Monday, 7 November 2011
Clean Energy Bill 2011, Clean Energy (Consequential Amendments) Bill 2011, Clean Energy (Income Tax Rates Amendments) Bill 2011, Clean Energy (Household Assistance Amendments) Bill 2011, Clean Energy (Tax Laws Amendments) Bill 2011, Clean Energy (Fuel Tax Legislation Amendment) Bill 2011, Clean Energy (Customs Tariff Amendment) Bill 2011, Clean Energy (Excise Tariff Legislation Amendment) Bill 2011, Ozone Protection and Synthetic Greenhouse Gas (Import Levy) Amendment Bill 2011, Ozone Protection and Synthetic Greenhouse Gas (Manufacture Levy) Amendment Bill 2011, Clean Energy (Unit Shortfall Charge — General) Bill 2011, Clean Energy (Unit Issue Charge — Auctions) Bill 2011, Clean Energy (Unit Issue Charge — Fixed Charge) Bill 2011, Clean Energy (International Unit Surrender Charge) Bill 2011, Clean Energy (Charges — Customs) Bill 2011, Clean Energy (Charges — Excise) Bill 2011, Clean Energy Regulator Bill 2011, Climate Change Authority Bill 2011; In Committee
The committee stage of the clean energy bills is designed to ensure that we get answers to specific questions. I seek to raise with the minister this morning whether the government still claims that the carbon tax is needed to save the planet. If so, why has it ignored constant warnings, especially from the opposition, that the carbon tax in Australia, acting alone, would in fact have the perverse result of increasing the world's carbon dioxide emissions? As yet another specific example, I refer to Coogee Chemicals, which will now shelve its methanol plant proposed for Australia. Instead of being built in Australia, it will now be built in China, with four times the amount of carbon dioxide emissions. Not only does the world suffer four times the carbon dioxide emissions; Australia loses 150 jobs, a $1 billion investment and $14 billion in export earnings. Indeed, the existing methanol plant, in Ms Gillard's very own electorate, has had its future questioned.
I ask in relation to all that: was this part of the Treasury modelling? In that context, I also ask the minister to explain—because it was not answered last week—why it is that Australian coal dug up for Australian energy production, for Australian jobs and Australian manufacturing, is seen as being so evil that it requires a carbon tax, but Australian coal dug up for energy production in China, for Chinese jobs and Chinese manufacturing, is okay and will not have a carbon tax imposed on it?
Finally, another issue that the minister did not answer last week: on what authority does the government claim that it can force this legislation through the parliament? Was it an election promise? Does the government claim to have another electoral mandate? Does it claim to have popular support as witnessed by opinion polls? On what basis does the government actually believe that it can guillotine these measures through this place, or is it simply that the government is doing the bidding of the Australian Greens?
Well, we have the usual menu of opposition attacks on this policy that we have heard for years now. Here we are in the committee stage. We have one amendment from the opposition. They have yet to move it. All they are doing is making the same political points over and over again that they have made for years.
They say they are asking questions. They are not interested in the answers. They are in large part the same questions they have asked for the last year. Really it comes down to this: the opposition just want to say no. They just want to vote no. It is all a complete pretence from them that they have any interest whatsoever in the detail of this legislation. They do not. They do not have any interest in the policy, as is evinced by the fact that they are putting forward a policy that seeks the same environmental outcome at a higher cost to Australian business and to Australian taxpayers. Let us pause there and remember: this opposition want the same reduction in emissions from Australia that the government has pledged, but the opposition want Australian business and Australian families to pay more to achieve that reduction. The position of the opposition only has to be said to be demonstrated to be utterly ridiculous.
I am very happy to answer some of the questions which have been put, but I will again say—and I will make this point in every contribution: move your amendment; have the debate on the amendment; vote on the amendment. Senator Xenophon has some amendments. They should be moved and debated. What we saw from the opposition in the last four hours on Thursday—and what I predict we will continue to see—notwithstanding all the complaints about the shortness of time, was more of the same, more of what we saw in the 63 hours of debate on the CPRS, what we have seen in the last year, what we have seen in question time, what we have seen in the some 30-odd inquiries on climate change and in particular the many which have occurred in the last parliament and this parliament: the same series of questions that they have no interest in the answers to, because they do not believe that climate change is real. Certainly Senator Abetz does not, and he does not believe that we should do anything about it. Bizarrely he seems to want us to tax Australians more to try and pretend to do something about it, but that is the economics that seems to be running the opposition at the moment. I was asked about Coogee Chemicals' proposed investment. I refer the senator to the statement put out by Minister Combet today, which made a number of points. The first is that, because we are committed to proper support of Australian industry as we transition from a very high-polluting economy to a clean energy economy, which is a very large economic transition—we agree with that; we have been saying that for many years—we have a $9.2 billion Jobs and Competitiveness package, which is designed to address the issue of competitiveness to which the senator referred in his question. For industries that are highly emissions intensive, which would include, I am advised, activities like methanol production, the assistance to be provided starts at 94.5 per cent. Let us just pause for a moment and understand what that means. That means that 94.5 per cent of their carbon liability under the package would be dealt with by the issue of free permits. Remember also that those free permits are against an average efficiency baseline—in other words, to look at the efficiency of the particular process as it exists. That in builds an incentive for people to be more efficient, because if you are actually more efficient than the average you can retain free permits over and above that. Mr Combet has told us:
The fact is that a highly‐efficient methanol producer like Coogee Chemicals is likely to end up with no net carbon price liability under our industry assistance arrangements, so they will not be at any disadvantage compared to their international competitors.
On the basis of information provided by the company—
Senator Cash interjecting—
I know you do not like it, Senator Cash. Perhaps if you listen, you might learn something. He said:
On the basis of information provided by the company, due to the expected efficiency of the proposed new facility, Coogee Chemicals would be entitled to more than 100 per cent of its carbon price liability in the form of free carbon permits.
Let us be clear. That is the advice that the minister has provided the chamber and I, as the minister representing him, provide the chamber with to put a little bit of clarity in the scare campaign that the opposition are engaging in.
I also make the point that it is not the case on the government's policy that assistance under this package is simply withdrawn after five years. There is a review process during which regard will also be had to the state of international action in the relevant industry sector. So that deals with that issue.
We go on and on about the Treasury modelling. Really there is one point that the opposition cannot get away from. They cannot get away from the fact that the Treasury modelling, the people who advised Peter Costello, have made it very clear in public modelling that we can grow our economy, that we can grow jobs, that we can grow income and that we can reduce emissions from what they would otherwise be with a carbon price. It does not matter how many times the government says that, the opposition simply do not want to accept it, so they ask the same set of questions over and over again. They simply cannot deal with the fact that those are the findings of that modelling.
I was asked about Australian coal. I covered that in great detail on Thursday with I think Senator Macdonald. We talked about the coal package that the government has in place. We talked about the fact that what we were looking at was a small number of very gassy underground mines and, therefore, the government has in place an assistance package and a coal abatement technology package as well that are designed to recognise those matters.
I also went through on Thursday with the senator—and I appreciate that Senator Abetz was not in the chamber and may not have had an opportunity to hear it, or maybe he did not wish to—the increase in investments in resources, including in coal, over the last three years. When we talk about the effect on the economy—and in the face of what is really quite a shameless fear campaign from those opposite—I invite senators to look at the actual investment numbers. It is sort of a question of: which proposition do those facts support? Which proposition does the money support? The investment demonstrates that the market recognises that they can continue to make money with a carbon price. So, despite Senator Abetz, Mr Abbott and others saying that the sky is going to fall in, the reality is that we see continued growth in investment in resources, including in coal, which really puts paid to the sorts of propositions that the opposition are putting.
I was also asked about the procedural arrangements. We have had years of debate on this issue. We had some 60 hours of debate on the CPRS. We have had numerous Senate inquiries. I have been asked questions over and over again by the opposition. The reality is that no amount of debate will change the minds of Senator Abetz or Senator Bernardi. They are vehemently opposed to a carbon price. The Labor Party have been trying to get a carbon price through this Senate for some years now. We were not able in the previous parliament and we look forward to the Senate finally taking the responsible step that it ought to have taken, finally doing what is right, and passing this legislation. I invite the opposition and Senator Xenophon to do the normal process in committees and move their amendments and speak to them.
If the package, as the minister asserts, is so good, why is it that Coogee Chemicals is now not going to invest $1 billion in Australia? Why is Australia going to forfeit 150 jobs? Why is Australia going to forfeit $14 billion worth of export earnings? Why is it good for the world environment that Coogee Chemicals goes to China on the back of the government's policies, where they will be emitting four times the amount of carbon dioxide than they would have been in Australia under the current laws? In the very long speech by the minister none of those issues were actually answered or addressed.
The minister referred in her answer to actual numbers. They are the actual numbers that I have given her—a $1 billion project, 150 jobs and $14 billion worth of potential export earnings being lost to our nation with the perverse result of four times the carbon dioxide emissions into the world's atmosphere. They are actual numbers. That is what is on the table. All that is going to occur because of the government's carbon tax.
Also, while the minister did talk about all matters coal on Thursday, she did not deal with the issue of why the burning of coal in China will not attract a carbon tax but the burning of coal in Australia will. If we are to believe the minister in relation to all the discussions that have been had over the years about the need for a carbon tax, can she explain why she herself, her leader, her deputy leader and every single Labor candidate at the last election went to that election promising there would be no carbon tax. The minister has not answered any of those questions. I will sit down again now to give the minister the opportunity to actually provide detailed responses to the detailed questions that have been asked rather than just giving her normal 10-minute homily in relation to why anything the opposition says or raises in this space is bad.
It is always ironic when Senator Abetz—and also Senator Brandis—accuse me of giving homilies! Even Senator Mason thinks that is amusing. I did in fact answer the Coogee Chemicals issue. I spoke specifically about our advice about the effect on such a new plant. If you are getting in excess of 100 per cent of your liability then it is hard to see how a carbon price would be an impost on the facility. So I have responded in detail to that.
In relation to China I want to say that I think it is extremely unfortunate that the opposition continue to make some pretty thinly veiled attacks on the government because of something China does. I would make this point. China has the world's largest installed renewable energy generation. In 2009, China added 37 gigawatts of renewable power capacity, more than any other country in the world. Everyone knows China is an economy on the rise. Perhaps Australia and the opposition should take some note of the fact that this growing economy wants to get ahead in the clean energy space. What does that say about where China believes the global economy will move? I also make the point that China has indicated it will introduce—
Senator Cormann, given you got rolled this week on super, I'd be quiet if I were you. How embarrassing! At least Mr Robb is out there running a sensible line. You just got rolled by Senator Abetz and Mr Abbott on a super policy you had already announced, so I would not be interjecting if I were you. I would keep my head very low for today. Very embarrassing. It shows that you just cannot deliver the fiscal responsibility you lecture everyone else about. But, anyway, I digress.
I am coming back to the point. China has also indicated it will introduce emissions trading pilot schemes in a number of provinces, including the industrial centres of Beijing, Shanghai and Guangdong. The World Bank has recently indicated the prospect of these schemes being expanded to a national scheme by 2015. India has a tax on coal which is expected to generate over half a billion dollars annually.
On the issue, the Senator has also yet again gone on about process here in this chamber. I again remind the chamber we have been debating this for many years. We look forward to dealing with the amendments and dealing with the bill. I thought I would also make this point. Mr Howard in October 2007 was asked:
Mr Howard, just in relation to climate change, haven’t you locked Australia into an emissions trading scheme in the next term…
Yes I have.
…regardless of what our trading competitors do?
Yes, but that is precisely the sort of contribution we should make, because that emissions trading system is tailored to suit Australia’s needs and it’s an earnest of our serious commitment to making a contribution commensurate with the capacity of our economy.
It says 'earnest', but that may be a typo for 'indication'.
In the address to the Melbourne Press Club of 17 July 2007, he said:
In the years to come it will provide a model for other nations to follow.
Being among the first movers on carbon trading in this region will bring new opportunities and we intend to grasp them.
Let no-one believe that the Liberal Party's position in 2007 was ever dependent on the rest of the world moving. It was not. Out of the mouth of your Prime Minister—for whom, Senator Bernardi, I know you have enormous regard—very clearly your policy did not expect or anticipate that the world would move before you introduced an emissions trading scheme. Four years later that is your new position because it is the only way you can justify the change in position we have seen from Howard to Nelson to Turnbull to Abbott. It is the only way you can justify it. But the historical record shows you went to an election very clearly accepting the same advice we did, which is that delaying increases costs. You were not waiting for the rest of the world to put in place a price on carbon.
I invite the opposition or Senator Xenophon to move an amendment so we can get onto the substance of the matters before the chamber.
Just the other day I was looking at What a carbon price means for you: the pathway to a clean energy future. There are very few copies of this left because, I understand, most of them were sent back to Ms Gillard and Mr Combet. They are about as rare as Shakespeare's first folio. But I did manage to find one. It says on page 7:
The economy will continue to grow as Australia embraces a clean energy future.
Implicitly, the government is arguing that this tax promotes growth. No doubt they think it is a case of the higher the tax the greater the growth. We might want to tell the Greeks about that one! On page 7 it continues:
A carbon price is not a tax on households—it will be paid by Australia’s biggest polluters.
As if householders will not pick up the bill! They will pick up the bill.
Finally, the document says:
By 2020 the carbon price package will take 160 million tonnes of pollution out of the atmosphere every year. That’s the equivalent of taking forty-five million cars off the road.
But how much will it lower world temperatures by? Approximately zero. I think it was the great American talk-show host Rush Limbaugh who said, 'No country has ever taxed itself into prosperity,' but that is what the Labor Party and the Greens think you can do—tax carbon into prosperity. Only Labor and the Greens, beholden as they are to this sort of magic-pudding thinking, could claim that a new tax will help the economy. Only Labor and the Greens could claim that a new tax is needed to save the planet, even though it will have no impact at all on temperature. Only Labor and the Greens could try to shackle this country with a new tax even though similar policies have already cost one Prime Minister his job and even though the current proposal has sent Labor's primary vote to its lowest levels ever recorded in Australian history. This carbon tax does for Labor's vote what it cannot do for global temperatures.
Almost two years ago, nearly to the day, I stood here along with my colleagues in this chamber arguing against a similarly harebrained idea—the CPRS—embraced by Labor. During the debate two years ago, the coalition argued:
It is ultimate folly to try to rush through and pass an emissions trading scheme before the United Nations Climate Change Conference in Copenhagen and before our major trading partners introduce similar schemes.
Guess what? Copenhagen was a dismal failure, as my colleague suggested it would be, and, two years on, none of our major trading competitors—not one; and they are the resource rich, trade exposed economies—are at all close to introducing similar schemes at home. We heard what the Canadian foreign minister said the other day: an emissions trading scheme is not on the agenda in Canada at all. In the United States, even when President Obama had huge majorities in the Senate and the House of Representatives, he did not introduce a scheme because he knew it would be against the national interest of the US. Brazil, Russia, India and China—none of them is going to introduce a scheme. Before anyone shouts out 'what about the European Union?' I remind you that, as you know, it is a small, limp and corrupt market useful only for spivs, speculators and organised crime. It has been a disaster of a marketplace.
It seems that, at a time when world economic growth is in the doldrums and has slowed to a crawl, no other competitor country is keen to enter into a sort of economic suicide pact. So, with a sickening sense of deja vu, two years later we are once again debating the same issues, and Labor and the Greens still don't get it.
Here are some questions which Labor still cannot address. Why would you do something that you know goes against the national interest and against the interests of the people you are supposed to represent? Why would you disadvantage a kid from Bankstown who is doing a diploma and wants to get a job in the mining industry? Why would you want to impose extra burdens and costs on a working family in Caboolture which is already struggling in difficult times? Why would you want to make it more difficult for a small business to carry on, employ people and contribute to its local community? Why would you want to punish your own people—why would you want to punish Australians—with a tax of such severity that no other country in the world has chosen to punish its people with a similarly severe tax? Why would you want to go it alone when none of the other major emitters and none of our major competitors are shackling their economies with similar schemes? Why would you want to impose a new tax in the name of fighting climate change even though that tax would have no impact at all on climate change?
We now know—the coalition knows, Labor knows and even the Greens know—that China is the largest emitter in the world and that India is the third largest. According to the 1990 benchmarks, China's emissions will have grown by 500 per cent and India's by 350 per cent by 2020. We now know that China is building two new coal fired power stations a week and that any reductions in emissions which Australia might achieve will be completely swallowed up in a matter of weeks—if not days—by the increases in China. We now know that, even according to the government's own documents, between 2010 and 2020 Australia's own carbon emissions will increase by eight per cent. That is what the government says—Australia's own emissions will increase by eight per cent. We now know that should current trends continue, and there are no signs at the moment that any competitor country is willing to change its course, global carbon dioxide emissions will increase by 43 per cent by 2035. We now know that this tax will make Australian businesses less competitive. We now know that this tax will push the cost of living up. We now know that this tax will not result in any real environmental gain and that regional Australia will be hardest hit.
