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Postponing the emissions trading scheme means further uncertainty for Australian business

Date
04 May 2010
Postponing the emissions trading scheme means further uncertainty for Australian business

Rupert Posner, The Climate Group's Australia Director, comments on the Australian Government’s recent announcement that it is shelving its proposed Carbon Pollution Reduction Scheme (CPRS) until 2013.

The Australian Government’s recent announcement that it is shelving its proposed Carbon Pollution Reduction Scheme (CPRS) until 2013 threatens to pull the handbrake on low carbon development in Australia – unless a viable alternative is found quickly. The country is now staring down the barrel of a three year hiatus that will see carbon continue to go un-priced, creating long-term uncertainty for businesses and investors.

The most damaging impact of the delay will be to undermine long-term investment decisions in low carbon technology, particularly in the energy sector, where a price on carbon is vital to wean Australia off its reliance on coal. This will cost the economy valuable jobs as well as putting it on the back foot in the race for emerging international clean tech markets, where it is already beginning to fall behind countries like China and Germany.

With international investment in clean energy predicted to tip the scales at $200 billion this year, Australia will now struggle to attract its share. After less than a week, there is already some evidence of the investment impact. Santos confirmed it would not go ahead with a proposed AU$800 million gas-fired power plant in Victoria, a state dominated by coal-fired generation, while there was no definite price on carbon. The same is also the case for renewable projects from concentrated solar power to geothermal, which depend on a carbon price to get over the line.

Prime Minister Kevin Rudd has said the decision reflects current political realities in Australia. The government lacks the majority it needs in the Senate to pass the CPRS, and both the Opposition and the Greens who have voted against it have indicated they are not willing to negotiate. The issue has been the hot potato in Canberra for more than a year, creating fierce debate in politics and the media. The scheme has twice been rejected in the Senate by an unlikely alliance of the Greens, who insisted the bill was not strong enough, and the conservative Coalition – a party dominated by the climate-skeptics – who labeled the CPRS “a great big new tax on everything". In November of last year, the bill was at the centre of a public row in the Coalition, which ended in a successful leadership coup and the end of bi-partisan support for the bill.

In failing to pass the CPRS, all the parties have done a disservice to the Australian economy. In the short-term, there may be some relief at not having to factor in the additional cost of carbon, but this is a short-term sweetener at the cost making high carbon infrastructure increasingly difficult to maintain, as well as locking in dangerous emissions levels. All the evidence shows that the longer we wait, the more expensive change will be.

With the centre piece of the government's climate policy now in deep freeze, even the lower end of Australia’s 2020 emissions reduction target of 5-25 per cent now looks to be, at best, aspirational, without a clear path to achieving this.

Some hope remains though – on a sub-national level, the Australian states will now be able to take on more of the initiative. The good news is that they have the inclination, and have had good practice under the Howard Government, when they were the driving force behind much of climate policy in Australia. There is also the fact that the majority of the Australian public still supports action on climate change, and the Rudd government’s CPRS scheme (something that makes the scheme’s failure so far all the more disappointing). In a federal election year, the Rudd Government needs to honor that support and act quickly to put in place interim policies that will spur the development of clean energy and infrastructure. This will only be a temporary fix to a long-term price on carbon, but will be a crucial one if Australia is not to lock itself out of new low carbon markets for years to come.

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