Today the Government released its Green Paper on a Carbon Pollution Reduction Scheme, in which it outlined the plans and structure for an Emissions Trading Scheme here in Australia. OTR have prepared this special edition of OTR covering the political highlights of today’s announcement. Have your say on the impact of the ETS on you, click here to vote on our online poll.

The Scheme
Overall there were no big surprises from today’s announcement; a cap and trade scheme with protections for certain industry sectors and consumers. There are a number of question marks however – the cap in the first five years of the scheme won’t be set until 2010 and the medium term target for emissions reduction by 2020 will not be known until later this year.

The revenue raising aspect of the Carbon Pollution Reduction Scheme is also unknown, but there are a few potential bites of the cherry – revenue from the Permit Auction and potentially additional GST revenue from the transactions on the secondary trading market.

So, the scheme will work like this:
• A cap on the total amount of carbon pollution allowed in the economy by covered sectors – 75% of emissions from about 1000 organisations;
• The Government will issue permits up to the annual cap each year;
• Industries will need to acquire a 'permit' for every tonne of greenhouse gas they emit in a year that is then surrended at the end of the year;
• The quantity of carbon pollution produced by each firm will be monitored;
• At the end of each year, each liable firm will need to surrender a permit to cover every tonne of carbon pollution they produced; and
• Firms compete in the market (either via an auction or through a secondary trading market) to purchase the number of permits they need.

The Pitch
They say music soothes the savage beast and the dulcet tones of Climate Change Minister Penny Wong at the National Press Club address were certainly reassuring. No lectern slamming rhetoric about the dangers of climate change or exhorting the Australian people to action, rather the Minister addressed the nation in the kind of tones one uses when dealing with frightened animals. No scaring the horses here.

The story on the Government’s response to climate change is Penny Wong’s to tell. Rudd himself has been distinctly hands off from this Government-defining policy, a signal of his confidence in the capable Wong. While Rudd himself has been quiet - the climate change story is very much an extension on the main themes used to sell Kevin07 in last year’s election:
• Economically responsible;
• Protecting families and low income earners (interestingly, pensioners and carers are now mentioned separately); and
• Preparing Australia for the future.

Labor is painting itself as the party of the future, the party prepared to make the hard decisions and tackle the big challenges in the national interest. The Australian economy must be transformed from high pollution to low pollution. Wong’s speech also emphasised pollution over emissions. Emissions don’t sound have the really nasty sounding ring that pollution does, which explains why to help communicate and sell its message the Government has moved away from ‘emissions trading scheme’ to ‘carbon pollution reduction scheme’.

While explaining there is no painless, cost free or simple way to tackle climate change, Wong also moved to reassure various sectors that the Government is listening and will continue consultation on the scheme design. She also outlined that the increased costs to petrol prices will be offset by a ‘cent for cent’ excise offset and that low income earners, families, pensioners and carers will be compensated for cost of living increases flowing from the scheme through various measures in the tax and welfare payments systems.

The Opposition
The Opposition left their response until late in the day, possibly due to only being briefed on the scheme for half an hour at 11:30am this morning. When he did finally speak, Opposition Leader Brendan Nelson slammed the proposed scheme saying that the costs will fall unfairly on the shoulders of middle Australia.

Nelson cautiously welcomed the decision to cut the fuel excise over the first three years of the scheme but said that voters couldn’t trust Kevin Rudd not to abolish the excise cut after 2013. The Opposition Leader once again questioned the start date for the scheme – saying that 2010 was too early and would put the Australian economy in a difficult position and threaten jobs in the coal industry.

However, the signs of a confused Coalition response are already starting to appear with Nelson now saying 2011 would be the earliest possible start date – despite previously flagging 2012 as the marker. Malcolm Turnbull and Shadow Environment Minister Greg Hunt will undoubtedly clarify the position shortly…

The US Position
With the current focus on climate change it is worth having a look across the Pacific at the views of the candidates in the US Presidential race, one of whom will have control of the ‘world’s biggest polluter’ after the election.

Climate change policy will be reformed in the US whatever the outcome of the election, with both candidates agreeing that climate change is real.

The policy approaches to climate change have a number of similarities, but there are key differences in the approach to emissions reduction targets and the use of nuclear energy.

Obama has stated that his market-based cap-and-trade system would aim to reduce carbon emissions to 80% below 1990 levels by 2050, whereas McCain is promising a 60% cut from 1990 levels by 2050.

