Australia’s Clean Energy Future Bill, which includes the carbon tax, will only cover approximately 60% of CO2 emissions because transport, synthetic gases and agriculture will all be exempt from the levy, set to be introduced on July 1 next year.
Grants will also be provided to certain carbon intensive industries under government schemes such as the Steel Transformation Plan (STP), which awarded A$100 million ($ 100 million) to Australia’s ninth biggest industrial polluter, BlueScope Steel, this week.
Claire Maries, a lead campaigner for the Australian Conservation Foundation (ACF), said exemptions and grants being provided to big polluters are excessive.
Maries said Australia’s biggest polluters are receiving between 65% – 94.5% of their permits for free.
“In some cases, particularly with the steel sector, the grants provided are all that is propping up the industry,” said Maries.
“Some targeted assistance is warranted, but it must be targeted at the industries that actually need it to cover trade exposure, not applied using the scattergun approach we’ve currently got,” she added.
Major companies in the mining, steel and energy sectors have spoken out over fears a carbon tax will hit their bottom lines, but analysis conducted by ACF contradicts these claims.
Will McGoldrick, of the Climate Institute, said the number of free permits going to industry is excessive and economically inefficient, but it does not necessarily undermine the environmental effectiveness of the scheme in reducing emissions.
The government’s scheme will progress to a cap-and-trade system in 2015, guaranteeing a certain level of emission reduction.
McGoldrick said: “By issuing free permits instead of an outright exemption, the incentive for businesses to reduce emissions remains because there is nothing stopping these businesses from selling the free permit at full market rate.
“If a large aluminium producer is given a free permit worth A$23 per tonne, but can reduce emissions for A$20 per tonne, then they have an incentive to invest in these emission reduction activities and sell the carbon permit, making a A$3 per tonne profit along the way.”
However, Wayne Gumley, a senior business law and taxation lecturer at Monash University, said the provision for permit trading in the scheme may be exploited by the fossil fuel industry.
“There will be plenty of room for manipulation,” said Gumley, “particularly after 2015, when it becomes a permit trading scheme.
“The creation of a new property right regulated as a financial product, with 13 or so separate pieces of legislation to make it work is an accounting and legal minefield – by far the most efficient option would have been tighter regulation of greenhouse emissions, or a simple carbon tax.”
Gumley said it appears nonsensical to impose a requirement aimed at reducing emissions, only to give free permits to a vast proportion of the worst offenders; though, to pass the bill through parliament, a trade-off with the fossil fuel industry was a must.
McGoldrick said in the first year, the government will spend 45% of the total value of the potential revenue collected under the carbon price scheme on allocation of free permits, equivalent to A$12 billion.
Gumley added: “It would have been better to have a simpler, more pure scheme with a much lower price but no concessions.”
Director of the Institute of Sustainability at Murdoch University, Glenn Albrecht, said the exemptions embedded in the clean energy bill are a political ruse by the government, concerned more with re-election than climate science.
Albrecht said, as such, the entire objective of the scheme (reducing carbon emissions) is defeated.
Yet Albrecht’s vision for a carbon tax would not focus on big business anyhow, as he said the way to make such a tax effective in reducing emissions is to place the levy on consumer goods in to reshape the entire consumer market.
“I reject the idea that there are big polluters that must bear the brunt of the tax, as we all consume the products that their materials and energy embody,” said Albrecht.
“Ralph Nader famously called aluminium ‘congealed electricity’ and I see imported cars or laptops as congealed greenhouse gas emissions (CGGEs).
“Consumers ought to pay for their CGGEs and big consumers should pay more than small consumers. It will be this kind of tax that will actually see major changes in the way people purchase and consume and will generate real and substantial reductions in greenhouse gas pollution,” Albrecht said.
