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Labour: No ETS deal without proper policy analysis

Charles Chauvel
Climate Change spokesperson

19 August 2009 Media Statement

Labour: No ETS deal without proper policy analysis and advice

The Labour Party says it would not be able to agree to any emissions trading scheme deal with National without proper financial and policy analysis from Treasury and other ministries says opposition climate change spokesperson Charles Chauvel.

“The Prime Minister and Minister of Finance will also have to quickly become deeply engaged on the issue, which (by the standard of the analysis released yesterday) appears not to be the case.

“A Cabinet paper and Treasury analyses on emissions trading policy, released yesterday, display a shocking lack of quality.

“High quality, independent analysis is needed on which to base any decisions on the shape of a final emissions trading scheme, one of the most important economic and financial issues the Government will face this term.

“The Cabinet and Treasury papers indicate the Prime Minister and Minister of Finance each have only one hand on the wheel,” Charles Chauvel said.

“Policy proposals appear to be under consideration behind the scenes which could cost taxpayers billions extra in subsidies to polluters. Investment in forestry – the first and biggest opportunity to cut greenhouse gas emissions – would be removed by imposing a price cap on carbon and continuing it for years.

“Treasury and Cabinet papers are silent on the huge impacts of these suggestions which will off forestry investment for years.

“The fact that Treasury has not provided full fiscal and opportunity analysis, other than at the highest level, after 14 years of advising on this issue, is very worrying.

“Treasury and Cabinet papers totally ignore the emissions reduction opportunities in forestry, other than at the highest level, and other sectors. They even use inconsistent carbon prices throughout.

“The outcome of this poor quality analysis and decision making could cost households and businesses, other than heavy polluters, billions of dollars over the next decade.

“We are already paying for 90% of their pollution under the current law. Will this now go to 95% or 100%, for years longer?”

“For example, the subsidy to agriculture alone between 2008 and 2012 will be about $900 million (at $30/tonne of CO2), compared to that which the sector would pay if charges were set in proportion to its emissions. If the carbon price goes to $50 per tonne, the value would be about $1.5 billion. Yet there is talk of giving agriculture an even softer ride, rather than sending the price signal to start using current technologies – and start planting trees – to reduce emissions now.

“We are concerned to know if the Government, in it is deep desire to ‘harmonise’ with Australia, is considering additional multi-billion dollar assistance to big polluters over the next 20 years.

“For example, under existing ETS law, taxpayers will subsidise 90% of heavy emitters’ bills, for polluting above 2005 levels, for the four years a sector is in the scheme. This is then reduced by 8% a year until it phases out about 2030.

“If we adopt the Australian assistance reduction rate of 3.6% a year, I’m advised this could cost an extra $1 billion a year or more.

“Yet Treasury, the Minister of Finance and Prime Minister are silent on these massive costs (unless for some reason they are in the sections of the Cabinet paper which have been excluded from public release).

“It’s an appalling position from which to try and make long-term policy which could grossly affect our trade and tourism prospects,” Mr Chauvel says.

“Labour, like the Government, wants a broad based agreement on an emissions trading scheme. That is in the national interest. It will give business certainty while also helping effectively manage climate change and protect our trading future.

“However, it would be irresponsible for Labour to enter into a bi-party deal without decent, credible, independent financial analysis. We could not sign up to a polluters’ charter, Charles Chauvel said.


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