I ask again: why are Labor and the Greens doing this? The answer is pretty simple. They are doing it because of moral vanity, the vain belief that the Left knows best and is the world's conscience; they are doing it because of guilt that Australian capitalism has made us one of the most prosperous and most successful nations on earth; and they are doing it because of self-loathing, or at least because of a deep scepticism about the value of our society. Moral vanity, guilt, self-loathing—the three great contributions to the temper of politics by the Left in the 20th century. Moral vanity in feeling self-righteous, guilt for one's own prosperity and good fortune, self-loathing and deep scepticism of one's own society—the leftist trifecta. For this lot, for the Left, it is all a giant psychodrama, sacrificing everyone else and everything else for the sake of that warm feeling that they are right and everyone else is not only wrong but actually dangerous, deluded and immoral.
This carbon tax legislation is the best example there is of the absolute disconnect between Labor's heartland in the battlers' suburbs and Labor's trendy inner-city elites. There is no better example. It represents the ultimate act of sacrificing the interests and wellbeing of working families. Remember working families? When was the last time we heard about them? This represents sacrificing working families for the sake of international interests and the moral vanity of a trendy elite. In the Labor Party today the battlers now tug their forelocks to the trendies, the lefties and the inner-city luvvies. That is what has happened to the modern Labor Party. The Labor Party is now wholly subservient to the Greens monster, as Senator Madigan has here today—
As Senator Madigan recognised earlier in this debate, Ben Chifley would never have sold out workers and working families in our country for the sake of satisfying the moral vanity of the inner-city trendies. Mr Rudd and Ms Gillard do not even bat an eyelid. The sad thing is that so many of Labor's senators and members in fact know this is a disgrace. They know it; the awful thing is that they have not got the courage to speak about it. The great tragedy of modern Labor is this: they have been cannibalised on the Left and they have sold out on the Right. The Prime Minister was certainly right when she said that this was a Labor government that had lost its way.
Remember the light on the hill? The light on the hill has flickered out and been replaced by a green wind turbine. Welcome to the new Dark Green Ages. Labor's continuing quest for relevance means that it is now far more comfortable fighting for polar bears and dolphins than it is fighting for working families. That is modern Labor. Labor and the Greens will sell our country's prosperity to satisfy their moral vanity. They will mortgage our national interest to make themselves feel better. They will gamble our nation's future to satisfy their guilt and their self-loathing. They want to be heroes. They want to save the world. They want to make the state bigger and the people smaller. They want to shackle business and empower government. They want to take the money from the productive and distribute it amongst the rent seekers in Australia and abroad. The Labor-Greens carbon tax will damage Australia and, as we all know, it will do absolutely nothing for the environment.
This is not about embracing the future. It is not inevitable, it is not moral, it is not righteous and it is not enlightened. It is self-righteous. In the end the carbon tax is a tax conceived in guilt and given birth to upon a lie. It is the bastard child of the Australian Left. The idea that the working people of this country should foot the bill so that Labor and the Greens can feel good about themselves is the ultimate betrayal of the people this lot say they represent. They will sell out working families so they feel better, so they feel righteous and so moral vanity can come to the fore. That is what modern Labor stands for. It is the final act of a party that does not deserve to govern, does not deserve respect and does not deserve the support of ordinary working families and ordinary Australians. In the end we back the boy from Bankstown and this lot back the luvvy from Balmain. They do not deserve to govern this country.
That was certainly a theatrical speech. It had words such as 'leftist trifecta' and 'great psychodrama'—really very little to do with what is actually happening here. There are a number of issues to which I feel I should respond. I was asked: why is the government doing this? We are taking the best advice of Australia's and the world's scientists. We are listening to that advice. We are taking and listening to the advice of Australia's best economists and we are acting in accordance with that advice.
I am asked about working Australians and I have to say that sitting on this side of the chamber it is pretty hard to stomach listening to the 'born to rule' pose from the other side, the people who put in place Work Choices and whose response to the Qantas dispute demonstrates that they retain their born to rule perspective, lecturing us about working Australians.
Opposition senators interjecting—
Let me just remind you about our government: we have put more into hospitals than any government in previous history. What did you do? There was a billion dollars taken out of public hospitals; that is what Tony Abbott did. What have we done? Understanding that the pension needed to increase, we have put in place a historic increase to the pension for Australians who have worked hard. Twelve years under John Howard did not deliver that. A Labor government delivered that. A Labor government delivered paid parental leave—the first government ever to deliver paid parental leave. In 12 years you never delivered support for working women, working mothers—never. A Labor government delivered that. We have increased the childcare rebate. We have increased the amount of support that we give to working families through the childcare rebate. It never occurred under you. We put in place the carers supplement. We introduced additional family tax benefits and an education tax refund. And we abolished Work Choices, which you, Senator Mason, were so enthusiastic in supporting—just as all of you have been so enthusiastic to jump on board the bandwagon backing Qantas's right to lock out all its employees.
So do not come in here and talk to us about working Australians, because we have actually delivered for working Australians—and we will continue to, because we do understand who we represent. We understand that managing the economy is about managing it for working Australians and their families. That work is never finished, and we will always continue to do that work, unlike those Johnny-come-latelies, who were in here on this side of the chamber telling us how wonderful Work Choices was—and I remember you, Senator Mason—and how wonderful it was for bosses to be able to sack people and for people to be able to have their penalty rates ripped away. Senator Abetz, Senator Mason and all those—
Senator Mason interjecting—
Are you shouting while you are not in your seat?
I am happy to take the interjection when he is in his seat, Mr Temporary Chairman. All of those who now pretend to be the champions of the working class lined up in the Work Choices debate to say how wonderful it was that this new flexibility would come into place that would enable employers to rip away peoples' entitlements. Give us a break! I think everybody knows, and, clearly, you saw it in the Qantas dispute—
You did not miss much!
Senator Mason interjecting—
When you are finished—
The TEMPORARY CHAIRMAN: Order, Senator Mason!
The TEMPORARY CHAIRMAN: You have the call, Minister.
Well, perhaps you might say something to him.
The TEMPORARY CHAIRMAN: Minister, I did, and you are reflecting on the chair. You have the call and I have called the senator to order. Will you continue, Senator Wong?
Senator Mason interjecting—
Well, perhaps I will finish when he is finished speaking to me.
The TEMPORARY CHAIRMAN: Senator Wong, you have the call.
The TEMPORARY CHAIRMAN: Senator Wong, if you have nothing further to say, you can resume your seat, or you have the call.
Thank you; I have the call. In terms of Labor values, we have brought to this package Labor values. Let us have a look at the assistance package—
Senator Mason interjecting—
I know you do not want to know this, but have a look at the assistance package.
Opposition senators interjecting—
The TEMPORARY CHAIRMAN: Order!
The TEMPORARY CHAIRMAN: Order on my left.
Senator Brandis interjecting—
The TEMPORARY CHAIRMAN: Order, Senator Brandis. Senator Wong, you have the call.
Who are the people we have prioritised in the assistance package?
Opposition senators: The Greens.
It is low-income Australians.
Opposition senators interjecting—
Chair, do I get to make any contribution without an interjection?
The TEMPORARY CHAIRMAN: Senator Wong, you have the call. When interjections get disorderly, I will bring the Senate to order. You have the call, Senator Wong.
Chair, I would ask you to reflect on the fact that Senator Mason was listened to in relative silence. I have yet to have 10 seconds on my feet without the opposition interjecting.
Precious? That's a little bit gendered from you, Fiona.
Opposition senators interjecting—
The TEMPORARY CHAIRMAN: Order! Senator Wong, you have the call.
Thank you. We have brought Labor values very much to the assistance package before the chamber. In fact, I recall some on the other side talking about this as wealth redistribution.
Yes, hear, hear! I will take that interjection from Senator Bernardi. They do not like working Australians, low-income Australians, getting more. We have given them more of the share of assistance than we have given high-income Australians. Let us have a look at what we are providing: an additional $510 per annum for couples combined on pensions; up to $110 per child under FTBA; up to $69 for FTBB; and additional funding, as I said, for pensions and also for self-funded retirees who held the Commonwealth seniors health card.
We have also put in place as part of this assistance package, tax reform. We will triple the tax-free threshold. That will give a benefit not only to low-income Australians but also to secondary-income earners. This is a very important part of the government's package. It will increase participation and it will give a tax cut to every Australian earning under $80,000 a year. We have unashamedly skewed this assistance to low-income Australia—and the opposition hate that.
Senator Mason interjecting—
They have, Mr Temporary Chairman—if I could shout over Senator Mason shouting at me—consistently said things such as, 'We object to the redistribution.' Do you know what they are actually saying? They do not like low-income Australians—pensioners and people earning under 80 grand—getting more of the assistance than high-income Australians. That is what they are actually saying.
So do not come into this chamber and lecture us about low-income Australians. You are the party that in government never provided the sorts of assistance—paid parental leave, increased childcare rebate, increased pensions and ripping away Work Choices—that we have provided. You have never put in place the funding for health and education and the investment in Australian families that we have put in place. We put in place these things because we understand that our job is to manage the economy for the benefit of working families.
I would invite the opposition to move their amendment. I would invite Senator Xenophon to move his amendment. We had four hours on Thursday night on precisely the same type of debate and we now have had for 45 minutes this morning and there has not yet been one discussion about the bill or the amendments before the chamber. There has been a lot of discussion about conspiracies, trifectas and psychodramas. I am not sure what that actually adds to the debate at this point.
The TEMPORARY CHAIRMAN: Before I call Senator Xenophon, can I remind senators to address their remarks to the chair and not across the chamber.
I am afraid I will not add to the theatre of this morning, but I do have some questions that I want to raise that I think are serious issues with respect to the pricing of electricity in this country and the price pressures of electricity as a result of this scheme and whether we can improve it. The chamber knows what my views are—that we should not be proceeding with this matter—and there is an amendment that I have introduced, and I think the opposition has one as well that is on the table, to defer this whole scheme until after the next election. I think there are some important principles there. The issues I genuinely want to ask the minister about relate to the concerns expressed by the Energy Supply Association of Australia. Those concerns are quite significant in terms of whether the design of the scheme in its current form could lead to unnecessary increases in electricity prices. I refer to the front-page story in the Sydney Morning Herald by Lenore Taylor, Peter Martin and David Wroe headed 'Tax flaw: power bills may rise 20%' The Energy Supply Association has written to me and has written to my colleagues saying that the plans under this scheme to force immediate payment for forward dated emissions permits rather than the deferred payment allowed under the Rudd government's emissions trading scheme, the CPRS, could lead to the consequence, perhaps unintended, of unnecessary increases in electricity prices. That is an area of significant concern.
I should indicate that Steven Munchenberg from the Australian Bankers Association has a different view. I respect that there are different views out there that you can have a derivatives market. I do not want to misquote Mr Munchenberg, because he contacted me in good faith to express the views of the banks in relation to this and to reject the Energy Supply Association of Australia's arguments. But I think there are some valid concerns there about whether the design of the scheme in its current form not allowing for deferred payments is going to cause unnecessary increases in supply costs. If you do have a derivatives market or a secondary market in terms of these matters—as the Australian Bankers Association has indicated, and I think it does have a valid point of view on this—will that market in itself be unnecessarily inflationary and lead to price increases?
I think these are legitimate concerns. I would like to hear from both the government and the opposition on what their views are in relation to this. It is all well and good to oppose a piece of legislation, but if there is an opportunity to try and improve a piece of legislation then I think that is what we are meant to do here in the Senate. The key role of the Senate is not only to play that scrutiny role but to improve legislation even if we disagree with it. If the numbers make it inevitable that it will get through but there is an opportunity to improve it, we should explore that opportunity. If it is a matter of improving the legislation then I think it is incumbent on us to try to do that.
I would like the minister to respond to this. Minister, you understand the spirit in which I am asking these questions. This is not a polemical debate; it is a practical debate. Will the design of this scheme in its current form, unlike the CPRS, lead to unnecessary increases in electricity prices? I reserve the right to move amendments in relation to this in the next couple of hours, but I really want to genuinely engage with the government in relation to what I think are important issues that have been raised by the Energy Supply Association.
I will first give a response on the ESAA modelling, which I think was referenced by Senator Xenophon. The advice I have is that it was a hypothetical exercise rather than an attempt to estimate what will actually happen to electricity contracting under the package. The modelling report itself says:
The study does not purport to project what will happen in terms of contracting levels, as they are influenced by numerous and countervailing influences.
The government remains confident in the findings of the Treasury modelling which shows the impact of a carbon price on electricity prices to be an increase of around 10 per cent, or about $3.30 a week, for the average household. I can say to Senator Xenophon that there was certainly a lot of consultation with this sector both in the context of the CPRS and in the context of this package. As part of the package before the chamber there is a very significant allocation to the Energy Security Fund of some $5½ billion.
The policy issue that you are referring to is the purchase of future carbon units and how that is managed. It is correct that under the CPRS there were a range of deferred payment arrangements in relation to the auctions of future vintage carbon units. The advice I have is that deferred payment arrangements increase the administrative complexity of auctions and inhibit the development of secondary markets to manage carbon pricing risk. The government is offering loans to emissions intensive generators who are otherwise unable to secure finance on reasonable terms to buy future vintage carbon units at auction. This addresses working capital constraints directly without interfering in the functioning of the auction.
There is a different mechanism that is being proposed in the package before the chamber to that which was previously proposed, both of which deal with this issue. But the advice I have is that the loan provision to which I have referred addresses working capital constraints directly without interfering with the functioning of the auction. The Energy Security Council can advise the Treasurer to provide further assistance to generators, such as loans, if that is required to safeguard energy security. The policy question here is how the companies manage their carbon price exposure. The expectation the government has is that the private sector will continue to offer hedging services to generators and there are the additional safeguards to which I have referred in the energy security package.
You invited the opposition to respond as well. If there is a concern about volatility in the short term and the impact on the electricity prices, I would make the point about—I cannot recall if it was the ESAA or some other industry association that said this—the likely price impact of the opposition's commitment to repeal. If they retain their position—I do not think they will, but if they do—that is likely to have two potential consequences. The first is it makes it more difficult to engage in long-term contracts, which obviously has an impact. The second is that it also makes hedging more difficult because of the inherent uncertainty. But really the issue goes to what the policy mechanism to manage this is. You are correct to say there is a difference between this and the CPRS, but the advice I have is these other arrangements deal with this in an appropriate way. I am also reminded that obviously there is a three-year fixed period, which is relevant here.
I want to follow that through. The minister has acknowledged that under the CPRS there was a deferred price mechanism. Presumably there would have been modelling done and advice sought as to the difference between the former scheme, the CPRS, and the current scheme in terms of the impact on electricity prices. I presume that modelling would have been done by Treasury. As to what the price impacts would be on consumers, I would be grateful if the minister could indicate whether any modelling was done on the price impacts of having a deferred payment scheme or paying upfront, as this particular scheme is seeking to do.
I think that goes back to the issue I was raising. This all comes down to the way in which companies manage their carbon price exposure. Pre-CPRS, as you said, there was deferred payment. In these arrangements we have the $5.5 billion, we have the Energy Security Council and we have the capacity to offer loans. This is assuming, of course, that the market does not deal with this. I know that the Australian Bankers Association had views on the previous occasion about whether deferred payment was in fact required. I assume the senator, because he has taken an interest in this, would be aware of the views of the financial sector that the market has the capacity to provide instruments to manage this risk without government interfering with the auction mechanism. For that reason, the government put in place the policy parameters that I have outlined to deal with this.
I want to go to the issue of what the impact will be of requesting upfront payments, if you like, under this scheme compared to the deferred payments in the CPRS. The Energy Supply Association of Australia complained in a letter to me, and I think to other senators: 'This effectively amounts to energy companies being asked to provide working capital to the Australian government which could be in the order of $10 billion.' They go on to say that they commissioned analysis from economic modeller ACIL Tasman and that this analysis found that reduced electricity contracting could increase volatility in the electricity market and increase retail electricity prices by 10 per cent in a single year for small users—households and small businesses—and up to 15 per cent for large users. They say that these rises in electricity prices are in addition to the carbon price.
