On October 18 this year, the Coalition called for changes to the proposed CPRS Bill. They continue to advocate an intensity-based cap and trade approach to the electricity sector, stating that this will more than halve the initial increase in electricity prices and reduce the economic costs of achieving emissions cuts.
The fact that the Coalition has made this step suggests that an agreement with the Government on the CPRS may now be more likely, either before or after the United Nations Copenhagen Conference in December 2009.
The Coalition's proposed amendments
The key amendments put forward by the Coalition to the Governments CPRS and the commitments that will be sought by the Coalition are as follows:
Trade Exposed Industries
- Amend the CPRS to provide a single level of assistance for emissions intensive trade exposed (EITE) industries at 94.5% until 2015 and 90% thereafter
- Lower the threshold for assistance from the CPRS proposal of 1000 tonnes of CO2 per $1M of revenue to 850 tonnes of CO2 per $1M
- Continue to provide assistance to Australian EITE industries at 90% until 80% of their international competitors have also implemented carbon abatement measures
- Include primary food processing such a dairy and meat in the EITE scheme
- Allow industries that include a series of sequential or parallel production processes to have these assessed as a single activity in determining assistance.
- Permanently exclude agricultural emissions from the CPRS
- Obtain Government agreement to introduction of an agricultural offset scheme in line with similar offset schemes to be introduced in comparable economies such as the US and EU.
Coal Mine Emissions
- Exclude coal mine fugitive emissions from the CPRS
- Provide the Minister with authority to use regulation to control fugitive emissions with the objective of achieving a 30% reduction by 2025 as technology and international best practice allow.
Lower Electricity Prices
- The Coalition will continue to advocate an intensity-based cap and trade model fro generators. This delivers the same emissions cuts as the CPRS but with a much smaller increase in electricity prices
- This would greatly reduce the burden on small and mid-sized businesses
- Under the CPRS retail electricity prices will rise by close to 20% in the first 2 years. Under an intensity approach, retail electricity prices would rise by less than 5% in the first 2 years
- If the Government continues to refuse to consider the intensity model, the Coalition will negotiate for an alternative approach to cushion near-term electricity price increases for small businesses.
Compensation for Electricity Generators
- Coal-fired generators must be better compensated for loss of value they experience from the CPRS, to ensure security of electricity supply and enable them to transition to lower emission energy sources
- The CPRS offers coal-fired generators 130 million permits over five years worth $3.6 billion. The Coalition makes the point that three respected private sector analysts estimate their losses at $9 - $11 billion
- Assistance should be increased to 390 million permits over 15 years (or about $10 billion). Assistance should be allocated to all generators in proportion to the losses they suffer
- In the absence of access to the Governments' confidential Morgan Stanley report, this represents the Coalition's best estimate of appropriate generator compensation given the available data.
Energy Efficiency and Voluntary Action
- The Coalition will negotiate for a national 'white certificate' energy efficiency scheme so households and businesses earn credits for efficiency measures, and contribute to reducing national emissions
- Likewise, the Coalition supports creation of a voluntary offset market in advance of the introduction of the CPRS, and amending the CPRS to ensure voluntary abatement leads to a lower national level of emissions.
The Coalition has stated that it will negotiate the above matters with the Government in good faith, and in the expectation that the proposed emissions trading scheme can be improved to deliver the same environmental benefits with less severe economic costs.
The Government's Second Reading Speech
In the second reading speech, the Government states that there is no need to wait until after Copenhagen to introduce the CPRS Bill, as there is nothing in the Bill which makes it contingent on Copenhagen outcomes. It is in Australia's interests to show up at the negotiating table with a plan to deliver our targets, as "the world is watching".
The Government's view is that coming to Copenhagen with the CPRS legislation passed means that our chances of playing a constructive role in negotiations is maximised, and it provides certainty that the targets we sign up for internationally will be achieved at the lowest possible overall cost.
To major developing countries, it would send the signal that Australia is serious about delivering the emissions reductions to which we have committed – and therefore encourage action from them.
The Government states that the CPRS has been designed to be sufficiently flexible to accommodate the range of possible outcomes from Copenhagen, so important details like scheme caps will not be set until after Copenhagen.
The Government states that it is pleasing that the Coalition has now finally come forward with proposals to amend the CPRS and is looking forward to negotiating in good faith with all parties.
Given that there has been some discussion about including additional offsets in the CPRS, the Government has said that it is important to keep in mind the following points:
- Offsets should only be available for sectors that are outside the CPRS. There would be double counting if offsets are provided for abatement that would also be recognised through reductions in CPRS obligations;
- Offsets should count towards Australia's international commitments. Otherwise, Australia would need to tighten its scheme cap, with a cost to industry and consumers, or purchase Kyoto units on the international market, costing taxpayers;
- Practical measures of measurement and administration have to be considered.
The Government reintroduced the CPRS Bills into the House of Representatives on Thursday 22 October 2009. The Bills are currently being debated, with the intention that a vote will take place in the week beginning 16 November 2009. Debate in the Senate will then follow, with a vote to take place before 26 November 2009, when Parliament breaks for the summer holidays.
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