Flying solo into the storm

According to key industry figures, introducing a carbon trading system with set minimum emission reductions and no international agreements will create significant problems for Australian business.

According to key industry figures, introducing a carbon trading system with set minimum emission reductions and no international agreements will create significant problems for Australian business.

“Introducing the scheme unilaterally and at a time when our economy is trying to stare down a global economic recession is too high a risk,” Australian Chamber of Commerce and Industry chief executive Peter Anderson said.

“The announcement is high-risk for an economy structured like ours.”

Prime Minister Kevin Rudd this week introduced the Federal Government’s long awaited White Paper, outlining its Carbon Pollution Reduction Scheme (CPRS).

The scheme will see Australia set a guaranteed target of 5% emission reductions by the year 2020.

The target could rise to 15% if other nations adopt similar schemes and targets.

Without these agreed upon international targets the CPRS amounts to little more than a tax on Australian business, Mineral Council of Australia (MCA) chief executive Mitch Hooke told MINING DAILY.

“If carbon costs are higher than the costs of what the industry can offset then the CPRS becomes a tax,” Hooke said.

“The Australian industry will be facing what our competitors won’t be facing, which is no carbon costs at all.

“The CPRS just becomes raising revenue because the industry cannot adjust and it is a price that our competitors don’t face.”

Australian Industry Group chief executive Heather Ridout agrees the conditions of the CPRS are made far more difficult by the economic crisis, calling its proposed targets, “a stretch.”

“The challenges for business will be exacerbated by the fact they will have to be met at a time when businesses are being called on to manage their way through an unparalleled global economic crisis and unprecedented domestic economic uncertainty,” she said.

“The planned CPRS remains a big ask and will have a big impact on the Australian economy.”

According to Hooke, Australia essentially going ahead alone means emissions heavy industries will be forced to face major changes in the future, both domestically and internationally.

“It’s a big call on adjustment, and it’s a big call in terms of a loss of international competitiveness if we get too far in front of what the rest of the world is doing,” he said.

The Australian Industry Group’s Dr. Peter Burn agrees that resources and minerals in Australia could be exposed by other countries not adopting similar carbon schemes.

“In the near term, 10 to 13 years, most of the countries that produce these goods and services won’t be subject to the carbon constraint,” he told MINING DAILY.

“The demand for products will be less than they would otherwise have been because they’ll be more expensive to make and sell.

“Australian producers will be squeezed because they won’t be able to pass their costs on.”

An alternative approach to carbon trading that would better suit Australian industries would be a gradual move towards to full auctioning, Hooke said.

“All trade-exposed firms would be included and required to purchase an increasing proportion of permits as other nations adopt binding emissions reductions under a global protocol and as new low emissions technologies are developed in the market.

“If Australia is to have an environmentally effective and economically efficient emissions trading scheme, it should be aligned with progress in the development of a global protocol, low emissions technologies and emissions trading schemes in other countries.

“This is a simple but significant change to the Federal Government’s White Paper to achieve the dual goals of improving the environment without undermining the economy.”

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.