I acknowledge what Senator Wong, the minister, said in relation to the Australian Bankers Association. They have a different view. They say that you could have a secondary market and that financial instruments could deal with this and manage the risk. So that is the difference between the two arguments. The question I am asking is: was some modelling done by the government on the impact of having deferred payments under the CPRS, as distinct from having upfront payments with this scheme? Surely there would have been some modelling done on such a fundamental aspect of the scheme design.
I note an article written by Lenore Taylor in the Sydney Morning Herald last Friday headed 'Ministers in final plea to delay carbon repayments'. It makes reference to the New South Wales energy minister, Chris Hartcher, and Queensland Treasurer Andrew Fraser. So you have a Liberal or coalition government in New South Wales and a Labor government in Queensland and the report says that both have written to the federal government 'in a last-ditch bid to win amendments to the carbon tax legislation that could prevent power prices soaring higher than forecast'. This again goes to the issue of deferring payments. So they are the issues. Was there some modelling done? What do you say to two ministers from two different political parties who have concerns about this—the Labor government in Queensland and the coalition government in New South Wales? I raise these issues because I am nervous that we are going to push up prices more than we need to. Given that the CPRS, the old scheme under the Rudd government, had deferred payments, I am trying to work out what the best public policy is to minimise the impact on households.
I want to ask a further question in relation to Senator Xenophon's remarks before the minister responds. This issue came up in the joint house inquiry. We heard from the Energy Supply Association, but from further discussions subsequent to that and after thinking about it, I think the difference between the CPRS and this scheme in terms of this particular issue is that the CPRS only had one year of a known price, whereas with this scheme we are going to a fixed price mechanism for three years before going to flexible pricing.
From my point of view, that does make a difference on this issue. As Senator Xenophon said, this is one of the issues that were raised that requires consideration. I went back to the minister's office to raise it with them and to ask whether this is really the issue it is being made out to be, because the government obviously has the benefit of a lot more confidential information than we have in relation to this matter. I am led to believe that the three years does make a substantial difference in the circumstances, so I would appreciate it if the minister, in answering part of what Senator Xenophon raised, could also refer to that matter.
I will answer both of these. I think that I understand what Senator Milne is referencing, although I was not involved in the committee. The proposition about the three-year fixed price is an important one. It means that there is a longer period over which this scheme is transitioned for all sectors before a floating price comes into play. That means that the products around hedging carbon risk have a longer period before the floating price comes in. That is of relevance. This policy proposition comes down to how generators will hedge carbon risk. I referred in my opening answer to the modelling to which Senator Xenophon just referred, so I have already responded to that.
On the issue of the two states and the different political parties, I would make the point that it is not surprising that treasurers of states that own generators might have a consistent position around this. I suspect that that is not party political but treasurers looking to the interests of their states. What the Commonwealth has to look at is what the sensible policy for the transition is. For the reasons that I have outlined, we think that the framework that we have put in place, with $5.5 billion and the capacity to provide financing from government if the market does not provide that, is able to deal with the risks that you have raised.
I am grateful for the minister's answer, but that brings me back to the question about what modelling, what assessment and what risk analysis were done by the government when it switched from a deferred payment scheme under the old CPRS that we were debating about two years ago this month—and I am sure that Senator Cormann will correct me if I am wrong on that—to what is now being proposed. You have the Electricity Suppliers Association of Australia concerned about it; the Australian Bankers Association disagrees. But you have two state governments who have expressed concerns. Notwithstanding that the Queensland government's interest in this is by virtue of being the owner of generators, if there are price effects, as found in economic modelling done by ACIL Tasman on behalf of the Electricity Suppliers Association of Australia, they are matters that deserve to be considered and rebutted by the government if the government believes them to be wrong. What modelling did the government do when comparing the CPRS and this scheme? What assessment was undertaken in terms of the potential impact on prices in the electricity market?
I am advised, Senator, that the Treasurer modelling did not assume deferred payment arrangements. In other words, the Treasury modelling—Strong growth, low pollution: modelling on a carbon price—
I am sure that it was not intentional. Was any modelling done? Given that under the CPRS that was debated in this place two years ago there was going to be a deferred payment scheme rather than an upfront scheme, which is what this scheme is proposing, why wasn't some modelling done based on the CPRS to determine what the differences in price rises would be if we had a scheme in place under which deferred payments were allowed, as was proposed by the CPRS?
I do not know whether the opposition has any view on this. I am grateful to the minister for her answer. I will try to put this another way. Given the concerns expressed by the Electricity Suppliers Association of Australia and by the New South Wales and Queensland governments—two governments of different political hues—will the government continue to look at this issue in the three-year transitional period proposed by this legislation so that, if it becomes apparent that there has been the unintended consequence of greater price rises as a result of the current design of the scheme in respect of upfront payments rather than deferred payments, the government can consider changing it? Will the government consider that or is the government saying that once this is passed that is the point of no return in terms of changing to deferred payments?
I do not have in front of me the entirety of the ESAA modelling and what the treasurers of the states said. But I am advised that the propositions in there assume a failure of financial markets to provide the sorts of hedging products that would be required. That is the assumption in that modelling. The proposition that is being put forward is that therefore these different price impacts will occur. First, we do not accept that the financial markets will not be able to provide such products. Second, even if that were the case—which we do not accept—the government has arrangements in place through the package to provide financing, including on the advice of the council. So there are a number of assumptions in what you raise. First, there is the question of whether the market will be able to provide these. We think yes and financial providers have also indicated that to be the case, which is important. Second, even if that is all wrong, the government has said that the Treasurer can authorise the provision of financing on certain terms if required. There are a range of policy requirements around that. So I think there are range of safeguards on this issue, and I again say that in many ways the larger risk is the coalition's talk—although I know they seem to talk about this a bit less—about the effect on electricity prices of the uncertainty imposed by the blood-oath of rescinding this, because that obviously is a signal to markets as well. Having said that, I suspect it will go the same way as their superannuation policy.
Minister, given the concerns expressed, will the government consider undertaking some modelling during this transition period as to what the potential price effects would be of having upfront payments rather than deferred payments? Wouldn't that be the prudent approach to take, given concerns that have been expressed, from a number of credible sources—from two state governments, from the Electricity Supply Association and from modelling done by ACIL Tasman? Would it not be reasonable to at least to consider that, as to whether then the minister needs to use regulation making powers to try and rectify any potential risks? In other words, given the concerns that have been raised, will there at least be some modelling done to deal with those concerns one way or the other?
These are very large modelling exercises. The first one was the largest modelling exercise the government has ever undertaken. Let's understand that. The government will continue to monitor the scheme. If that monitoring showed that modelling was required then that is obviously something we would take advice on, but for the reasons I have outlined we think the policy framework we have put in place is a sensible one.
I think this is my final question on this issue, which does concern me as to whether there is an opportunity to avoid unnecessary increases to households and small businesses. The government's position—and it would be the position of the Australian Bankers Association as well, and of those that disagree with the Electricity Supply Association—is that you could have secondary markets in place to manage the risk, to hedge the risk. I think that is a fair summary. But wouldn't it be better to try and deal with the problem directly rather than relying on a secondary market? All I am asking is: will the government have an open mind in looking at issues of the risks involved that have been raised and, if necessary, to commission modelling on these issues, given the very live concerns that have been raised by two state governments, of different political persuasions; the Electricity Supply Association; and the modelling carried out by ACIL Tasman?
With respect to Senator Xenophon, I think it is actually the same set of questions. What I would say, again, is this: this is about how you manage that uncertainty. What you are flagging, as opposed to 'advocating'—I accept I verballed you—is a policy proposition that says: let's fiddle with the auction process within government to manage this risk. We say: no, we believe financial markets will, as they do now, provide the ability for firms to hedge risks. Let's remember, firms hedge risk all the time; not just on a carbon price but on a whole range of issues: exchange rates, whatever the commodity price is and so forth; this is not a new concept. If we are wrong in that then the government has the capacity to provide financing through the mechanisms I have outlined.
I thank Senator Xenophon for raising these issues, which are certainly issues the opposition would like to explore as well. I would like to follow on from some of the points that Senator Xenophon has raised. Perhaps, just for the benefit of the base principles of dealing with this issue of the forward-selling of permits, and whether or not the funds from the forward-selling of those permits to electricity generators are collected at the point of sale or indeed in the vintage year at which they become available for use, could the minister explain as clearly as possible to the Senate what the policy rationale was behind the government changing its approach on the payment times for these permits from the CPRS model, which did defer the payment—and therefore did of course defer the risks and the need for this type of hedging, at least in terms of the costs of those payments—compared with this model, which ESAA claims will cause detriment because there is this requirement for this upfront payment? So, before we go too much further into some of the other more specific questions, can I just get from the minister what the policy rationale was for changing from the CPRS approach that ensured this particular problem was not a factor, to this approach that does bring this particular problem into at least debate and discussion.
I think I have just answered that about seven times for Senator Xenophon. I will repeat what I said: deferred payment arrangements increase the administrative complexity of options and inhibit the development of secondary markets to manage carbon pricing risk. Obviously, secondary markets actually provide firms with an indication of where the price is going in the future—that is important for business. I have also indicated the government has said we will offer loans to emissions-intensive generators who are otherwise unable to secure finance on reasonable terms, to buy future vintage carbon units at auction. This addresses working capital constraints directly, without interfering with the function of the auction. We are also providing $5½ billion of assistance under the Energy Security Fund to the most emissions-intensive generators.
I thank the minister for repeating those points. But perhaps, Minister, if you could provide us with some information and explanation as to who advised and informed the government that the previous model was a flawed model and that this then is a better model, and who actually is supporting the theory and approach that you have just outlined that there are in fact benefits from bringing the payment forward. Obviously, the electricity generators themselves have concerns and do not see there to be a benefit. So who is actually supporting the government in arguing that the bringing forward of the payment actually is of benefit?
Senator, this is a package. There are elements of it that are very similar to the CPRS and there are elements that are very different. I have talked at some length about the tax package. It is as a result of the Henry review having reported. This is a very good and much better assistance package because it combines a tax reform element with the assistance, which is of more benefit to participation than the previous assistance. So, there are parts that are different and parts that are similar. The policy proposition is the one I have outlined on quite a number of occasions. It is a very cogent proposition that we have put forward. I am not sure how much further I can assist the senator with it. I have outlined on a number of occasions now the policy rationale behind this.
I note, Minister, that in response to Senator Xenophon you describe the ESAA modelling as hypothetical, and of course all modelling, as I am sure you would agree, deals with a range of hypothetical scenarios. You also indicated that the Treasury modelling did not assume the deferred payment scenario. Minister, are you able to advise the chamber whether the Treasury modelling did assume or believe there would be a reduction in the forward contracting for electricity? It is of course one thing for it not to assume the deferred payment scenario and, therefore, as you rightly said, presumably it then did assume that payments would be made at the time that the forward purchase of these permits was locked in. However, does it accept the principle, to some extent at least, of the scenario outlined by the ESAA that there will be a reduction in forward contracting of electricity prices and, therefore, the greater risk and uncertainty, and the possible higher use of spot price electricity and, with that, the potential flow-on for increases in electricity prices? But, very particularly, does the Treasury modelling that was undertaken accept that there is a chance, in places, that there will be a reduction in forward contracting?
I will just check that. I am advised that there was no assumption as to a reduction in forward contracting in the electricity sector. I am also advised that no suggestion of such a risk was raised by the two independent modellers for the electricity market component of the Treasury modelling.
Given that, does that mean that the government rejects outright the proposal put forward by ESAA that there could be some reduction in the forward contracting of these electricity contracts. Is it the government's contention that this modelling that they have outlined and believe does present a real risk to forward contracting is totally flawed?
Minister, I am not convinced that it is. I note that we have got to the point now where you have confirmed that those who informed the Treasury modelling say that there was no belief there would be a reduction in contracting, but the electricity generators obviously believe that there will be a reduction in forward contracting. The generators believe that, if there is a reduction in forward contracting, it will have a flow-through effect on electricity prices and of course on prices for consumers. Does the government at least accept the principle that if you have it wrong, if there is a reduction in forward contracting of electricity, the way in which the electricity market works and the way the Energy Supply Association of Australia argue that it works there would be an additional impact on electricity prices above that which has been forecast?
On the first issue I refer to my previous answers. On the broader issue about electricity prices I would make the point that without a price on carbon we will continue to see a stalling of investment in our energy generation sector, in particular. This lack of investment feeds through to electricity prices, but in that world there is no assistance available to households.
The next point I would also make is that the most significant risk to electricity prices is the position of the opposition on this. It is that uncertainty and that opposition that is more risky for electricity prices. On the policy issues that have been raised, I have extensively answered them in previous responses.
I am not at all convinced that the minister has given a clear answer on whether the government accepts that if there is a reduction in forward contracting for electricity there will be a commensurate flow-through of increased price and volatility in the electricity pricing market. It is a pretty straightforward proposition; it is one that the government can and has rejected on whether or not that will happen. But there is conflicting modelling presented by the Energy Supply Association of Australia—conflicting modelling that says the opposite to that which the government's Treasury modelling has assumed. So, if the government's Treasury modelling is wrong, and instead the ACIL Tasman modelling done by the ESAA is correct, then do you accept that there is a risk that forward contracting could be reduced? The particular question I was asking on this occasion was: if that scenario eventuates, if there is a reduction in forward contracting for electricity, does the government accept that that means there is a potential for greater volatility and higher prices in that market? It is fairly straightforward and, if you have answered it before, do the chamber the courtesy of answering it again. But from your answers previously I cannot see a clear-cut and direct answer to that very direct question.
I am being asked to respond to a hypothetical if. We are not here to debate hypotheticals; we are here to debate the package. I have explained that the independent modellers on this issue, which we used as part of the Treasury modelling, did not anticipate a reduction in forward contracting. I have also explained that the advice of financial institutions is that such products would be available. I have explained that if the market did not work as anticipated the government has made clear it will provide loans for market participants to address these working capital constraints that have been asserted. I have also explained that we are providing $5½ billion under the Energy Security Fund.
I have also explained on a number of occasions now that if the opposition do care about uncertainty in the market, which is an issue that goes against forward contracting and management of risk through the longer term, then they would not be opposing this and they would not be suggesting that they have some blood oath to rescind it. That of itself puts uncertainty into the market and would therefore add to the very policy risks that the senator has referred to.
Minister, given that you have highlighted the reliance upon the government having a backup provision as such for the provision of working capital to purchase these future permits, are you able to tell the Senate what the terms and rates for that working capital will be, please?
The advice I have is that government loans may be available where generators need to finance their debt but finance is not available from the market. The Energy Security Council will advise the government of the provision of loans in these circumstances. Both forms of loans will be priced on terms that encourage generators to provide private finance where possible and there will be an assessment of the potential recipient's capacity to repay the loan.
Obviously in that answer, Minister, you have not exactly provided either terms or rates, you have simply provided a process by which such loans may be provided. Again, that hardly provides any certainty to the industry in the passage of this legislation. In particular your statement that it will be structured in a way so as to encourage generators to seek the commercial provision of loans, is that an indication that the packages as structured by the government would be at rates above commercial rates or at terms that are less favourable than commercial terms, meaning that really there is only one offer on the table?
I think it is important to clarify that there are two types of loans. The first is loans to emissions intensive generators who are otherwise unable to procure finance on reasonable terms to buy future vintage carbon auctions. This is to address working capital constraints. I am advised that auctions will not be engaged in until the 2013-14 financial year and obviously the details of those terms will be the subject of further consultation between Treasury and the sector. There is a second capacity to provide loans in the event that this is required to safeguard energy security. That is amongst the assistance that the Energy Security Council is able to advise the Treasurer about. Obviously the priority there is energy security.
On the first working capital loans, there was a bit of the minister's statement when she referred to the 2013-14 financial year as a start date. I did not quite catch, due to a little bit of background noise, what you said the start date for that was.
Following on from that, the forward purchasing of permits by electricity generators and when they will first be available to those generators and when those first auctions will take place for the non-fixed price period, that will start in the 2013-14 financial year? I am seeing nodding from the advisers, so the minister will correct me if that is incorrect. Minister, are you able to inform the Senate in terms of the budget estimates that the government has undertaken what the fiscal impact would be and what the reduction in revenue from the sale of permits would be were those revenues not to be collected in the 2013-14 financial year but instead to be collected in what I assume would be the 2015-16 financial year, being the vintage year for those permits?
We do not provide budget costings for scenarios which are not government policy. In relation to some further detail on the issues you raised earlier, the explanatory memorandum to the Clean Energy Bill 2011, page 207, paragraph 6.185 onwards but in particular 6.193, goes to more detail on the loans provisions to which you are referring.
