Greg Hunt (Flinders, Liberal Party, Minister for the Environment) Share this | Hansard source

I am delighted to answer the questions from the member for Port Adelaide. It is good to see him on his feet. He has not actually asked a question in 9½ months in question time, but I have not embarrassed him in public about that fact.

Let me deal with part 2 of the question first in relation to the Carbon Farming Initiative extensions. The answer is very simple: we are using the lowest-cost purchasing model. That is the way to purchase abatement, and we are shamelessly, clearly, openly, purchasing abatement on the lowest cost. That was what we said we would do on 2 February 2010 and we have never deviated from that model. We have continued that through to this particular approach, and the answer is very simple: the clean energy regulator will produce a weighted average price for abatement and the way that purchasing will occur will be up the cost curve. So, as volume needs to be purchased, each successive unit will be acquired and, then at such time as the regulator has acquired all of the units which it needs to acquire, we will see a final price and that weighted average price is released. We are not differentiating by sectors and we have always said we would not do that.

As an example, if you have $100 to acquire units, you could acquire on a differentiated basis two units at $50, because you wanted to support a particular sector but you would only get two tonnes of abatement. Or you could acquire 20 units at $5 per tonne, if that were the cheapest. We will without doubt, without question, be purchasing the lowest-cost abatement. That was always our intention and that is how you can get the maximum efficient result for Australia. I think that that is very important.

Secondly, it is important to put this in the context that the world has two primary approaches. One is a carbon tax based system which is, for example, the European system—although they have high caps relative to actual production. They have more than 100 sectors carved out as being trade exposed, and many have said that the net contribution to emissions reduction is likely to be minimal, if not negligible, between now and 2020 such as the head of Point Carbon's research desk—Point Carbon being, arguably, the leading trading house in relation to the European scheme.

The alternative scheme, the clean development mechanism, produces abatement as an offset, which is then purchased on a lowest-cost basis. At the moment there are about 1.4 million tonnes of genuine abatement credits which are available internationally. The evidence is clear that the clean development mechanism, which is a model for what we are doing here, has produced genuine, low-cost abatement.

The second half of the question was in relation to the Emissions Reduction Fund. I will point the member to the work of Energetics. I will also point the member to the fact that the white paper sets out expectations. The modelling on which that was based is also set out in terms of the budget. The budget sets out a projected cash flow.

The full $2.55 billion will be available from day one. We have changed. We have made a policy change here: instead of the $2.55 billion being phased over four years, it has all been brought forward and is all available from day one. A projected cash flow has been set out, which is based on, obviously, the analysis of the department. What we cannot do of course is release the projected price, because that is commercial-in-confidence and would prejudice a Commonwealth tender. That work has been done. It has been done not just by us in terms of analysis; it has also been done by firms such as Energetics. What does it mean? We will achieve our targets and will achieve them easily. Most significantly, we will achieve them without a carbon tax.

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