Ross Garnaut warned in his draft report that “intense lobbying” could lead to “serious distortion of policy-making processes”. But this lobbying will extend from smokestack industries and miners, through driving organisations and the pensioner lobby, to millionaire wind-farm financiers, solar panel-makers and insurance companies.
After weeks of escalating complaints about its emissions trading scheme, the Rudd Government has agreed to work with the major polluting industries to find a fairer way of distributing compensation in the early years of the scheme. The Government had been warned that its proposed formula might seriously harm the economy.
An informal paper circulated by the Department of Resources ahead of a meeting between the Resources Minister and industry peak bodies and chief executives “canvasses alternative approaches” for compensating high-polluting industries that are unable to pass on the cost of emissions permits.
While the Rudd Government is unlikely to start playing down the threat of global warming, it will want to dampen expectations about how quickly and deeply Australia should try to cut its carbon emissions, at least until the rest of the world is on board.
Environmentalists point to the high voter concern about global warming and support for programs that will deliver abatement. However, recent polling shows that while 72 per cent of people supported the introduction of an emissions trading scheme, half of those polled admit they do not know what emissions trading is.
The Rudd Government faces a dilemma with no escape: it must either alienate the green lobby and climate-change believers to whom it has pandered, or proceed without sufficient support from corporate Australia in the teeth of warnings about corporate financial risk. The second option is unthinkable.
The Business Council of Australia’s warning about the economic costs of the Rudd Government’s climate change strategy provoked a strong response yesterday from BP chairman Gerry Hueston. He said that arguments about trade-exposed industries was obscuring the need for Australia to quickly introduce an emissions trading scheme.
The Rudd Government’s response to climate change now becomes a diabolical challenge. It is trapped between its political pledge to price carbon to alter investment flows and this business analysis showing that under Rudd’s model, a range of Australian-based companies will struggle to stay viable, facing hefty profit declines, a crippling of new investment and significant carbon leakage offshore at Australia’s economic cost.
The Business Council of Australia’s research paper, which was released earlier today, found that under the Rudd Government’s proposed emissions trading model, three of the 14 businesses studied would have to shut down immediately when the scheme began operation, and that four more would have to review their operations on the back of profit downgrades between 32 and 63 per cent. It also found that the proposed scheme was a threat to future investment.