Let me structure the question then in a way that is very specific to what is government policy. Of the revenue from the sale of permits the government expects to bank in 2013-14, how much of that is from the sale of fixed-price permits that obviously are for that vintage year and how much of that revenue is from the sale of non-fixed-price permits from future vintage years?
The fiscal impacts of the package, including the revenue impacts, are detailed in the bill or in the fiscal table in the EM. We do not propose to engage in a further costings exercise at the senator's request. He could of course support the Parliamentary Budget Office Bill, and then he could cost this policy, if that in fact is his policy.
That is just an outrageous response from the minister. The minister has been calling on the opposition to come in here and ask detailed questions about the legislation—
Through you, Madam Chair, do not verbal me, Senator Birmingham. Of course, the fiscal impact is relevant, which is why we have costed it. It is not my job to provide you with every aspect of government's costings. It is my job to provide you with the budget quality costings that we have provided—far more than anything your party has done since you have been in opposition. So we have provided the fiscal impact and the cash impact and we have provided those fiscal tables in the context of the legislation. So do not verbal me and pretend that we have not been transparent about that. As I said, we have been far more transparent than you have with the $70-plus billion of cuts to services you have to find to fund this and other policies.
It will all be there. We will ensure that. For Australians who want to talk about budget costings, who want to talk about deficits, who want to talk about the budget deficit—
That's right! Not once have you delivered a budget surplus. Correct. Not once has your budget delivered a budget surplus and not once will your government deliver a budget surplus.
Senator Wong interjecting—
It was 1990 the last time a Labor government handed down—
Government senators interjecting—
Senator Wong interjecting—
The TEMPORARY CHAIRMAN: Senator Birmingham has the call. Please allow him to continue.
I was more concerned then with the way they were talking over the chair. That was terrible behaviour on the behalf of the minister and the acting government whip.
The TEMPORARY CHAIRMAN: The chair can look after herself, thank you very much.
I am sure the chair can. It is interesting, when we get to talking about the budget questions, just how evasive the minister gets on this matter. Today we see debate out there that once again this government's budget forecasts may yet be proven wrong and once again their promises of returning the budget to surplus may look terribly, grossly overly optimistic. We see a situation in which the Labor government, who have never managed to hand down a surplus—and Labor governments of course have not managed to hand down a surplus since 1990—will never actually manage to get there. They keep promising, they keep saying it will be in a couple of years, but, as crunch time approaches, you can see that it is going to get pushed out and pushed out even further.
The remarkable thing is that this carbon tax package adds to that deficit. You would have thought, when a government introduces a new tax measure that brings in around $9 billion per annum, that it might somehow actually help put the budget back towards surplus, but this new tax measure only pushes the budget further out into deficit. The question I asked the minister was a pretty straightforward question. It was simply the question of: in 2013-14 and 2014-15, how much of the revenue from the sale of permits is from the sale of fixed-price permits for those vintage years and how much is from the sale of non-fixed-price permits for future vintage years? That is all. I am not asking for some elaborate breakdown of the budget costings. I am not asking for her to tell me which industry sectors she expects each of the permits to come from. I am not asking for her to look in some technical or elaborate way at breaking it down amongst the alleged 500 companies that the sale of permits revenue will come from. I am simply asking a fairly logical question, I would have thought, as to how much of the revenue is relevant to the financial year in question and how much of it is for permits relevant to future financial years.
The government should surely be able to answer that question. That should surely be a question that is very relevant, very germane, to this Committee of the Whole process of debate; very relevant to the issues that Senator Xenophon started the line of questioning on about what the policy implications are, what the cost implications are, of this approach to the forward selling of permits to electricity generators. If you are going to sell them to electricity generators in advance and expect the money in advance then it is only reasonable to know, within the budget, what the implications of that policy decision are. It is only through knowing that that there can be a thorough understanding of what the implications are of any amendments that Senator Xenophon might be considering on this matter. I note that even Senator Milne said that this was an issue that requires consideration, so even the government's partners in this carbon tax legislation, the Greens, acknowledge that there are concerns here, and they acknowledge that they could be genuine concerns. They are genuine concerns because, if what the Electricity Supply Association of Australia says is correct and true, there is an additional cost impact for electricity consumers above and beyond what is already there, above and beyond the 10 per cent modelling that the government claims. We now know that that is the case because the government has confirmed that Treasury modelling does not believe that there will be any drop-off in the forward contracting of electricity. If the government got that wrong—and it would not be the first time that this government has got anything wrong—then we would have a situation where there could be a drop-off in forward contracting and the flow-on effect of that would be that consumers would see greater price volatility in the electricity market and for small businesses, householders and others that would flow through to potentially higher prices, according to the ESAA.
The government has decided it is going to go down this alternative policy path where it takes the money and banks it in advance. That happens to make the fiscal impact of this carbon tax look better and healthier in the years 2013-14 and 2014-15 than would otherwise be the case. It is worth noting that the money that comes in does in some way boost the revenue in those early years for the government than would otherwise be the case. So the question then is: how much does it boost it by? The only way to ascertain that and to ascertain what budgetary implications of any amendments that the Greens, Senator Xenophon or anyone else might consider is to know how that is split up. It is a pretty straightforward split. It is a pretty straightforward question. Minister, how much of the revenue in 2013-14 and 2014-15 is attributable to the sale of fixed price permits in those vintage years versus the sale of non-fixed price permits in future vintage years?
I have a question about the impact of the carbon tax on electricity generators, specifically in relation to the government's so-called transitional assistance package. Minister, how much of the $5.5 billion transitional assistance package for electricity generators is expected to go to the No. 1 emitter in Australia, who the Prime Minister would describe as the No. 1 polluter out of 500 polluters—Macquarie Generation? Given they are responsible for 23.4 million tonnes of CO2on the latest available information and would be expected to pay about $540 million worth of carbon tax, how much transitional assistance will Macquarie Generation get under the carbon tax package that the government has put before the parliament?
I should be clear with Senator Birmingham that in the fiscal tables the revenue from a forward transaction is accounted for in the year in which that transaction is acquitted, so that is the effect on the fiscal balance. That is where it occurs.
Senator Cormann, I think you were asking me—I am sorry, I was a little distracted—how much a particular generator will get under the energy security package. Obviously, I will get some advice on that. We have set out some principles on the allocation of that fund and those principles include the energy intensity of the relevant generator, so there is a finite pool of funding via free permits and cash which is to be allocated. The permits will be allocated by the regulator and the cash will be allocated by the department. I do not think in those circumstances it would be appropriate or probably possible to in fact identify the exact quantum to any particular market participant.
Let me move away from what the minister seems to be describing as a commercial-in-confidence matter. Given we are talking here about a very significant generator in the national electricity market, somebody who is on the record in the government's own data as being responsible for 23.4 million tonnes of emissions and being on track for a $540 million carbon tax bill in year 1, even if you cannot put a number on it, can you tell us whether Macquarie Generation in New South Wales will stand to receive any transitional assistance under the $5.5 billion transitional assistance package and, if so, what sort of assistance?
I do not know and I am not familiar with the details of the emissions intensity of that particular generator. We have laid out the policy principles around the allocation of this assistance. There will obviously be ongoing consultation with industry about the detail of that. Again I would say it is less a commercial-in-confidence issue than a market issue. I do not think it would be appropriate, in the context of a very substantial amount of funding, for me to be indicating an estimate of what particular market participants might receive from this assistance package. I think what is in the public interest is what is in the explanatory memorandum and in the package itself around the principles for the allocation of funding. How that translates to the factual circumstances of particular generators is a matter to be dealt with either between the regulator and those generators in relation to the free permits or the regulator and the department.
Minister, here we have the largest single electricity generator in Australia responsible for a significant proportion of the electricity generation through the national electricity market and you cannot even tell us—yes or no—whether they are getting any transitional assistance under your transitional assistance package for electricity generators. That sounds, quite frankly, unbelievable, Minister. Presumably, then, you would not be able to tell me whether, for example, Verve Energy in my home state of Western Australia, which stands to pay nearly $200 million worth of carbon tax, will be eligible for any transitional assistance under the carbon tax package.
In terms of the detail around assistance, the application for assistance et cetera, I refer you to chapter 6, page 171, forward of the explanatory memorandum. It goes through in quite a great amount of detail how the annual assistance factor is determined, the determination of eligibility, the process of applying for assistance, the assessment by the regulator, the issue of assistance and also the energy security test—the power system reliability test—which is included in this. Those provisions are transparent on the public record.
What I do not think is appropriate—and you can huff and puff all you like about this—
And I am saying I do not think any minister would want to come into this place on an issue of public policy and say to the Senate, 'Company X will get this much and Company Y will get that much.' I do not think that is appropriate. I think what are appropriate are transparent arrangements around how a pool of funding will be allocated and the process for that. That is what is in the explanatory memorandum. I am sure there will be further detail that will be the subject of consultation upon passage of the bill between the government, the relevant department, the regulator and the companies concerned.
I am well aware of the provisions that are on the public record. I have read through them. They have been subject to discussions at a Senate carbon tax inquiry hearing. The question I am asking you—and you are well aware that I had already flagged that I was not asking for a dollar figure—is whether or not there is going to be any transitional assistance at all for a very significant electricity generator like Macquarie Generation as a result of how your government has structured the transitional assistance package. That is a question that obviously goes directly to the impact of the carbon tax legislation on energy security and the cost of electricity moving forward, so don't point me to things that we can all read. I am asking you very directly about your understanding of the implications of the way you are proposing this legislation should operate for a significant electricity generator like Macquarie Generation.
The reason I am picking Macquarie Generation is only that they just happened to be on the top of the list that has been released by your department—sorry, the Department of Climate Change and Energy Efficiency. I have reverted back to the period pre-election. But this is a list that has been put out there by the Department of Climate Change and Energy Efficiency. It is very clear and on the public record that Macquarie Generation was responsible in that particular year—I think it was 2009-10—for 23.4 million tonnes of CO2; which, if you multiply that by $23 a tonne, will take you to $538,402,193.
Your government has talked about the fact that there is transitional assistance available for electricity generators to assist them through the transition from a high-carbon to a low-carbon economy. I want to know if Macquarie Generation is going to be eligible for any transitional assistance whatsoever under the $5.5 billion transitional assistance package. That is a pretty straightforward question. The answer could be as short as 'yes' or 'no'. That obviously might lead to some other questions for you to describe what sort of assistance the highest emitting electricity generator would be able to access. If they are not able to access any transitional assistance, I would be interested in knowing why that is. Given that they are responsible for 23.4 million tonnes of emissions, it stands to reason that they are a very significant supplier of electricity into the National Electricity Market.
It is a very simple question. Yes or no: will Macquarie Generation be eligible for any transitional assistance under the government's $5.5 billion transitional assistance package to assist them from the transition from a pre- to a post-carbon-tax world?
The government has designed its energy security fund to reduce energy security risks. We are providing assistance to the most emissions intensive generators in the country wherever they may be. Assistance is targeted in this way because the modelling and expert advice indicate that this is the best way to reducing risk to energy security. I have outlined the nature of the energy security fund and I am again saying to the senator that I do not think other ministers, including from your side of government, would have gone through, in the context of a whole-of-economy-and-sector reform, what a particular company would get in relation to a program that had yet not passed the parliament. I do not think that is appropriate. I think what is sensible is to go through the policy rationale for why assistance has been structured in the way it has. I have done that, but we can do this a fair bit all day. You can move from one company to another and another. What I would say is that they would get no assistance under your package.
It is interesting, isn't it? I do feel sorry for Senator Cormann, because he is trying to be the fiscally sensible one and he got rolled this week because he very sensibly said, 'If we oppose the MRRT, we should oppose the spending measures, because we haven't funded it.' But then he got rolled—Mr Robb did not even get invited to the meeting—and they are now, again, engaging in more unfunded expenditure. This is pretty embarrassing for the senior economics spokespeople of the opposition, who have yet to come up with a policy that is properly costed.
Senator Birmingham was goading me before, and I was responding to him, but the harsh truth is that, since Mr Abbott became the opposition leader, the opposition—including for the election campaign—have yet to come up with a properly costed policy—
They have yet to come up with a properly costed policy. So they can lecture us all they like about fiscal responsibility. We know those over there are no Peter Costello.
So I again say there is $5½ billion worth of assistance under the Energy Security Fund, designed to reduce energy security risks. We are, clearly, providing assistance to the most emissions intensive generators in the country. I accept there are some generators who do not agree with that decision. The reason the government have taken that policy decision is that the advice to us from modelling and from experts is that this is the best way of reducing risks to energy security. That is why we are structuring the package in the way that we have.
Reading between the lines, I take it that what the minister is saying is that, if you are a coal fired power station that is less polluting—has less emissions—and has a lower emissions intensity, then you are going to be worse off under this package than if you are a higher-polluting coal fired power station. If you are a lower emissions intensive coal fired power station, you will cop the whole cost. That is $540 million in additional tax for Macquarie Generation, which happens to be responsible for 40 per cent of the power generation in New South Wales, or about 13 per cent of the power generation across the whole eastern seaboard. So they get nothing—they get zero; that is what I am reading between your lines—and the reason they get nothing is that they just happen to be a too-environmentally-friendly coal fired electricity generator.
Of course, the higher polluters need more assistance, and I hear what you are saying there, Minister Wong. But let me just make this point: you talked about how they would get no assistance under our policy; of course they will not get any assistance—because they will not be whacked with a $540 million tax bill either! There will not be a $540 million tax on Macquarie Generation under our policy, Minister. And, if you are not going to get whacked with a $540 million tax, you will not need to access transitional assistance. But your government is going to whack Macquarie Generation, which just happens to be responsible for 40 per cent of the electricity generation in New South Wales, with a $540 million tax. Why aren't you giving them any transitional assistance? Because they are too environmentally efficient; their emissions intensity is too low. That is what you are saying. It is the same with Verve Energy or Griffin Energy in Western Australia. They are not polluting enough. If their emissions intensity was above 1, rather than below 1, they would get transitional assistance.
The minister can stand there with her back to the chamber and try and ignore us as much as she likes, but that is the effect of the government's policy. The government, very disingenuously, refers to the 500 biggest polluters without telling people that those 500 biggest emitters are either the energy suppliers that are helping Australia keep the lights on or some of Australia's major employers, all of whom have made significant efforts to reduce their emissions intensity, to reduce their emissions and to improve their energy efficiency over the last 10 to 20 years, without a carbon tax.
The evidence that we have had at the Joint Select Committee on Australia's Clean Energy Future Legislation from organisations like Macquarie Generation, and Verve Energy in Western Australia, is that they will be asked to take 100 per cent of the tax without any transitional assistance whatsoever because they are too environmentally efficient and their emissions intensity is not high enough. In the case of Verve Energy, they are saying this is going to be a net cost to their bottom line. They will have to pass it on, either through increased electricity prices or through the states' taxpayers. Will there be any effect on emissions as a result? No. In the case of Western Australia, WA is not part of the National Electricity Market. Western Australia is an energy island, Minister. You may not have realised that when you put your policy together. Minister Wong is now, finally, turning around; we have managed to get her to turn around and focus on what is happening in the chamber rather than keeping her back to us. But, Minister, Western Australia is an energy island—there she goes again; she is obviously not interested in what is being talked about in the chamber. Western Australia, for energy security reasons, needs to have a diversity of energy sources. We will continue to have to rely on a combination of coal, gas and various renewables—but coal and gas to a significant degree.
During the Senate committee inquiry, we asked witnesses what the effects would be in terms of the use of coal as part of power generation in Western Australia. Well, Verve Energy has to pay $200 million in additional tax, and the effect is going to be zero. Verve Energy will not be able to close down one single coal fired power station. In fact, the evidence we got is that it is most likely that, even with a carbon tax, the next new power station in Western Australia will be a coal fired power station, and that is for energy supply reasons. So this is just a net cost that is going to be imposed on the people of Western Australia, in the context of Verve Energy, through increased electricity prices, through increased taxes or through reduced services at a state level. There is zero, zilch, transitional assistance from this government in order to do it. The minister then says, 'There won't be any transitional assistance under your package.' No, there will not be. But there will not be a $540 million tax on Macquarie Generation, there will not be a $200 million tax on Verve Energy, there will not be a $180 million tax on Alinta Energy and there will not be a $161 million tax on Victoria Electricity. These are taxes that you are imposing, Minister, and in this chamber you cannot even bring yourself to say the words: 'Yes, you're right, Senator Cormann. Macquarie Generation is not going to get any transitional assistance under this package. Verve Energy is not getting any transitional assistance under this package. And the reason they are not getting any transitional assistance under this package is that their emissions intensity is too low. They are too environmentally efficient. They have done too good a job in keeping their emissions intensity as low as it can be.' That is why they have to cop the whole force of the carbon tax. That is why they have to pay 100 per cent of the carbon tax. If only they had not done what they could to keep their emissions intensity as low as possible, if only they had kept their emissions intensity above the factor of one, then your government would rush out and give them billions of dollars in transitional assistance. That is one of the many ludicrous parts of this package that your government, Minister, has put forward—a carbon tax that of course the Australian people were promised we would never get. And here today you cannot even fess up and say the words: 'You're right. There is no transitional assistance whatsoever—not one dime, not one cent; nothing, zilch—for companies like Macquarie Generation or Verve Energy because they are too environmentally efficient', in your judgment, 'to warrant getting any assistance.' That is completely inappropriate.
