Clean Energy Amendments & Ozone Protection and Synthetic Greenhouse Gas Amendments

Mr FLETCHER (Bradfield) (21:45): I am very pleased to follow my friend and colleague the member for Riverina to add to the weight of concern which he has highlighted to the House about the ill-advised measures contained in the Clean Energy Amendment (International Emissions Trading and Other Measures) Bill 2012 and related bills—yet another package of legislation among the enormous amount which seems to continually descend on this House on the topic of climate change and this government's responses to it.

The key impacts of the bills the House is debating this evening are to establish arrangements to link Australia's carbon tax system to the European emissions trading scheme and to remove the floor price, which the government had hitherto committed to maintaining for a period of time.

In the time available to me, I would like to make three points. The first is that we are seeing embodied in this legislation a capricious reversal in policy which will inevitably damage economic and investor confidence. The second point is that it is a truly bad idea to hand significant control of a major domestic tax and a major set of domestic regulatory arrangements to a foreign jurisdiction—in this case the European Union. Thirdly, I wanted to highlight the question of the potential budgetary impacts of the measures contained in the package of bills before the House this evening.

Let me turn firstly to the proposition that what we are seeing in this package of legislation is a capricious reversal in policy. As colleagues on this side of the House have pointed out on a number of occasions in this debate, the Labor government affirmed its commitment to the floor price as a crucial component of its carbon tax legislative package on at least 11 occasions. Let me just highlight a couple of those reaffirmations of the importance of the floor price for the elucidation of the House. On 13 September 2011, the Prime Minister had this to say here in the House of Representatives:

The bill also provides for a price cap and a price floor to apply for the first three years of the floating price period. This will limit market volatility and reduce risk for businesses as they gain experience in having the market set the carbon price.

That was the Prime Minister on 13 September 2011. It might be said that 13 September 2011 is some time in the past—it is more than a year in the past. That is true. But that of itself, in my view, would not be an adequate explanation for the capricious reversal in government policy, although that argument might be made. But that argument could not be made in respect of a statement made by the relevant minister, Minister Combet, just a couple of months ago on 21 August 2012. When being interviewed by David Speers on Sky News, he had this to say:

We have legislated the floor price; that's quite well known. I am discussing with the European Union the linkage of our schemes. It is an issue that's in those discussions, but we are committed to the arrangements we have legislated.

David Speers asked him:

At $15?

Minister Combet responded:

That's the floor price.

This statement was made by the minister only a week prior to his announcement that the floor price was being dumped. Could there be a more compelling demonstration of this capricious reversal of policy? This is a policy that senior representatives of this government, from the Prime Minister down, have repeatedly affirmed that they were committed to, a policy in reliance on which Australian businesses and investors had structured their affairs—and yet, at very short notice, there has now been a capricious reversal in this policy. We are seeing a major structural change in the policy architecture to do with the carbon tax, and that comes not 10 years, not five years, not even one year after the introduction of a carbon tax but a mere three months after the carbon tax came into operation. The government is back in this House proposing legislative change to fundamentally vary a core element of this legislative scheme. It is hard to overstate the impact of this on certainty, on business confidence and on the capacity of investors to structure their affairs in reliance on commitments government has made. It sends a truly disastrous signal to anybody who is trying to do business, anybody who is trying to increase prosperity, anybody who is trying to employ Australians under this government.

It is not the case that, since the government implemented the carbon tax, this is the one lapse in an otherwise honourable and immaculate record of consistency. Far from it: this is one of eight changes which have been made to the arrangements since the government implemented its policy. Barely a moment after implementing its policy, it started making change after change after change. As members on this side have reminded the House this evening, those changes have included bailing out major companies, using taxpayers' funds, on the eve of the carbon tax being introduced, including funding to Energy Brix and Alcoa; halting the clean technology investment grants just weeks after the grants were first announced; and abandoning the Contract for Closure program to shut down power stations, meaning that the carbon tax will need to increase if the same emissions reductions are to be achieved. Those are but three of the eight changes which have been made since the carbon tax was implemented only a few short months ago. It is no exaggeration to describe this as an extraordinarily chaotic approach to public administration. These circumstances make it remarkably difficult for businesses to carry on, when they have very little confidence that what is the law today, under this government, is going to be maintained as the law tomorrow.

