Australia faces opposition to carbon trade law

CANBERRA, March 10 – Australia’s government faced new objections to its pioneering carbon trading scheme from both ends of the political opposition on Tuesday, just as it unveiled the legislation it hopes to pass by the middle of this year.

The draft laws contained few changes to what could be the most sweeping cap-and-trade system in the world, including a commitment to cut emissions by 5 per cent of 2000 levels by 2020.

Instead, lawmakers from the Greens and the conservative opposition banded together to establish a two-month inquiry, saying they will not support the scheme without major changes.

Greens politicians want tougher targets and conservative opposition parties want the scheme delayed to soften the blow for businesses that will shoulder higher costs during a recession.

”This scheme, in its current form, cannot get through,” Opposition spokesman Andrew Robb told reporters.

Under the current legislation, the scheme will be the world’s broadest, covering 75 per cent of emissions. Around 1,000 of the largest polluters, from transport operators and aluminium makers to gas producers and refineries, will have to pay to pollute.

Some of the permits, each representing a tonne of carbon dioxide, will be auctioned and some given away depending on the industry. But the overall aim is to push companies to pollute less over time or face ever rising costs.

Australia’s centre-left Labor government needs the support of the opposition, or the five Greens and two independents, to pass the carbon trade laws in the Senate, and the new review raises the risk of a significant set-back just as the US government tries to galvanise support in the fight against climate change.

”The negotiation process is going to be fairly convoluted given there are three main parties to participate and, of course, they are pulling in different directions,” said ANZ Senior Economist Julie Toth.

”I think the actual trading system will go ahead in some form but I wouldn’t be at all surprised to see it delayed by six to 12 months.”

Releasing the package of six bills, Climate Change Minister Penny Wong said she was open to talks with opposition and Greens Senators to ensure the laws, which will be introduced to parliament in May, are passed by the end of June in time to meet the government’s schedule to start trade from July 2010.

The legislation was largely unchanged from a policy White Paper released three months ago and the draft laws will be open for public comment until April 14.

”The Government does not have the majority in the Senate and we will talk to senators from all sides,” Wong told reporters. ”The question that will confront some senators is, ’do you throw away something because you’d rather have everything?’”

Wong said the government wanted the laws passed before a UN-backed meeting in the Danish capital in December that will bring together nearly 190 nations to try to seal a broader global framework to cut greenhouse gas emissions.

The Greens want the government to make strong emissions cuts of around 25 per cent by 2020, but the conservative opposition, which holds the biggest voting bloc in the Senate, wants delays and more compensation for big business.

The government has said it will back a 15 per cent cut if other rich nations commit to similar cuts at Copenhagen.

Australia, the world’s biggest coal exporter and a growing supplier of LNG, accounts for 1.5 percent of global carbon emissions but is one of the highest per-capita polluters, with 80 percent of electricity from coal-fired power stations.

The Australian emissions trade scheme will see a large portion of its carbon credits auctioned, unlike EU emissions allowances which are given out free.

Australia’s major exporting polluters, including iron ore and aluminium producers BHP Billiton, Alcoa and Rio Tinto, and liquefied natural gas (LNG) producers Chevron and Woodside Petroleum, will get significant exemptions for their emissions.

Scam is right. Cap and Trade is a big part how Obama plans to claim he’s balanced the budget by 2012. All it is, is a way for the government to levy more taxes on gasoline and electricity. And ofcourse enrich those who will act as the broker for the credits. Read this and you get a taste of what cap and trade is all about. More taxes.

President Obama’s budget numbers depend heavily on revenues from a proposed cap-and-trade program for reducing carbon dioxide emissions. Under the plan, these revenues will come at the cost of higher energy prices, with some states being affected far more than others.

The cap-and-trade program does not yet exist: it will need to be established in future legislation. But the inclusion of future revenues in the budget, and a promise to pursue necessary legislation, is the strongest commitment yet that the administration will follow through with one of Obama’s campaign promises and establish a cap-and-trade system for carbon dioxide emissions.

Under such a system, the government sets an annual cap on carbon dioxide emissions—the budget calls for a cap of 14 percent below 2005 emissions levels by 2020, and 83 percent below 2005 levels by 2050. The government then issues a set number of credits for the total emissions allowed under that cap. Under Obama’s plan, those credits won’t be given away, as they were in the initial version of a cap-and-trade system employed in Europe. Instead, the credits will be auctioned off, and that money will be the source of government revenue. Polluters will be required to buy enough credits at the initial auction to cover their carbon dioxide emissions, or acquire more by trading with others at a later stage. Alternatively, they can reduce their emissions by investing in more efficient technologies. Either way, these costs will result in higher energy prices.

The budget includes $78.7 billion in projected revenues from the cap-and-trade system in its first year, 2012, and $525.7 billion total by 2019. According to Point Carbon, an energy-market analysis firm based in Olso, Norway, these numbers are based on the assumption that credits for a ton of carbon dioxide will sell for $13.70 in 2012 and $16.50 by 2020. These estimates are in line with carbon credits issued in Europe, says Veronique Bugnion, a managing director at Point Carbon. The 2012 price for carbon dioxide emissions will increase gasoline prices by 6 percent compared to current prices, she says. Average electricity prices will increase by 6.8 percent—perhaps more. According to calculations by Gilbert Metcalf, an economist at Tufts University, the average electricity price increase would be 9.7 percent by 2012 and 11.7 percent by 2020.

What’s more, the impact of the cap-and-trade system will vary by state. Electricity prices will rise more in states that rely heavily on coal, such as North Dakota, than in states that rely on sources of electricity that produce little carbon dioxide. According to Bugnion, prices could increase by 19.2 percent in North Dakota by 2012 but only 2.6 percent in Washington State, which relies heavily on hydroelectric power, over the same period.

To offset some of these price increases, the budget includes provisions to use some of the auction revenue for tax relief. From 2012 to 2019, $15 billion a year from the carbon-emissions program will be used to pay for “vital investments in a clean energy future”—funding for clean energy technology. The remaining money from the auction is expected to be just enough to pay for a tax credit that is an extension of the “Making Work Pay” credit—a $400-a-person credit included in the recently passed stimulus bill.

But at the core of cap and trade’s failure is the impossibility of verifying reductions in carbon to the point that they can then be commodified. New Zealand’s Bryan Leyland put it best:

“So, to my knowledge, carbon trading is the only commodity trading where it is impossible to establish with reasonable accuracy how much is being bought and sold, where the commodity that is traded is invisible and can perform no useful purpose for the purchaser, and where both parties benefit if the quantities traded have been exaggerated. … It is, therefore, an open invitation to fraud and that is exactly what is happening all over the world.”

And it just gets better from there. Not only does cap and trade not reduce carbon, it will also wreck the U.S. economy. Complying with Kyoto mandates would cost as much as 4% of GDP. Worse, even if Kyoto’s targets were met the Earth’s surface temperature would be reduced by an imperceptible 0.14°F per 50 years.

So to recap: cap and trade does not reduce carbon, it harms the economy, and it would do nothing to affect global temperatures.

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