Minister, you confected outrage when I made the observation that I did not believe that when the government put this package together they understood that Western Australia was an energy island. My question to you is: what are the features in this carbon tax package that give effect to a recognition that Western Australia is actually an energy island which has to be energy self-sufficient and which of course is going to be impacted very differently, and in an even worse fashion, by this carbon tax package as a result of the way you have structured it? When it comes to transitional assistance to energy suppliers under your package, what are the features in which you recognise that Western Australia is not part of the National Electricity Market but is in fact an energy island?
I find it highly amusing that Senator Cormann and those opposite are seeking to ask questions of the government regarding the operation of the various assistance packages which form part of the government's clean energy package and the set of bills being debated in committee this morning, because of course we all know that Senator Cormann and those opposite are completely opposed, in the whole, to those assistance packages. They are opposed to the Jobs and Competitiveness Program. They are opposed to the Steel Transformation Plan. They are opposed to the assistance that the government is proposing for the coal sector. They are opposed to our community support package, which will provide assistance for community based organisations to over time reduce their emissions intensity and improve their energy efficiency. And of course, importantly, they are opposed to the assistance package for households and the increases to pensions, which are an important part of the government's program. They are opposed to the payments to families. They are opposed to the additional payments that will be available for job seekers and students.
All of these assistance measures are very important parts of the government's clean energy package because they provide the basis on which our economy will transform itself and move from an industrial based economy based on heavy carbon pollution to a clean energy future based on a transition to renewable fuels, and they make the transition much easier, particularly for households and those on low to middle incomes. That is the aim of the scheme: to target the assistance; to target the use of half of that revenue to where it is required the most—that is, to low- and middle- income earners. The assistance is not a one-off proposal. The increases to pensions and to family payments will grow in line with the increases in the carbon price. So I find it highly amusing that Senator Cormann and opposition senators are seeking to gain points by asking a series of questions associated with the assistance, particularly the assistance that is there for business.
That is symbolic of the fact that Senator Cormann and those opposite do not understand the way the scheme will work and the fact that it is a market based mechanism. Those in the Liberal Party say they are all for the efficiency of markets and government getting out of the way when it comes to the running of our economy, but they are opposed to this market based mechanism. They are opposed to an emissions trading scheme, which of course our scheme will move to after the first three years. Senator Cormann has raised the issue of those who are doing the right thing, companies that are reducing their emissions, and the assistance that will be available to them; but he fails to comprehend the fact that through an emissions trading scheme there is a natural advantage for those companies who do the right thing and over time reduce their emissions. The advantage becomes the fact that they are able to generate permits, buy credits and sell those credits both domestically and in the international market as well as reduce the costs associated with their emissions. That is the whole basis of the scheme. That is the way the scheme will work. Under Labor's plan, a market based mechanism, companies have the opportunity to make their own decisions about the way that they reduce their emissions and therefore reduce their costs. We are not going to force outcomes on them; we are seeking to allow them to do what companies do best—to make their own decisions about how they reduce their emissions intensity and therefore their costs. That is what will occur under our scheme over time. It is opposed by those opposite, because they do not understand the fundamental nature of the way that this scheme works. It is very difficult for them to grasp the nature of this scheme and how it will work.
That became evident when they developed their direct action policy. Through their policy they are saying that they are opposed to the sale of permits, particularly in an international context. Senator Cormann has raised issues in the committee stage today about the opportunities for high polluters to make a transition into the clean energy future and to reduce their costs. One of the ways that they will have the opportunity to do that is to install new technology, make changes to their production methods, and, to offset some of that cost, generate permits and be able to sell those permits on the international market. Under the opposition's plan, that opportunity will not be there for many of these companies. That will mean that their costs will be pushed up.
That was borne out in the evidence given to Senator Cormann's committee, the Scrutiny of New Taxes Committee, when they conducted an inquiry into the carbon pricing mechanism. I particularly draw the committee's attention to the fact that, whilst that committee was taking evidence, they heard from a number of big players in the domestic electricity sector—most notably, Loy Yang Power, one of the biggest producers and generators of electricity on the eastern seaboard. When they were giving their evidence to the committee, they were asked what it would mean for them, a big producer of electricity and a big emitter, if they were not able to purchase abatement permits on the international market. Their answer was very succinct and very simple. Their answer was that their costs would be pushed up; that their costs would be greater than they otherwise would if they had the opportunity to purchase permits on the international market.
That is quite symbolic of the fact that those opposite do not understand the way this market based mechanism will work. Companies will be able to make their own decisions about how they reduce their emissions and over time reduce their costs. Indeed, wider than that, across the whole economy, households, businesses, small businesses, larger companies and farmers will make their own decisions about how they reduce their emissions over time. So it is nonsensical and quite amusing that those opposite seek to come into this debate at this point in time and criticise the government about the way the scheme will work.
The opposition's direct action scheme is anything but a market based mechanism. It is a scheme that will be based upon the premise of subsidising the biggest polluters in our country—providing government assistance to those who are the biggest polluters—and for the rest of the economy, those who do not receive assistance, there is no incentive for the reduction of emissions over time. So those who are doing the right thing will be penalised under the opposition's scheme if they are not able to access that assistance.
Some of the premise on which the opposition's scheme is based is highly dubious. The claim that 85 million tonnes of abatement will be achieve through soil carbon is something that many experts in this field say is a dubious claim—most notably, the Farmers Federation. The Farmers Federation have said that they do not believe that that level of abatement will be able to be achieved under the opposition's scheme.
Of course, there is also the issue of ongoing uncertainty, particularly in the National Electricity Market, associated with the opposition's scheme. If the coalition roll back the carbon pricing mechanism, the fact that we would not have a domestic carbon price and would not be contributing in terms of an international carbon market would add to the uncertainty that would be ongoing in one of the most important industries and sectors in our economy.
But it is not for me to make these claims; these claims have been made by serious players in this industry and by their associations. The Energy Supply Association of Australia have said that Mr Abbott's warning not to purchase permits will put pressure on electricity prices and consumers. Again, that is a fact that came through in the evidence of Loy Yang Power. It will push up costs, because those opposite are opposing the notion of trading permits. The National Generators Forum have said that Mr Abbott's approach would increase the risk for electricity generation contracts, which would fuel higher prices. A number of banking organisations that work in the industry have said the same thing. So what we would see if the coalition's plan were implemented would be ongoing uncertainty and increases in prices—not only on the wholesale market but also for consumers ongoing—and we would not achieve the levels of abatement that we need to achieve as an economy and as a society to ensure that we are rolling back our emissions intensity over time compared to baseline objectives.
So, once again, I find it highly amusing that Senator Cormann and others are seeking to criticise the government's package when it comes to a move to a clean energy future and important assistance that will ensure that companies, small businesses, households and consumers can make that transition to a clean energy future—because they are fundamental to that transition. Once again it demonstrates that those opposite fail to understand and grasp the notion of a market based mechanism. They are seeking to reward those that are the highest polluters in our economy whilst providing no incentive other than for those they are seeking to subsidise through their Direct Action Plan, which of course will not provide the impetus for an economy-wide approach to reducing emissions and trading both domestically and in an international market. It is unfortunate that they seek to waste the committee's time with these issues. I hope that we get some more sensible debate in the remainder of the time allocated to these issues.
I will respond briefly to Senator Cormann in relation to Western Australia. I am advised that modelling undertaken for the government in the context of the Treasury modelling did look at Western Australia as well as the NEM. I am advised it did not suggest that Western Australia would be disproportionately affected relative to black coal generators in other states and that there was no reason to discriminate in Western Australian generators' favour on energy security grounds.
If the senator is concerned about energy security, the government is very focused on that, which is why the assistance has been structured in the way it has. It is true that the $5½ billion under the Energy Security Fund does target the most emissions-intensive electricity generators. I have gone through the policy rationale for that. It is important to note that the two other components of assistance under this package—the loans to emissions intensive generators who are unable to secure finance, which is the working capital point, and any other assistance recommended by the Energy Security Council, which might extend to loans or other matters—are not limited to a particular emissions intensity. Whilst the emissions intensity point is relevant in relation to the $5.5 billion, those two other components have a differential policy basis—I will just correct that: I understand that the refinancing loans do have an emissions intensity limit but not the assistance recommended by the Energy Security Council.
Your answer misses the whole point as far as the impact on power generators in Western Australia is concerned. To compare the impact on black coal fired power generators in Western Australia to the impact on black coal fired power generators in other parts of Australia who are part of the NEM is completely irrelevant. The Western Australian energy market is its own distinct market. In the National Electricity Market you are going to get substitution from one electricity supplier to the other, which you will not be able to get in Western Australia. What matters is the relative impact within the market, not the relative impact in the Western Australian market compared to the relative impact in another market. That might be too complicated for you to grasp this morning, Minister. You have now confirmed that $5.5 billion in assistance and the assistance with any financing arrangements through the transition as a result of the impact of the carbon tax will go to the highest emission intensity electricity generators. The reason why electricity generators like Macquarie Generation, Verve Energy and so on are not getting any transitional assistance—zero, not one cent, not one dime, zilch—is that they are too environmentally efficient. That is why they get no transitional assistance at all.
Senator Thistlethwaite was making a point about things that Loy Yang Power said. I draw his attention to the evidence given by Loy Yang Power to the Senate Select Committee on the Scrutiny of New Taxes inquiry on the carbon tax. Loy Yang Power said that the government's carbon tax would:
... place pressure on our cash flows, make our refinancing of existing debt more difficult, may cause compliance problems with financial services licences and may lower the creditworthiness of the company.
… … …
… Loy Yang Power suffers a significant deterioration in business value, which may impact on the operations of the business in the medium to long term.
Even Loy Yang Power, who are getting some assistance through this package, are complaining about the fact that it will not adequately compensate them for the impact the government's carbon tax and will not prevent an impact on electricity consumers. Minister, if you are going to have a carbon tax that is going to hit the lowest emissions intensity electricity generators the hardest, which means that they will want to pass these costs on to electricity consumers and so on, can you give us a list of those electricity generators that are going to get the $5.5 billion worth of transitional assistance under your package?
Minister, I have not asked you the question before as to who is going to get the $5.5 billion in transitional assistance. I have asked you before whether Macquarie Generation is getting any and you were not prepared to say no. Reading between the lines, what you were saying was, 'No, they are not getting any.' Verve Energy is not getting any. The question is: who is getting the $5.5 billion worth of transitional assistance under your carbon tax package? Is any electricity generator outside the state of Victoria going to get any assistance under the $5.5 billion transitional assistance package?
Senator Cormann is not a stupid man, so he would recall that on a number of occasions he has asked me about generator X or generator Y and I have said that it would not be appropriate for a minister, in relation to a policy area where there is a package before the Senate, to get into details of individual recipients of assistance. What is appropriate is for me to outline, as I have done, the basis on which assistance is provided, the basis on which assistance is disbursed between different players in the sector and the policy rationale for that. I have done so and I will continue to do that. But, as I explained to him when he asked the first question, I do not think it is sensible, helpful or appropriate, frankly, for ministers to say company X will get this amount of money.
We have before the chamber a package which includes three components of assistance in relation to energy security. I have gone through those. I have explained to you why $5.5 billion is allocated on the emissions intensity basis and other bases and the reason for that, which is energy security. I have explained to you the additional assistance in terms of the provision of loans. That is referenced at paragraph 6.193. I am happy to read that onto the record for him if he would like, but it is in the explanatory memorandum. I have explained that in addition there is a backstop mechanism whereby the Energy Security Council can recommend additional measures if required for energy security. I reference my previous answers, because I have gone through the policy rationale for why emissions intensity has been used as the basis on which the $5.5 billion is to be disbursed amongst—
Senator, that is the advice to government. That is the policy proposition. What I am not going to do here is to go through individual companies and say precisely how much any company will get under an arrangement that is not yet in place. The EM goes through a lot of detail about how this is to be allocated between generators, up to the amount of $5.5 billion.
With respect, the minister has said that they have done it this way because that is their advice. The minister has not gone through the policy rationale. I would like the minister to explain why it is that 100 per cent of the transitional assistance goes to the highest emission intensity electricity generators when lower emissions intensity coal fired power generators get nothing. What is the policy rationale? I am not looking for a glib reference that 'that is the expert advice'; I want an explanation on the record as to why in the government's judgment that is the appropriate policy.
I think I read this out before. The government's Energy Security Fund is designed to reduce energy security risks. It provides assistance to the most emissions intensive generators in the country, wherever they may be. Assistance is targeted in this way because the modelling and expert advice suggests that this is the best way of reducing risk to energy security. The plan also contains other provisions to address residual risk to energy security.
Minister, again, that is a process description of what is in the fund. It refers to modelling and expert advice. It does not give a policy rationale. Why is it that in the government's judgment it is appropriate for 100 per cent of the transitional assistance to go to the most emissions-intensive coal fired power generators when the less emissions-intensive coal fired power generators get zero? If it is based on expert advice on energy security matters, why is it that you do not then assess Western Australia as a distinct market, which it is? It is a distinct electricity market. If the question is one of energy security exclusively, then surely the impact of the carbon tax, as far as the Western Australian electricity market is concerned, has to be assessed in isolation and quarantined from the impact on the national electricity market.
The minister is clearly not prepared to explain the policy rationale, and so I might leave that there. But let me just make this observation. Macquarie Generation is at the top of the government's carbon tax hit list, not because it is more polluting than anybody else, not because it has a higher emissions intensity than anybody else but because of the volume of electricity that it generates. It is generating electricity in a way that is more environmentally efficient than a number of other electricity generators. It is generating that electricity in a less emissions-intensive way, and yet this government is going to hit this company with a $540 million tax in year one, going up year after year after year, for its efforts.
If you want to do well under this government, you have to make sure that you are more polluting, not less. If you want get the handouts from this government under the merry-go-round of the carbon tax, you have to be a more emissions-intensive electricity generator. If you are an electricity generator that has lower emissions intensity, you will be punished. The reason you will be punished is that you are so successful in providing a large volume of electricity, even though you are providing that large volume of electricity at a lower emissions intensity than other providers in the market. That is just ridiculous. When we asked the minister to give us an explanation as to why that is the case and why the government thinks that is a good way to go about things, all she said was, 'Well, that is our advice.' Okay. But why? The minister's answer is: 'That is our advice; we're not going to give you an explanation as to why we think that we should hit Macquarie Generation with a $540 million tax without transitional assistance whatsoever. You're just the Australian parliament; you're just the Senate. Who cares about giving any explanation to the Senate as to why that is a good idea? Who cares about the impact that's going to have on consumers in New South Wales?'
Here we have Senator Thistlethwaite sitting in the chamber saying that this is a great idea. And this government is about to whack—
You have not. Here we go: a $540 million tax with zero transitional assistance. And why? Because their emissions intensity is too low. So, because their emissions intensity is too low, they will not be getting any transitional assistance. And, despite their emissions intensity being too low, they are still top of the list. They are still top of the carbon tax chart. They are still the number one 'polluter'—that is how the Prime Minister talks about them. The Prime Minister talks about 500 polluters. The number one polluter—in the language of the Prime Minister—is Macquarie Generation. They are the top of the charts. They are going to be number one on Labor's carbon tax hit list, paying $540 million of tax with zero transitional assistance. Now we are told that the reason they are getting zero transitional assistance is that they are too environmentally efficient. If they were less environmentally efficient—if their carbon intensity were higher—we are told that the Gillard Labor government would be providing them with assistance. Instead, they are going to face the full brunt. And electricity consumers in New South Wales will face the full brunt of this, Senator Thistlethwaite, either as consumers or as taxpayers in the state of New South Wales.