McCain has said that if he is elected he will build 45 new reactors by the year 2030, with the ultimate goal of 100 new plants. In contrast, Obama is on the record as stating that he is “not a nuclear energy proponent”.

To read more on the two different policy platforms:
Obama - http://www.barackobama.com/issues/energy/
McCain - http://www.johnmccain.com/Informing/Issues/da151a1c-733a-4dc1-9cd3-f9ca5caba1de.htm

The Reactions:
The Environmental Groups:

“The government has missed a real opportunity to fund things that are a real solution, like public transport and vehicle efficiency. So we would have liked to see the money go towards more long-term lasting solutions rather than a short-term cut in excise."
- Australian Conservation Foundation (ACF) climate change program manager Tony Mohr told Sky News this morning, reacting to reports this morning that the Government will lower the excise on petrol.

"Australia's overall poor result is embarrassing, and highlights the government has some tough decisions ahead of it if it wants to raise Australia's overall climate change performance,"
- from World Wildlife Fund (WWF) Australia chief executive Greg Bourne.

The WWF and insurer Allianz also released a well-timed report by consultancy Ecofys showing Australia has the largest per-capita emissions in the world - mainly due to our reliance on coal.

The Business Groups:

"For companies that are exposed to international competition where the prices set for their product are in world markets, and we're adding a big impost in the Australian market to introduce climate change abatement policies ... those activities will just go offshore and we'll destroy investment industries in Australia." -Australian Industry Group CEO, Heather Ridout commenting on the impact an Emissions Trading Scheme will have on big business, who she argues should be compensated to remain competitive.

“Farmers have maintained that we are willing to play our part in meeting Australia’s, and the world’s, climate change challenge. Today’s Green Paper provides the opportunity for Government and farmers to work together to ensure this can be achieved in an equitable, measured and sustainable basis.”
-National Farmers Federation President David Crombie seeing today’s Green Paper as a prudent way forward.

“The Government has shown it wishes to take a lead position on emissions trading by pursuing the inclusion of carbon embedded in wood products through the development of international rules. The forest industry is looking into the future, towards an inevitable international carbon trading scheme. In the international carbon market it will be vital that Australia has the maximum amount of carbon stocks available for trade and that means fully recognising all aspects of forestry.”
- National Association of Forest Industries CEO Allan Hansard, pleased to be named as the only carbon positive industry.

“The green paper provides the basis for ongoing discussions with the government, but the devil remains in the detail in terms of whether the options put forward will achieve the twin objectives of sustaining growth while meaningfully reducing emissions.”
- Business Council of Australia President, Greig Gailey.

The Unions:

"I don't know that we will see huge losses of jobs. On the contrary, you are going to make aluminium somewhere, you are going to make steel somewhere. Whatever the industry, we know that there is a real chance that if we can be ahead of the market internationally, if we can retro-fit and restructure our plant, look at the redesign of work, then we may very well expand some of those industries, not see them decline."
-Australian Council of Trade Unions President, Sharon Burrows


“The Rudd Government appears to have accepted the reality that the Australian economy is based on coal. The Prime Minister has joined a long line of eminent thinkers...who all believe that low emission technology must shape our energy future. A decision to invest $5 billion, will allow Australia to continue its coal exports, not just of export quality black coal but the technology that will make it an appropriate power source into the future. We are on the eve of historic announcement that will shape a new future for Australia. These are nation-building moments. Clean energy will mean better jobs, economic growth and profits."
-CFMEU Mining and Energy Union National President, Tony Maher.


The Consumer Groups:

"We're always very concerned about the additional cost to motorists. This, I think, achieves the goal of making sure motorists are in (the emissions scheme) but also their costs are reduced because fuel is such an intricate part of the economy."
- The NRMA likes the proposal to compensate motorists by cutting fuel excise as a step in bringing in an emissions trading scheme. President Alan Evans supports what he describes as a balance between cutting greenhouse gases and protecting motorists.

“While everyone will have to bear the costs of responding to global warming some groups, including those who rent and can’t make the necessary investments to improve efficiency, will need help.”
-CHOICE Director of policy & campaigns, Gordon Renouf.
CHOICE released an Energy and Equity report with ACOSS and ACF back in April and take the view initiatives are necessary to protect those on low incomes, disadvantaged communities and the rental sector. They also argue any costs passed on by business to consumers must be transparent to ensure there is no price gouging.