Let me turn now to a proposition which ought to be obvious, which ought to be self-evident: that it is an extraordinarily bad idea to hand significant control of a major domestic policy instrument, the carbon tax, to regulators in another jurisdiction. That is a remarkably bad idea. Let us look at some of the things that have been said by parties which have made submissions to the recent—regrettably truncated—House of Representatives Standing Committee on Economics inquiry into the provisions of the bills before the House this evening. This is what the Cement Industry Federation had to say:

Australia must initially ensure it will not be disaffected by individual distortionary measures that are captured within the EU ETS. This analysis should occur before legislation is introduced to link the Australian and European Union schemes.

The federation went on to say:

The CIF is concerned whether the Australian Government will have sufficient negotiating power with the EU on future scheme changes (particularly after the two way link) given the relative size of the two schemes. If Australia were to lose sovereignty on scheme design and administration, this would represent an unacceptable risk for Australian liable entities.

That is what one major industry peak body has had to say about these changes. Here is what another body had to say. The Australian Industry Greenhouse Network, an organisation whose members account for over 90 per cent of Australia's mining, manufacturing and energy transformation emissions, said:

Concerns with respect to international competitiveness have not reduced as a result of the decision to legislate and operationalise a unilateral link with the EU ETS. In the transition period to a broader international trading system with potentially all major economies, competitiveness must be preserved.

Australian industry has concerns as to how will Australian competitiveness be 'preserved' if the EU continues to use policy drivers to change their scheme. The EU will do that in their interest which will not necessarily be in ours. It will simply drive up our costs and should be addressed in both the bilateral agreement and the regulation.

What sensible observer could disagree with the plain common sense in the observations of these two significant industry peak bodies? In handing to officials and politicians of a jurisdiction with a different set of interests to those of Australia and its citizens and its businesses we have put our economic prospects, our economic interests and, I dare say, our environmental interests at significant risk because we are in essence abdicating control and decision making to officials of a different jurisdiction who will naturally and inevitably give first priority to the considerations of the interests of that jurisdiction rather than the interests of Australia.

Prominent economist and former Reserve Bank director Warwick McKibbin wrote about this policy proposal in the Financial Review on 30 August and he noted that it was equivalent to the notion that we should make the unilateral decision to abandon Australia's currency and join the eurozone—and, therefore, by implication, voluntarily put ourselves in the same position as those unfortunate nations in Europe which find themselves unable to control their own monetary systems and are left vulnerable to present economic circumstances. He made the point that it is quite extraordinary—I hasten to add that 'extraordinary' is my paraphrase of his remarks—that, at a time when Europe's economic judgement is widely questioned, the federal government of Australia is giving up the right to set its own carbon price applicable in Australia and it is handing that right to Europe, a decision which could most charitably be described as curious. Again, they are my words interpreting his observations. I think, more frankly, it could be described as bizarre.

Let me turn to the question of the likely impact of these changes on the federal government's budgetary position. This was an issue that was explored at some length by my parliamentary colleagues, my coalition colleagues, who are members of the House of Representatives Economics Committee which inquired into this matter. They asked representatives of the Treasury about the impact of removing the floor price and what that will do to the budgetary position. Witnesses from Treasury told the parliament's Economics Committee that the 2012-13 budget is based upon an assumption of a price of $29 per tonne. They went on to say that this equates to a set of tax revenues over the four years to 2015-16 of $24.4 billion.

When Treasury witnesses were questioned by my good friend the member for Moncrieff about the impact if the price per tonne were to fall, they were unable to disclose the precise impacts and they noted that the government had not published any estimates. I should not wonder that it has not published any estimates of the impact of a material fall in the price, bearing in mind that the price in Europe is materially below the kinds of numbers that we have just heard, that are assumed in the Australian budget. A concern which pretty rapidly emerges when you consider these matters is that the budgetary position could be under substantial pressure because the per tonne rate which has been assumed in the budget is wildly above what is likely to be maintained upon the move to this alignment with the European Union's emissions trading scheme.

This is a government which is making it up as it goes along. It is an extraordinary admission of incompetence to be seeking to be making fundamental changes only three months after the carbon tax has been introduced. It creates great uncertainty for business and it is yet another instance of this government not being on top of the job.