When we ask the government to provide an explanation as to why that is sensible policy, they cannot tell us that. All the minister glibly says is, 'I refer to my previous answer.' And the previous answer was a nonanswer; the previous answer was a description of what is in the legislation, not an explanation as to why. Then we had the glib comment that that is the expert advice. Minister, you should be prepared to tell us in your own words—in the government's own words—as to why you think it appropriate for zero transitional assistance to go to a power generator that is responsible for 40 per cent of the energy supply of New South Wales and that is going to be hit with a $540 million tax. I am not holding my breath. I suspect that you have not got an answer to that.
Quite frankly, Minister, this is just another example that demonstrates the absolutely ludicrous nature of this carbon tax, which will push up the cost of everything, make Australia less competitive internationally, make more polluting businesses in other parts of the world more competitive and help more polluting businesses in places like China take market share away from businesses in Australia. That in turn will shift emissions from Australia to other parts of the world, which will cost jobs in Australia and result in lower real wages. Prices will go up. That will result in Australia having a smaller economy than we otherwise would have had. And all of that without doing anything to reduce global greenhouse gas emissions. We are imposing all of this cost and sacrifice on all Australians, including electricity consumers in New South Wales, for no purpose whatsoever. And you are not even prepared to provide a proper explanation in the chamber of the rationale for it.
They still have no moved it. They still do not want to vote on it. And they are still giving the same speeches—except that they are not quite the same speeches. If anybody thinks that Senator Cormann has had a consistent position—
On super, to be fair to him, he has had a consistent position. It is just that he got rolled. In August 2007, he said, 'The government's recent announcement of a national emissions trading scheme is a positive and sensible approach to addressing global warming.' So in August 2007, Senator Cormann—when Prime Minister Howard was in power—supported an emissions trading scheme and supported the price on carbon that he now says is a tax on everything. And he also supported the part of the policy of the then Prime Minister that the emissions trading scheme would be introduced ahead of other nations. Let us keep things in perspective when we hear the continual diatribe from Senator Cormann.
In relation to a number of the issues raised, if the senator cared about giving an incentive for cleaner energy generation and investment in cleaner energy generation he would support a price on carbon, because what a price on carbon does is give people an incentive to abate—that is, to reduce pollution. It also gives investors an incentive to invest in clean energy. If the senator cared about incentives for clean energy generation, he would not worry about the argument over who is getting handouts; rather, he would support a price on carbon to give people an incentive to pollute less and investors an incentive to invest in clean energy. The fact that he does not demonstrates that he is not being principled in his approach to this.
The second point that I would make on handouts is this: one of the most bizarre things in this whole debate is that the Labor Party is arguing for a price signal and a market mechanism and the Liberal Party are asking for taxpayer handouts. It is fantastic, isn't it? The Liberal Party, who are supposed to be the rational economists in this place—but they certainly have not demonstrated that under Tony Abbott at any point—are arguing for taxpayer funded handouts for polluters. If Senator Cormann is worried about handouts he ought to go into his party room and argue against their direct action policy, which is the government taxing Australian households to give money to polluters on a wing and a prayer and a hope that they might reduce their pollution. With respect, Senator—and I know there is a lot of rhetoric in this place—I have outlined very clearly that the rationale behind the fund is the mitigation of energy security risks as Australia transitions from highly emissions-intensive sources of generation to more renewable and low-intensity sources. That is why we have the Energy Security Fund and the measures I have outlined. I have also explained to you that that is the rationale behind the emissions-intensity basis of the allocation of one component of the assistance, which is the $5½ billion.
In terms of the impact on households, we have been completely transparent about that. We have not only done the Treasury modelling previously; we have done it subsequently—and what that shows is that you are looking at a CPI impact of around 0.7 per cent in 2012-13. On average that is $3.30 per week, about 10 per cent on electricity prices. We recognise that, and that is why we are providing a reduction in people's income tax arrangements. We are increasing the tax-free threshold. That is why we are providing an increase in the pension payment—in the age pension, in the disability support pension—and also assistance through the family tax system. So we have not hidden the price impact, Senator; we have accounted for it and we are providing assistance which is particularly focused on low-income Australians.
I invite the opposition to move their amendment. I certainly invite Senator Xenophon, who has come back at this stage, to get to his amendments, because he has quite a number and as yet we have not dealt with any of them. I appreciate he has asked some questions about one amendment which he is considering his position on. I understand he flagged that, but I would certainly invite him to consider moving his amendments.
I have a few brief remarks. Just to make the point again: what the government is introducing is a massive new tax, a massive new bureaucracy and, of course, a merry-go-round of money. For the government to try and tell us that a massive new tax, a massive new bureaucracy and a merry-go-round of money is somehow a market based mechanism beggars belief.
The minister tries again to perpetuate this myth that somehow there has been an inconsistency in approach. Let me just again place on record, very succinctly, that the world and Australia's national interest since August 2007—when it comes to action on climate change and when it comes to Australia's contribution to help reduce global greenhouse gas emissions—have changed.
Could I finish. The challenge of climate change is still there to be addressed, but we actually have to make a judgment on whether what is on the table is going to make a positive difference or whether it is going to make things worse.
Here is the crux of the argument: in 2007 there was a general expectation that countries like the US and others would introduce cap-and-trade emissions-trading schemes. There was a general expectation that there would be an appropriately comprehensive global framework around pricing emissions agreed to in Copenhagen—and, of course, Copenhagen was a complete failure. And you need not go any further than the assessment of then Prime Minister Kevin Rudd as to what his views were about the success or failure of the Copenhagen conference.
All throughout 2008, 2009 and 2010 we had the Garnaut review report; we had the government's green paper and white paper; we had a number of parliamentary inquiries; and we have a clear public understanding, and the understanding in this parliament, of what a price on carbon in Australia would do in the absence of an improvement in an appropriately comprehensive global agreement to price emissions. All throughout 2008, 2009 and 2010, in the context of a lot of public debate, in the context of a lot of discussion, Senate inquiries and House of Representatives inquiries and policy debates within the various parties, there clearly was an increased and improved understanding of what a price on carbon in Australia in the absence of a price on carbon imposed by most of our trade competitors would (1) do to Australia's national interests, in terms of the impact on our economy, on jobs, on costs of living, and (2) have on the impact on global emissions. Of course, the conclusion after those processes all throughout 2007, 2008, 2009 and 2010 was that, in the absence of an appropriately comprehensive global agreement to price emissions, that in the absence of countries like the US and others deciding to price emissions in their countries through an emissions trading scheme or carbon tax, it was not in Australia's national interest to impose a price on carbon outside of such a framework.
If you look at all of the comments on the public record, whether from me or others, all throughout 2008, all throughout 2009, all throughout 2010, you will find that our position in 2008-09 was that we should not make a judgment on Australia's decision on a carbon pricing regime before Copenhagen. Indeed, the position when Malcolm Turnbull was our leader was 'not before Copenhagen'. Our position was that, if the government was going to put this legislation to a vote before Copenhagen, we would vote against it—and indeed we did. We voted against the government's legislation—together with the Greens, I might add. The Greens were sitting there right next to us voting against the Carbon Pollution Reduction Scheme, initially in the House of Representatives in late June 2009 and then in the Senate on 13 August 2009. I remember the day well! We voted against the Carbon Pollution Reduction scheme—that is, the coalition, Senator Xenophon, Senator Fielding and the Greens. We all voted against it because we all shared the view that what the government put on the table was not effective action on climate change. It was a scheme which, in the coalition's judgment, was just going to push up the cost of everything, cost jobs and put Australia under pressure without doing anything to help reduce global greenhouse gas emissions. And of course, the Australian people are entitled to believe that after a lot of backwards and forwards, after a lot of toing and froing, our Prime Minister, Julia Gillard, came to the same conclusion—because not only did Prime Minister Gillard tell then Prime Minister Rudd to kill the CPRS, not only did she tell him not to go ahead with the Carbon Pollution Reduction Scheme; she also, of course, went to the last election with the most emphatic promise of them all, with the most emphatic promise any Prime Minister could ever make, when, looking the Australian people straight in the eye, through the barrel of a camera, in that memorable Channel 10 moment, in the morning, five days out from the election, she said to the Australian people:
There will be no carbon tax under the government I lead.
The reason she said that is that no doubt at that point in time Prime Minister Gillard, like the rest of us, realised that it was not in our national interest to impose a carbon tax in Australia when our trade competitors in other parts of the world were not doing the same. All we are doing is making higher-emitting businesses in other parts of the world more competitive than even the most environmentally efficient equivalent businesses in Australia. That is what the debate is all about.
So, Minister Wong, you can come in here and quote from my first speech as much as you like, but you know very well that the world has changed over the past four years. You know very well that the debate on Australia's national interests, in the context of carbon pricing, has changed.
I will take that interjection because this is at the core of the Labor-Greens lie. You want people to believe that your tax is going to do something to improve the environment. It will not. You are painting this picture of how we have disastrous prospects of rising sea levels, floods, droughts and this and that. But your tax is not going to do a thing to stop a single flood, a single drought or to stop sea levels from rising. In fact, arguably, your tax will make it worse to the extent that it will make environmentally efficient businesses in Australia less competitive than more-polluting businesses in places like China and encourage the shifting of economic activity from Australia to other parts of the world. You have reduced economic activity in Australia—and your Treasury modelling assumes that economic activity in Australia will be lower than it would be without a carbon tax—but you will have shifted it to other parts in the world where the same level of economic activity will result in higher emissions. So, the world is no better off. That is what this is all about.
Your government, Senator Thistlethwaite, wants to make Australian businesses less competitive so that higher-emitting businesses in other parts of the world can take market share away from them. Your carbon tax aims to reduce emissions—no, it will not reduce emissions; they will continue to go up—compared to what they would have been without a carbon tax in a way that increases emissions, arguably by more, in other parts of the world. What is the sense of that? There is no sense in it.
The reason this is a legitimate thing for us to assess is that we are not alone in this world. Look at what is happening in other parts of the world. Canada has just said that there is no way they are going to go down this path. The US has made it very clear that there is no way they are going to have a carbon tax or an emissions trading scheme. And I do not believe that Barack Obama would go back on his word in the same way that Prime Minister Gillard has. I am prepared to give you a guarantee that Barack Obama is not going to put emissions trading scheme legislation forward.
Let me address another Labor-Greens lie. The minister keeps coming in here and saying: 'Well, China is making all these efforts. China is doing so much better than anybody thinks they are.' That is just not true. It is a complete fabrication. You do not need to look any further than the government's own modelling.
I rise on a point of order concerning relevance. I do understand that we have a wide-ranging debate, but how is this germane to what is before the chamber? We have had a second reading debate and we have amendments yet to be moved. Does the opposition not want to move their one amendment and have a debate about that?
Of course there is no point of order. There is a minister who is touchy about the fundamental and inherent flaws in this carbon tax. I understand why the minister is touchy. She is very embarrassed by the fact that she has to push through a carbon tax that the government knows will do nothing to help reduce global greenhouse gas emissions.
I will conclude on the point I was making before the minister rudely interrupted me. The minister wants us to believe that somehow China is making huge efforts to reduce emissions. Back in 2008, only three years ago, the government thought that by 2020 emissions of CO2 in China would go up to 16.1 billion tonnes. Do you know what figure the government now thinks CO2 emissions will go to in China in 2020? It will be 17.9 billion tonnes of CO2. So, over the past three years there has been a deterioration to the tune of 1.8 billion tonnes of CO2 in the government's expectation of what will happen in China with CO2 emissions. That figure is three times the total volume of CO2 emissions in Australia, which puts into perspective what we are talking about here.
This government is all spin. There is no honest policy and there is no honest factual information; it is all spin. The government comes in here and says that China is making all these efforts, when over the past three years its expectation of what will happen in China by 2020 has deteriorated—it has gone backwards. The government's expectation of what will happen with CO2 emissions in China is now worse than it was three years ago, whereas Australia continues to meet its commitments under the Kyoto protocol—whether it was the Howard government or the current government. We are doing our bit. We are doing what we committed to do. So don't give us all of this false rhetoric, Minister. Give us some facts.
That was a speech like many we have heard from Senator Cormann simply railing against pricing carbon, not really dealing with the bill before the chamber. But I want to make a couple of points because the exhortation is to deal with facts. The facts are that it will cost us more as an economy and as a community to act later rather than earlier on climate change. The facts are that the government's policy will cost the economy, households and business less than the opposition's policy. The facts are that the science in the last few years has got worse. If you read the updates to the settled science—and I invite those opposite to read the work of Professor Steffen and publications earlier this year—what they tell us is that the window of opportunity is even narrower than it was when we first presented the CPRS. The facts are that those opposite like to talk about other countries in an attempt to say to people in this chamber and elsewhere, 'Don't worry about the risk to the next generation, don't worry about the fact that it might be a good thing to shift from being a very highly polluting economy, let's just say no.' Those are the facts that Senator Cormann and his colleagues do not wish to face. I again suggest, Madam Temporary Chair, that it would be a good thing if we could deal with some of the amendments before the chair.
Just a few questions, and I will not take much time of the chamber. One of my concerns is abattoirs. In one of our hearings for the Senate Select Committee on Scrutiny of New Taxes at Tamworth, Bindaree Beef, an abattoir in Inverell, the town I live in, estimates the cost to be $1.74 billion in the first year. Just a couple of points here. The Clean Technology Food and Foundries Investment Program provides a total of $150 million over six years. Minister, I am sure you are aware of that. This is just $25 million per year, but Bindaree Beef's budget to introduce systems will cost about $30 million. Refrigeration is the largest energy user on any meat processing plant and contributes around 65 per cent of electricity use at Bindaree Beef. They anticipate an annual increase of electricity costs to around $4.8 million from $3.2 million by 2012-13.
This is the concern I have: this whole program compensates houses and pensioners, but it also affects our business sector. The minister was just saying, in response to Senator Cormann, what the rest of the world is doing. These costs are not going on abattoirs in America which businesses such as Bindaree Beef have to compete against. They do not have those costs. What can be done about helping these industries that are vital to regional Australia and rural Australia, and people in the cities also eat meat? What are you going to do? The $150 million package over six years, just $25 million a year for the whole abattoir industry, is simply not enough. It will not achieve the change.
JBS, commonly known as Swift, has an abattoir near Ipswich—$3.3 million a year is their cost with emissions and the cost of electricity. Minister, could you inform me: what you are going to do to help these businesses survive? The $150 million you have proposed over the six years simply will not do anything and the criteria for the industry mentions:
So a lot of your so-called compensation package does not relate to abattoirs; they will not be able to receive any of that package. Minister, what are you going to do to see that these jobs remain in our abattoirs? Just two weeks ago we had the abattoir at Grafton close and some 120 jobs have gone. What are you going to do to see that these abattoirs survive with this extra cost on their production?
Perhaps I missed it, because I had to have a brief discussion with Senator Xenophon, but what you were quoting from? We might want to come back to that.
I am advised that the Treasury modelling shows that under a carbon price meat product manufacturing is in fact estimated to grow by 12 per cent to 2020 and by some 137 per cent to 2050. I am also advised that most meat processing facilities are likely to fall below the coverage thresholds of the scheme and hence not be directly liable. It is the case that there is dedicated support of some $150 million for the food and beverage processing industry available under the Clean Technology Food and Foundries Investment Program. This sets aside dedicated funds to support the industry to invest in technology or processes to reduce their emissions. The government will also establish a $40 million energy efficiency information guidance program which will help industry peak bodies, including those that support the meat industry, prepare and disseminate information for their members on how to improve their energy efficiency.
As the senator would know, households are also provided with assistance to cover any increase in cost of consumer goods in the form of the household assistance package to which I have referred previously. To keep this in perspective, the additional Treasury modelling released in September 2011 estimates the carbon price will have an impact of about 0.4 per cent on the consumer price of beef, equating to about 10c a week. I certainly heard your comment about Bindaree Beef. I am advised that officials from DCCEE, the Department of Climate Change and Energy Efficiency, have also visited a number of sites, including to Bindaree Beef, to explain the program and either are presenting or have presented at a meat industry workshop in recent times or shortly. My briefing says shortly, but I understand that has already been done.
This requires a simple yes or no answer. You would be aware, Minister, that in New South Wales, Queensland and Western Australia the coal-fired generators are still state-owned, they are properties of the state. Do you agree with that?
I was just checking whether it was in fact all of them, but certainly there are still state owned generation entities in those states. If this relates to assistance and compensation, I do not know if you were in the chamber but we have had a lengthy discussion about that already.
No, it is not in relation to compensation. It is in relation to the Constitution. You are aware that in New South Wales, Queensland and Western Australia those coal fired generators are property of the state. The second part of section 114 of the Constitution clearly states:
… nor shall the Commonwealth impose any tax on property of any kind belonging to a State.
