Mart srl : Australian Minerals Council Rejects Carbon 'Tax Grab'

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The Minerals Council of Australia has published a lengthy report on the country’s proposed carbon tax, stating that an integrated policy approach is absolutely necessary for a carbon pricing scheme to be effective.

The Council views the carbon pricing scheme as a “tax grab” by the government, saying that it will generate carbon tax revenue of around AUD523 (USD557) per person in its first year. That compares with tax revenue generated by the European Union’s emissions trading scheme of just AUD0.96 per annum since its commencement in 2005, according to the Council.

It says that since 2005 the European Union ETS has raised AUD2.9bn in tax revenue, and that a CPRS-style Australian scheme (assuming an opening carbon price of AUD25 per tonne CO2) will raise more tax than that in its first three months alone. By 2020, the Australian scheme is projected to raise more tax (AUD150bn in current dollars) than the annual GDP of 170 countries.

The integrated approach suggested by the Council includes a global agreement with concerted and comparable action by all major emitters; a measured transition to carbon pricing, with cost burdens comparable with those facing Australia's competitors, and the development and deployment of low emissions technologies. However the Council says that international action is weak, and where action is underway, carbon pricing has been phased in to prevent carbon leakage.

The report points out that many of Australia’s leading trading partners including the USA, Canada and Japan have rejected or postponed plans for carbon pricing schemes. Free (or virtually free) allocation of all permits is a common feature of carbon pricing schemes that are being implemented or planned around the world, including in the European Union, regional US schemes and Korea. “Australia is not lagging the rest of the world,” it says.

Despite a commitment that ‘all carbon pricing options were on the table’, the Minerals Council says that the government has refused to consider alternate approaches and simply reverted to a model based largely on the Carbon Pollution Reduction Scheme (CPRS). The Council believes that a re-run of the flawed CPRS is the wrong approach.

“A CPRS-style approach to the treatment of trade exposed sectors will put Australia’s export and import competing sectors at a severe competitive disadvantage,” the report says.

Beneficiaries will be other nations because “not a single Top Four competitor/producer in any of 13 key minerals commodities has a functioning carbon pricing scheme”.

The Council proposes an alternative to prevent loss of export competitiveness under carbon pricing, saying that Australia should follow other nations and adopt a phased approach to the introduction of auctioning of permits.

While international schemes are based on a model where trade exposed sectors are safeguarded from carbon costs during a lengthy transitional period, the Council says that more than 80% of Australia’s merchandise exports will face the full brunt of carbon costs from the outset of the scheme.

In the absence of a binding international agreement on greenhouse gas emission reductions, the Council believes there should be a full or 94.5% allocation of permits to trade exposed firms.

“Under such an approach, all trade-exposed sectors would be treated equally – there would be no arbitrary emissions intensity thresholds or complicated formulae for determining eligibility,” the report says.

“Failing to deal with the trade exposure issue will mean that the environmental integrity of Australia’s scheme will be compromised. The effect of the policy will not be a reduction in global emissions, but a simple reallocation of where those emissions take place. The costs borne by the Australian community will therefore have no environmental benefit,” it concludes.