Industry free ride will cost the economy Media Release

Sep 17, 2008 - 1:00am

Proposals from Government and special pleading from business groups that emission intensive trade exposed companies should receive handouts are likely to come at a substantial economic cost to the wider community, according to independent economic analysis commissioned by The Climate Institute for it’s submission to the Government’s Green Paper.

Handouts under current proposals are estimated to be worth around $3 to $6 billion a year, more than half of total Government spending on infrastructure, transport and energy or about one third of the total spending on education.

“We need a detailed study into ‘carbon leakage’ before handing over what could simply become windfall profits for some of our biggest polluters. Revenue would be better spent driving investment into the shift to a low carbon economy,” Climate Institute CEO John Connor said.

The analysis from McLennan Magasanik and Associates (MMA) examines Government and Business Council of Australia proposals – including the Aluminium and LNG sectors - and questions the extent to which companies will shift investments offshore.

It highlights that current proposals to hand out free permits to existing polluters are not likely to deliver a net benefit to the economy and are unlikely to impact on investment decisions. The foregone revenue may be better spent driving emission reductions and reducing other economic distortions such as reducing inefficient taxes.

MMA concludes a more effective and economically efficient approach would be to provide direct assistance to companies to implement world’s best practice emission reduction technologies. 

“Rather than the overhyped claims of carbon leakage we need a serious discussion on industry assistance and industry plans to reduce carbon pollution and how to grow our low-carbon economy,” Mr Connor said.

“Accordingly, if limited one off assistance is given to selected generators, it should be on the condition of achieving clean energy outcomes.”

Other key recommendations and findings in the TCI submission include:

  • The national carbon pollution reduction target needs to “speak to” how Australia will do its bit to help developed countries achieving the Bali Roadmap (25%-40 % emissions reductions off 1990 levels by 2020. Australia should reduce by at least 25%.
  • Proposals for a soft start and/or fixed carbon prices will only prolong business, political and environmental uncertainty and should be rejected.
  • The petrol excise offset should be rejected with the billions of dollar savings better directed to assist vulnerable communities and public transport investments
  • A reserve bank style independent regulator to set annual cap extensions and transparently direct assistance to strongly affected exporters and generators.
  • A Carbon Trust style body to administer energy efficiency initiatives in residential, commercial and industrial sectors.
  • A direct proportion of revenue to be committed to helping developing countries clean-up development, afforestation and adaptation – a crucial negotiating asset in global talks
  • A clear focus on the opportunities of the transition to a low carbon economy.

“We need a laser like focus on driving clean investment and opportunities in the low carbon economy, not ‘loser-lite’ strategies that shield polluters with unjustified claims and inaction,” concluded Mr Connor.

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