Macquarie Generation are one of the large coal fired generators in New South Wales and produce 40 per cent of the electricity in New South Wales. How can you impose a tax on Macquarie Generation when the Constitution, under section 114, clearly says you cannot impose a tax on property belonging to the state?
We have just had a changing of the guard of advisers, to move to the constitutional law person. I am happy to come back to this after I just get some advice. I do not know if another senator has a short contribution. I will just get some advice and come back to the senator.
My third and final question to the minister is: what compensation will there be for local government? During our Senate inquiry, we heard that Tamworth Regional Council would pay an extra $300,000 for electricity alone. The reports are that there will be a five per cent increase in the cost of road building. In New South Wales we have rate pegging. Last year the rates were pegged at 2.8 per cent. That does not include water, sewerage and other charges. In Inverell Shire Council, for example, their rates went up around $250,000 in income this year, brought about by rate pegging of 2.8 per cent, controlled by the state government, and their wage bill has gone up some $450,000. Now they face an increase in electricity and in road building. With their rubbish dumps, what are their rubbish emissions? Do they come under the 25,000 tonnes when they group together the emissions out of all their rubbish dumps? What is the compensation to local government? That is my third and final question.
But I take you back to that constitutional item. How does the government wangle its way around the Constitution, which is above this parliament? The minister agrees that in Western Australia, Queensland and New South Wales those coal fired generators are properties of the state. That is who they belong to. They might be in the name of Macquarie Generation or various other names, but they are properties of the state, and the Constitution clearly says you cannot impose any tax on property of any kind belonging to a state. So those are my two questions. Firstly, how do you get around the Constitution under this proposed carbon tax? I think it is against the Constitution. I think it is in breach of the Constitution. Secondly, what is going to happen to local government? These are the last two questions I will be asking, Chair, because I know time is of the essence and Senator Birmingham has a quick question before we get into amendments from Senator Xenophon, I think.
The whole problem with this tax is that you are going to strangle the business sector. One day, over that side of parliament, you will realise where our nation's wealth is derived from. It is the business sector that employs people, pays tax and gives money to governments, which you then use to give out pensions and provide services and hospitals and aged-care facilities. You are going to compensate low-income families and pensioners, but you are doing nothing for abattoirs competing in the world market. We know what it is going to do the cement industry. We have already had two factories close in the last 12 months. The first was in Rockhampton. Now they have announced the closure of the factory in Kandos, where I think 96 people are directly employed plus all the businesses and the truckies and those that hang off and rely on that industry. This is where you have got it so wrong. You are strangling business, the very sector that drives our nation's wealth. You strangle our business sector, you strangle our economy and you strangle our nation financially. You might be able to compensate people, and that might shore up your votes if the compensation is 20c a week more than the cost is going to be, but here is the problem: you are going to put the costs onto local government and our industries competing overseas, and I question whether this is simply in breach of the Australian Constitution.
First, in relation to the business sector. Let us come back to some economics. Most businesses will pass on the price. That is why we are assisting households by giving them more income—
Senator, let me go through this. I listened to you in silence. Most businesses will pass on the price, and that is why there is assistance being provided to households—to reflect the 0.7 per cent CPI increase, which I must say is significantly less than the price impact of the GST when it was introduced. There are businesses who cannot pass on the price. Businesses in what I used to call the emissions-intensive trade exposed sector—I do not know if we still use that term—are provided with a very substantial amount of assistance. I think it is $9.2 billion over the forward estimates under the Jobs and Competitiveness Program directly to deal with those issues. If the senator cared about business costs, he would care about two things: he would care about the fact that he is imposing a higher cost to achieve the same environmental outcomes through his policy—
I will take the interjection that that is wrong. He is basically telling the Treasury and the Department of Climate Change and Energy Efficiency—apolitical public servants—that their advice is wrong and that he, Senator Williams, the National Party senator for New South Wales, is right. You are imposing higher costs on businesses through your policy, including your refusal to allow international trading. You would not do that if you did care about costs on businesses.
The second point on that I make is that you would support the MRRT because that actually will provide a tax cut to companies and small business. The Liberal Party is opposed in a multispeed economy to miners paying more tax and other companies, including the agricultural sector, paying less tax. You want to come in here and lecture us about business costs? Have a look at your own policy position.
I am going to come to those questions. I am just responding to the point on the business sector. In relation to section 114, the government's advice is that the provisions do not contravene that provision of the Constitution.
In relation to local government, as I said, the impact, which includes the impact on council rates, is 0.7 per cent of CPI. You might recall that the GST introduction was a 2.5 per cent CPI increase. The government provides ongoing financial support to local government through the financial assistance grants. That is a pool of funding indexed to the CPI, so obviously that indexation of itself captures the carbon price impact.
A question on landfill was raised with me. Landfill operators who take action to reduce pollution from waste before 2012 can secure carbon credits under the Carbon Farming Initiative. If landfill operators use methane from landfill to generate electricity, they may be eligible for renewable energy certificates under the Renewable Energy Target. I am advised that legacy waste emissions are excluded from any liability and, therefore, it is expected that carbon farming credits from landfill waste will in fact exceed liability on landfills in the period to 2020.
The government also made some changes in the other place to landfill liability to further ease the burden on local councils. There will no longer be a liability on landfills that emit between 10,000 and 25000 tonnes. Landfill operators will be able to meet 100 per cent of their obligations using carbon farming credits. Regrettably, Senator, I think your party opposed those amendments. The Australian Local Government Association welcomed the outcome of this and the introduction of a market based approach to carbon pricing. They said:
The amended legislation addresses local government's concerns about the impact of a carbon price on small landfills, many of which are owned by councils.
I have a very quick question for the minister before we bowl into the amendments. I want clarification from the minister or an extension to an answer that she gave me earlier today. The clarification relates to the issues we were exploring about the budget impact. I think in response to a question of Senator Cormann the minister made a statement regarding when the budget accounts for permits for a future vintage year that are purchased in advance. She said that they are accounted for in the year in which they are acquitted. I am assuming she is meaning the year in which the permit is acquitted, in the vintage year of the permit. Minister, could you clarify for me, so we are absolutely clear in terms of the fiscal impact and the underlying cash balance impact, where that money is treated within the budget tables.
The answer I gave was in relation to the fiscal impact—that is, the accrual accounting impact—and that is correct. The tables that reflect both the underlying cash balance and the fiscal balance, the latter which is of course accrual accounting, are in the EM.
Thank you, Minister, for that clarification. So we and anyone who chooses to look at the tables and the impact can have a crystal clear understanding: permits with a vintage date of 2015-16 that are purchased in 2013-14 do not appear in the government revenue for the fiscal impact tables but are of course taken into account in 2013-14 for the cash balance impact; is that correct?
I know that the minister is very keen for the amendments to be moved—I appreciate that—so we can get on with this. It is worth noting that the debating time for this bill in the committee stage has been truncated as a result of a procedural motion last week, which I do not think is desirable.
I have a question I would like to ask before Senator Birmingham moves an amendment that is identical to the amendment that I have tabled relating to the issue of when this legislation will come into effect. I am happy for Senator Birmingham to do that, but there is one preliminary issue before we deal with that amendment. It is a seminal issue that I think was touched on last Thursday night. Under the CPRS, under the legislation introduced by the Rudd government, there was a clear target of five per cent reduction in greenhouse gases based on 2000 levels. Whilst this legislation does not have any specified target, can the government confirm that it is the intention of this bill to achieve the same outcome of a five per cent reduction on 2000 levels, or will a greater amount or a lesser amount be achieved? This is not a trick question. It is a genuine question to establish whether what we are going for is the same target as that in the CPRS.
There are a couple of remarks I would like to make before we get to the coalition's amendment. One is in relation to the deferred payments issue that we have been debating here this morning. I am now really confused about where the coalition stands in relation to this matter. I understand that what Senator Xenophon was talking about was a concern about the working capital burden that a carbon price imposes on the energy sector in terms of buying the permits upfront and having that investment. Generators are saying they will need to hold $4 billion worth of permits in any one current year and a further $6 billion worth of units to support forward contracting. They were asking for deferred settlement arrangements.
We have talked about the fact that they do have a three-year certainty and so on, so the matter has been dealt with. We will have to wait until we see the practice to see whether these concerns are exaggerated. I have taken those up with the government. But clearly what the Energy Supply Association has said is that if they cannot afford a contract then the market, in their belief, would be more volatile, the electricity market would be more expensive and prices would be higher for consumers. So what we have, as I understand it, is the coalition saying that they will not honour any forward permits. They have come out and said that. In fact, the Leader of the Opposition, Mr Abbott, has come out and said that electricity generators ought not buy any forward permits because the coalition will not honour them.
By the same logic and argument, therefore, the coalition is saying that they want more volatility in the electricity supply market. They want to have greater expenses for the electricity market and they want to have much higher electricity prices for consumers because they want to deny generators the capacity to purchase into the forward market. That is as I understand it at the moment, so I find it interesting that Senator Birmingham is standing here trying to suggest he has some concerns about the provisions of the legislation relating to the settlement arrangements under the auction provisions when it is the coalition's policy to actually prevent any banking of permits and any projection into the forward market. In fact, AGL came out in the joint committee and said that the coalition's position represented a billion-dollar dead weight on the Australian economy because it drives up the cost of capital in the next few years because of the level of risk the coalition is driving into the scheme.
I thought it was important to clarify here with the coalition attempting to show some concern about the energy supply sector's supposed concerns about their ability to forward contract. If any group of people is undermining a forward contract market and driving up electricity prices and volatility in the market, it is the coalition. It is another reason why I believe we are going to see yet another retreat from the coalition. We will see them back off and not repeal these bills—in the event that they ever did come into government—because business will not tolerate it. Business wants certainty. Business wants the ability to forward contract, to hedge against risk, to even out its supply over time and its working capital arrangements. It wants those certainties, and the coalition is intent on taking those certainties away.
So business is going to start to wind up, as we saw them do when the International Monetary Fund came up for discussion last week, when even the Business Council of Australia came out. Even the Business Council, which has supported the coalition to the hilt up until now, came out last week saying that the Leader of the Opposition, Mr Abbott, was completely wrong on this and that it would be a breach of Australia's global responsibility and reputation to behave in the way that the coalition was suggesting.
As for the idea that what the coalition says in here stands, at the very time we had the coalition in here talking about why ARENA and CFEC were such bad ideas—'such a honey pot for the white-shoe brigade', to quote Mr Robb—in the lower house we had Mr Macfarlane saying that, not only would the coalition not oppose ARENA, contrary to the blood oath, in fact they would not repeal it either. They are not even opposing it, let alone repealing it. So in relation to the emissions trading part of this scheme we will see the coalition not repeal these bills if ever they get the chance.
Now we are going to find business winding up very strongly on the coalition on economic credentials. We saw it over the weekend with the embarrassing situation for Senator Cormann where nobody told him the coalition was going to make a massive retreat on superannuation. He was busy up here with the superannuation industry, telling them there was absolutely no way they were going to honour the nine to 12 per cent. There was every certainty they would be repealing that, and then when you turn round twice there is a phone link-up based on what the politics demand and Senator Cormann is left hung out to dry. So already we have had the coalition in the Senate hung out to dry by expedience from coalition members in the lower house.
So I thought it was important to get some clarity around the issue of working capital arrangements for generators, future contracting and cash flows. I want to put on the record that the Greens did take this seriously through the joint house committee. We have looked at the submission from the Energy Supply Association. We have recognised that ACIL Tasman did that modelling for them. We have seen how ACIL Tasman can be very various according to whomever has asked for the modelling. I noted that in particular in relation to other aspects of this carbon price. I want to look very carefully at what does happen on the forward contracting, but I am of the view now, as is the government, that the three-year period gives people a clear indication of where things are going on pricing and will give them a clear collar, if you like, once flexible pricing starts. I think it is important in this context to have that on the record.
Isn't it remarkable that, just as I get to utter the words 'I move' and then yield to Senator Xenophon, who asks a sensible question, Senator Milne—who has come into this debate at various intervals and said, 'Why aren't the coalition moving amendments?' and 'Why aren't there sensible questions being asked?'—comes in and goes off on a tangential rant! Is it any wonder then, Senator Milne, that I am going to respond? I am going to respond because you came in here and asked us to respond and talk about a whole range of other issues which were not the subjects of the debate.
I can see that Senator Milne is frustrated by this debate, as are the Greens. It is evident that, whenever Senator Milne sits down in her chair, she wants to bounce up and answer the questions instead of allowing the minister to do so. She is desperate to be the minister responding to questions about this package because, of course, she was so integral to its development. Senator Milne was sitting around the multi-party committee table designing and developing the package. Whilst Senator Wong, admirably, knows much of the detail of this package and handles it with aplomb much of the time in the chamber, Senator Milne is nonetheless the frustrated author of this package, and she wants to get to her feet herself and make sure that she has her say.
Senator Milne has the gall to attack the opposition for a lack of amendments, even though our position on this legislation has been crystal clear: we oppose it. My question for Senator Milne is: where are the Greens amendments? If you want to question where the opposition amendments are, I ask you: where are the amendments from the Australian Greens? There is not a single one.
Senator Milne, do you contend that this package is perfect? Do you contend that it meets all of the designs that the Australian Greens would have liked to have had in it? Does it achieve everything that you chest-thumped over during the CPRS debates—all the things which Senator Wong well knows the Australian Greens needed to have in the CPRS but which you do not have in this package? You did not have the courage then to talk to Senator Wong, and you were not willing to negotiate with Senator Wong at all when she was the minister on the CPRS package, so, now that you have negotiated something, it does not achieve half of the things you talked about during those CPRS debates. It does not go anywhere close to achieving the things that you wanted at that time.
So, even though you love to come in here and attack me, attack changes in opposition positions and attack a lack of opposition amendments, the Greens are just as guilty as any other political party in this place for the way that the politics of this matter have been handled over many years. You come in here and talk about the electricity generation industry and how they are treated and say, 'The Greens took this matter seriously during the joint select committee, and we looked at closely.' But I have here in my hand the Greens contribution to the joint select committee's report. It is a sole paragraph which does not mention the electricity generation sector once! That is the Greens consideration of the matter, so do not come in here moralising, hectoring and lecturing all of us. We have heard plenty of that from the Greens time and time again.
I appreciate the frustration of the Greens. It is sometimes hard to tell, looking across the chamber, who is the biggest captive of whom. The Greens have had to sell out a lot of the things they demanded in order to be able to sign up to this package, and in doing so they have not even said to the government, 'We reserve the right to move a few amendments of the things that we didn't get during a multi-party committee stage.' You could have done that, Senator Milne. You could have said, 'We'll support this, but, at least in the chamber debate, we'll move some of the amendments of the things that we have said are important.' But, no—you backed down on all of that and did a fully fixed deal with the government. Senator Xenophon could move the most worthy and most sensible amendment in the world, and the Greens would not consider supporting it. It could be an amendment that most aligned with the things that the Greens used to talk about during the CPRS debates, and still they would not support it.
Do not come in here, Senator Milne, and lecture everybody else about things, because frankly the position the Greens have taken on this debate sells out many of the things that you used to talk about in the debates on the CPRS. You know it and Senator Wong knows it, because she had to sit through all of those debates and hear you speaking about them time and time again. Whilst often on this side we talk about the government's having to yield to the Greens to put this package up and so back down on Prime Minister Gillard's promise at the last election that there would be no carbon tax, it is equally true that the government have managed to persuade the Greens into supporting a package which was not previously in line with Greens policy and does not go towards achieving it.
We have been having a sensible discussion in this chamber at times this morning about the impacts on and the concerns of the electricity generation industry. Senator Xenophon has been asking some questions on that, I have been asking some questions on that and other senators have touched on different aspects of that. You have not been in here asking any of those questions, Senator Milne, so do not come in and lecture us now. I note that there was a question from Senator Xenophon before you spoke, Senator Milne. It went to the issue of what the target is, and I think the minister was about to get to her feet to answer when you, Senator Milne, interrupted the chain of the debate. I invite the minister, if she remembers Senator Xenophon's question, to answer it. If she does not remember it, I am sure Senator Xenophon will happily ask it again before we proceed the amendments.
Thank you for the reminder, Senator Birmingham, because I had actually forgotten, but I have now recalled it—I think I have recalled it; let me have a go and we will see. If I do not do well enough I am sure you will come back at me. I think the question was whether the government remains committed to the five per cent target—the relation between that and the bill, essentially. The government's unconditional commitment—and the opposition's, as I understand it—remains the five per cent, and the fixed-price period and the default caps in the legislation are consistent with that unconditional target.
I will follow on from that, but can I first say this. Senator Milne and I have our disagreements but I think we have a pretty constructive working relationship. We might have fundamental policy disagreements. I do not think it is fair to criticise Senator Milne for a lack of participation in the debate, which I do not think is quite right anyway when she participated very fully in the committee—a committee that I could not get on because of the way the numbers were. I do not think anyone in this chamber, whatever side of the debate they are on, could ever accuse Senator Milne of not participating fully and very vigorously in this debate. That is a fair thing to say which I think is a pretty apolitical statement.
Given the minister's answer, what I am trying to work out is this: five per cent was the target under the CPRS—a five per cent reduction of greenhouse gases by 2020 based on 2000 levels. The minister has said, as I understand it, that this bill does not resile from the government's position of a five per cent reduction in greenhouse gases based on the 2000 levels. Does it mean that this bill, in its form, in the scheme design that has been presented to us, could lead to a greater reduction than five per cent on 2000 levels by 2020? I am just trying to see whether this bill is an improvement on the CPRS in terms of its scheme design.
Yes, the target by 2020 can be altered, and I think the government has previously set out some policy parameters which would be relevant to that. The bill also sets up the Climate Change Authority, which would provide advice on that. My recollection is that any revision to caps would be by way of disallowable instrument, so obviously there is also parliamentary oversight of the executive's decision, which would be taken subject to the advice of the authority.
Can I just indicate as a matter of courtesy to the chamber: at some point before question time I will not be in the chamber and Senator Lundy will be handling the bill for a short period. So, if there are specific questions of me, perhaps we should deal with them and then it might be sensible for Senator Birmingham to move his amendment, which would enable at least that discussion to occur in my absence which might be fairer on Senator Lundy and the chamber.
I thank the minister for indicating that she may have to go elsewhere briefly before question time. In relation to the structure of the scheme, it means that the target of five per cent is flexible. It is a disallowable instrument. I am not taking issue with that in itself, but what I am trying to understand is this: if that is what the government is saying, that you could vary the target—presumably upwards not downwards, I take it; you cannot vary the target downwards by disallowable instrument, can you?
It is bad to use 'up' and 'down' when you are talking about reductions, but the unconditional five per cent is the position. I think you mean: could it become less ambitious than that?
I just want to finalise this particular issue. I know that is the government's position, but does it mean that another government with a different position could simply say, by disallowable instrument, 'We will reduce the target to one per cent,' or 'to zero per cent'? It is not a cute question; it is not a trick question. I just want to establish that. Assuming that the answer to that is no, the other issue in terms of increasing the target is: if the government says that one of the reasons we need to have this scheme in place is to give certainty, won't there be a degree of uncertainty if the target can be moved by way of a disallowable instrument? That is the flipside of that question.
I am conscious that Senator Milne was also seeking the call. In relation to the uncertainty issue, caps are set in advance of five years, so that does provide a significant amount of certainty. In relation to the first question, of whether a different government could set a less ambitious target—
yes, it could. This is assuming that there is no other amendment to the legislation. Obviously, if there is an amendment to the legislation we are in a different world—correct? Sorry?
I will try. As I understand it, Senator Xenophon is asking whether any future government, were this legislation able to be passed, could alter the five per cent target to be less ambitious—to make it a three per cent target, for example. My response to that is: assuming no other change to the legislation—because obviously a subsequent parliament can change legislation—yes it could, but that would also be a disallowable instrument.
I want to talk to this issue of targets for a couple of moments because it is a critical component of this legislation and one of the key differences in the design of this scheme compared with the Carbon Pollution Reduction Scheme. What has been set up here, which goes to Senator Xenophon's question about what a future government might do, is a climate change authority which is independent and which, if you look at the requirements in the legislation for what the climate authority has to do, has to take into account the latest science. It has to take into account how effectively the current legislation, whatever it might be at that time, is working, in terms of reducing greenhouse gas emissions. And it has to set out a trajectory to meet the scientific imperative. It has to have regard to the government's target, and the target that has been set down by this government is an 80 per cent reduction by 2050. The Climate Change Authority, having regard to the latest science and the government's 80 per cent trajectory, will set down, for the first five years of the scheme, emissions reductions per year that are consistent with that objective. In my view, a climate change authority that is taking into account the latest science will be setting down a trajectory that is much more ambitious than would constitute a five per cent reduction. In fact, we would hope that this climate authority, taking into account the latest science and what needs to happen by 2050, will be setting a quite substantial trajectory in those five years.
How it will then work is the Climate Change Authority will provide its report to the government of the day about what that trajectory will be and what those emission reductions will be per year. Having taken that into account, the government of the day will then make a recommendation to the parliament by way of a regulation—and that regulation will be disallowable. In the event that the parliament of the day determines that it does not support whatever the recommendation of the government it will disallow that instrument. Obviously, what Australians would not want to see is a situation where there was no reduction target in place in such a circumstance—and not only people concerned about climate change; all those businesses that have established on the basis of ongoing reductions and have a business plan associated with that want to have some certainty. So the default position in the event that a parliament disallowed is for a five per cent equivalent reduction target expressed in tonnage. So whatever the Climate Change Authority recommends goes to government and the government then puts to the parliament a regulation and the regulation can be disallowed.
There is also the scenario—which I think is the one Senator Xenophon may have been referring to—where a climate change authority may make a recommendation to a government and a government may decide that it is not prepared to give effect to that climate authority recommendation. The recommendation will become public and it will be up to the government of the day to justify to the community and to the parliament why it is making a recommendation that is contrary to what the Climate Change Authority may have recommended. It will be up to the government of the day to make that case.
There is no way that you could see a professional climate change authority, based on its mandate to take account of the latest science, would be recommending a trajectory on a yearly basis that would take us back to a lesser target than the ones that it had recommended previously, because the ones it had recommended previously go to that trajectory. So it would only be in a situation where a Climate Change Authority's recommendation to a government was rejected by that government and that government decided to put in a regulation that gave effect to a much lesser ambition in terms of greenhouse gas reduction. It would then depend on the parliament and the make-up of the parliament as to whether that instrument was disallowed. In the event that it was disallowed, because it absolutely undermined the emission reduction effort, the five per cent would kick in.
Unless a particular party which was a climate denier and did not support emissions reduction had control of both houses of parliament, it is difficult to see a scenario where such a low ambition represented in a regulation would actually be accepted by a parliament and not disallowed. So I think Senator Xenophon's concern about the reduction is not something that we could see expressed—certainly for the foreseeable future, because of the make-up of the parliament.
But in terms of the question as to whether the trajectory can be higher than the five per cent, it absolutely can be higher than the five per cent, because that climate authority is tasked with recognising the climate change impact, and we would certainly be expecting that the trajectory of emission reduction in the first five years and then annually thereafter would be consistent with the kind of reduction you need to get to, at least 80 per cent by 2050. Of course, the Greens would be hoping that it would get to net carbon zero by 2050 but, nevertheless, you could expect that trajectory to become steeper.
Having said that, giving the climate authority that independent power is critically important. That is why the Greens are saying that we need to put in place the Climate Change Authority and let the Climate Change Authority understand its mandate, as presented in the legislation, to take into account the latest science and to have regard to all of the other matters in its mandate and then set the trajectories. That is why we do not want meddling with the independence of the climate authority. In the same way, we have said the ARENA and the Clean Energy Finance Corporation need to be independent of the politics, they need to be overseen, they need to have the decisions implemented by people who have expertise and who are there for their expertise, and they need to deliver on their mandate, rather than to respond to which electorate may need investment at a certain time on the basis of what polling results might show.
I think the real strengths of this package is the establishment of a climate change authority to take this into account; the connection with the Productivity Commission in terms of the Productivity Commission working with the climate authority to assess over time whether the compensation to industry is such that it compromises our ability to meet the targets; and that we have an independent authority set up, with ARENA, and an independent authority, with the Clean Energy Finance Corporation. These are the real strengths of this particular package, because for the first time you get expertise-based leadership—based on science, economics or investment and finance expertise.
Senator Xenophon, I understand where you are coming from, and I can assure you that the Greens thought very carefully about the extent to which a future government might be able to try to undermine what is the strength of this package—and that is upward flexibility in terms of ambition—and I am satisfied that the checks and balances are there.
I thank Senator Milne and note the comprehensive answer that she just gave. It probably does go at least partly to the point I was making before that Senator Milne is desperate to be the minister in this debate. In this instance she gave a good and detailed answer about how the Climate Change Authority will work and about how the targets may be set. I note that she confirmed, in response to Senator Xenophon, the possibility, and it may well be a remote possibility, that the Climate Change Authority could recommend a target below the five per cent target that has been agreed to by all sides. It is an interesting revelation. It is quite possibly a revelation that is not likely to ever come into play, but it is an interesting revelation nonetheless.
I particularly note the comments that Senator Milne made at the end of her contribution, when she said that the Greens gave great consideration to the capacity of a future government to change the targets and whether that was a risk within the establishment of the Climate Change Authority, and that they were confident that the way the legislation was structured and the way the authority was structured minimised that risk. That is an area that should be of some concern to individuals. It is all very well to have expert authorities, but we all know that expert authorities do not always get it right. We know there are often circumstances where people expect the government of the day to act. It does seem as if the Greens have deliberately gone about setting up a structure, and have elicited the support of the Labor Party in setting up a structure, that does its best to remove the capacity of the parliament to chart the nation's own destiny, or certainly the capacity of the government. The parliament in the end obviously has the capacity to amend legislation if the support is there in both chambers, but for governments of the day it is noteworthy that the Greens sound like they take it as a source of pride that they have managed to get the Labor Party to structure this in a way that removes the capacity of future governments to make decisions that they think are necessary without significant change to this legislation.
I have a question that relates to this area of targets that we have been examining, which Senator Xenophon put us on. I will ask it and, if the advisors are able to give the parliamentary secretary a clear answer, that is fine. If they are not, I am happy for it to be taken on notice pending the debate resuming later in the day and Senator Wong's return. It relates to clause 17(2). There was a discussion with Senator Joyce late last week about clause 18(2), which is the annual reduction of 12 million units that occurs if there is not agreement to the regulations that are tabled in the parliament. The minister's response then was that the 12 million unit reduction was to achieve a steady reduction towards the five per cent target. In clause 17(2) the default mechanism formula for the initial year is described as total emission numbers for the eligible financial year beginning on 1 July 2012 minus 38 million units. My question is about how that 38 million unit figure is derived. I note that it is not evenly divisible by the 12 million units, so it is not simply a figure that maintains the flat trajectory that the 12 million units per annum does. How did the government come up with the 38 million units and why is that figure seemingly unrelated to the annual step down beyond the fixed price period of 12 million units?
Senator Birmingham, I think you already know where this is but I refer you to chapter 2 in the explanatory memorandum, which runs through the detail of the pollution caps. With respect to the question you just asked, the 38 million reflects the reduction between year 1 and year 4 of the carbon emissions to reach the target. Hopefully that answers your question.
Perhaps the advisors can arm Senator Wong with the detailed answer later on. I understand the 12 million is a per annum figure that gives an even trajectory towards the five per cent target. That was the argument Senator Wong put in Thursday's debate. Given that 38 million units obviously is not three lots of 12 million or two lots of 12 million, is it a higher target that has to be met in the initial fixed-price years of the scheme compared with what will be required in the non-fixed-price years of the scheme? If they are able to provide a clear answer there, that would be appreciated.
Whilst I am on my feet I will move, on behalf of the opposition and Senator Xenophon, the amendment on sheet 7168:
(1) Clause 2, page 1 (line 16) to page 5 (line 3), omit the clause, substitute:
(1) The provisions of this Act commence on a date to be fixed by Proclamation.
(2) A Proclamation for the purposes of subsection (1) must not be made until after elections have been held for the 44th Parliament and the Parliament has met.
This is a very simple amendment. It is an amendment the opposition moved in the other place. It is an amendment that both Senator Xenophon and the opposition have circulated in relation to this debate. It is simple because what it seeks to achieve is simply to defer the proclamation of this legislation until the meeting of the next parliament. It seeks to ensure that the Australian people have a say on whether this package of bills comes into law or not. This amendment is put forward mindful of the fact that the Australian public were so willingly, deliberately and clearly misled at the last election. We have heard the words time and time again but, as I said in my speech in the second reading debate, just because the reminder of the Prime Minister's commitment at the last election that there would be no carbon tax under a government she led has been repeated time and time again in this place, in the other place and in public debate does not make the Prime Minister's breach of faith, her total backflip on that promise, any less significant.
Senator Evans wants me to put my heart into it. Senator Evans, you and every other senator on that side of the chamber and every Labor member of the House of Representatives went to the last election backing the Prime Minister and her promise. It is possible that Mr Rudd was not backing the Prime Minister as enthusiastically as everybody else, but the rest of you went to the election backing the Prime Minister, who stared down the lens of the camera and uttered those words: 'There will be no carbon tax under a government I lead.' That is the promise she made. She went to the election on it and she managed to cobble together a government in the weeks after the election, having only just limped over the line.
Those opposite all know that if she had not made that promise, if she had not betrayed the Australian people, if she had not told what has turned out to be a mistruth during the election campaign, they probably would never have limped across the line. They would never have got those votes together. But they cobbled together a government. They did a deal with the Greens and the Prime Minister came out and said, 'Lo and behold, circumstances have changed.' The only circumstances that changed were her desire to occupy the Lodge and the threat that she may not be able to do so unless she did a deal with the Australian Greens. So in the one month we heard the Prime Minister on the one hand saying that we would not have a carbon tax, selling that to the Australian people, and then on the other hand signing a deal with the Australian Greens to say we will have a carbon tax.
This amendment seeks to right that wrong. This amendment seeks to give the Australian people a chance, a choice and an opportunity to have a say on this policy. We can go to an election and give the Labor Party the chance stand for their principles and fight for what they are now attempting to legislate. This is an invitation to the government and an opportunity to go to an election and say, 'We believe in this, we are genuine about this and we will stake our position in government on this.' That, after all, is what the Howard government did in regard to the GST package. Former Prime Minister John Howard went to an election in 1998 and gave the Australian people a choice before bringing fundamental reform into this parliament. Your government has done the exact opposite. You went to the election promising one thing and then did the exact opposite afterwards, giving the Australian people absolutely no choice whatsoever.
The lack of consistency between those two examples is seen right through every stage of the debate. I have highlighted that in this place before in relation to the committee examination of this legislation. It is like chalk and cheese. For the GST we had multiple committees undertaking multiple examinations of the legislation over a period of five months. Here we had one hastily convened committee controlled by the government and the Greens that only had a couple of weeks to examine the matter. In this chamber today we see a vastly different situation occurring. When the GST was debated in this chamber the committee stage lasted for 51 hours and 32 minutes. How much time do you think we have for the committee stage this time around? We will be lucky to have 30 hours. We will be lucky to have half the amount of time.
The government proclaims the carbon tax is a bigger reform than the new tax system was. They claim this is even bigger. They certainly acknowledge it has economy-wide implications, and yet they will not provide the same amount of time for its debate in this place. At every opportunity they run away from debate. They run away from the opportunity for the Australian people to have their say. This amendment is their opportunity to have a say, the government's opportunity to put it to the Australian people and to have the courage of their convictions, to let their government rise or fall on this matter.
As a co-mover of this amendment, I come to this from a different perspective. I do not believe that the Prime Minister lied to Australians when she said just before the last election that there would not be a carbon tax under a government that she led, but I believe that she changed her mind. She changed her position because of the exigencies of minority government. There is a fundamental principle here: if you tell the people on such a key issue, an issue that could have been an election changer, that you are not going to do a particular thing but then change your mind after the election for whatever reason, I believe it is incumbent on you to go back to the Australian people on that issue. I supported a plebiscite. I do not support the view that there was some deliberate lying or misleading of the electorate. But it was a fundamental mistake for the government to say one thing before the election and then after the election, because of different circumstances, say, 'We will plough ahead with this regardless.' That is dangerous. That is fundamentally wrong. It is an issue that can only be resolved if this package of legislation is passed subject to the safety valve of it not being given effect until after the next election.
My position is consistent. Thirteen years ago in the South Australian parliament I voted against the then Olsen Liberal government's moves to privatise electricity assets. They went to the people at the 1997 state election in South Australia saying they would not privatise the assets. They changed their mind a few months later, and my position is the same. It is entirely consistent with the view I have had for virtually all of the time I have been involved in parliaments. Do not promise not to do something and then change your mind without going back to the people first. That is why there is such deep cynicism about politicians and the political process—because they change their minds without going back to the people to get the necessary mandate in order to deal with an issue that will be fundamental to this economy. It is a fundamental issue of democracy. We should not proceed further with this bill unless we have this amendment in place.