Ron Boswell (Queensland, National Party) Share this | Hansard source

Could I associate myself with Senator Arbib’s remarks. Today I want to bring to the Senate further feedback on the government’s proposed emissions trading scheme. In particular I wish to canvass response from the rural sector. Even though agriculture will not form part of the scheme until 2013, the industry will be hit hard from the very beginning. The government’s scheme will lead directly to increased cost of inputs such as electricity, fuel and fertiliser. If our international competitors do not have a similar scheme in place, we stand to lose markets and viability across agriculture.

The Land reported last week:

Current ABARE chief, Phillip Glyde, said whether or not agriculture was shielded or not from being part of a scheme, the impacts on the sector through the use of emission intensive inputs would be significant.

The Australian Food and Grocery Council stated:

It is industry’s view that any emissions trading scheme which does not include international emitters represents a real threat to the packaged food and grocery industry.

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Obligations imposed up and downstream of the farm gate mean that carbon costs will be passed through the food supply chain to consumers ... This will undoubtedly result in significantly higher food, beverage and grocery prices for Australian produced products.

Former ABARE chief Dr Brian Fisher is reported as saying:

... the government should focus its domestic climate change policy on adaptation because it will be “years” before there is an international agreement on emissions trading between the 190 countries involved in the ongoing negotiations.

With eight plants located through southern Australia, Murray Goulburn Co-Operative processes over 35 per cent of the nation’s milk supply into quality products which are sold on both domestic and export markets. Murray Goulburn directly employs approximately 2½ thousand people, mostly in regional Australia. The co-op is wholly owned by dairy farmers.

The size and ownership structure of Murray Goulburn means that it plays a vital role in the success of the Australian dairy industry. The capacity of Murray Goulburn to extract returns from international and domestic markets establishes the farm gate returns of the majority of Australian dairy farmers, including those that do not supply milk to MGC.

Furthermore, all of MGC’s milk is produced and processed in regional Australia, and any impact on MGC has a major and direct follow-up effect on the regional economy. Murray Goulburn believes that the inherent risks of emissions trading outlined by Professor Garnaut have not been addressed in the proposed CPRS and that changes to the proposal must be made to address inequities that would lead to unfair burdens on some sectors and to poor environmental outcomes.

The Australian dairy industry is highly trade exposed. For example, as the largest processor of milk in Australia, MGC could not pass on the cost of a CPRS to consumers. Rather, it is Australian farmers such as the owners of Murray Goulburn who would bear the brunt of the cost, leading to a reduction of overall industry competitiveness and to carbon leakage to other less affected dairy industries.

Australia’s major competitors in dairy markets will not have comparable schemes in the short to medium term. The proposal to exempt imports from any exposure to the scheme provides overseas companies with a direct competitive advantage. Most dairy lines can be freely imported, and there are already significant imports of dairy products from New Zealand.

Murray Goulburn says that the proposed CPRS will arbitrarily penalise producers in industries that undertake significant processing in Australia or who operate in high-value, low-margin business. When applying the green paper to the real world situation—Australia’s $9 billion dairy industry—Murray Goulburn found many inequities and data gaps.

I now turn to the submission of Rockdale Beef, which details the cost it would face under the proposed carbon scheme. Rockdale Beef is one of Australia’s largest feedlots and beef abattoirs, exporting to many countries and engaging more than 500 people in regional New South Wales. Rockdale processes over 55,000 tonnes of beef per annum and is estimated to generate $2 billion of economic activity in the regional area. The abattoir processes 180,000 cattle per annum and the feedlot has a peak capacity of 53,000. Approximately 70 per cent of the product is exported.

Rockdale Beef has been involved in developing an integrated biomass project on site. The facility would use manure and liquid waste in a combination of technologies to produce electricity, heating and cooling and fertiliser. Rockdale recognises that these projects need to have the potential to be cost-effective in their own right and not rely on funding to make them economic. It says that the real issue facing it is a changing economic environment which challenges the feasibility of agriculture in Australia and discourages large-scale investment of this type. As with coal based power plants, these facilities expect an operational life of over 30 years, which represents a significant commitment from the owning corporation in terms of capital and risk.

The uncertainty in the agriculture sector and unclear issues surrounding the CPRS have hindered the very investment that the government wishes to encourage. Rockdale Beef also produces approximately 13,000 kilotonnes of high-grade tallow per annum and sells this product to a number of pet food and cosmetic users. Rockdale has developed a project to produce biodiesel directly from tallow during processing. Tallow biodiesel is recognised as having significant advantages over fossil fuel from an environmental perspective, without impacting on the food chain. Yet the proposed CPRS appears to disadvantage biodiesel from a sales point of view.

Then we turn to the cost of livestock emissions themselves. At 100 grams a day, over two years each animal would be responsible for 1.679 tonnes of CO2. There is very little opportunity for the farmers to offset these emissions and the cost will be passed forward through the supply chain to the abattoir. With an intake of 180 head per annum, Rockdale would need to purchase $6 million worth of permits per annum—$33.60 per head—and would need to pass the cost onto the customers. Furthermore, at a stocking rate of 50,000 head, the feedlot would need an additional $840,000 per annum to offset its emissions due to on-site ruminant activity. As Rockdale make clear in their submission:

This is an untenable situation as Rockdale’s export competitiveness will be lost immediately and/or the farmers growing cattle for Rockdale will be forced out of business.

They estimate that the impact of the CPRS in 2010 would see the abattoir’s electricity, gas, fuel and water costs rise by $520,000, which will need to be passed on to export customers. They make the point that they should be an emission intensive trade exposed industry, but will not be eligible until 2015. Rockdale will be exposed to price rises from 2010 to 2015 without assistance. Cost increases will reduce Rockdale Beef’s export competitiveness with non-participating countries. Because the current economic situation is not conducive to large-scale investment, the planned biomass facility will delay the biodiesel plant. Opportunities for generating offsets from these innovations have been virtually lost. The cost of direct emissions from liquid waste management will be $90,000 in 2015 based on a $20 per tonne of CO2 cost.

These scenarios are of serious concern to Rockdale Beef and its foreign owners. Agricultural investments are usually expected to generate a five per cent return. By 2015 the direct and indirect cost increases from the CPRS will result in the Rockdale project becoming unviable in Australia unless there are significant shifts in international demand. This is their foreboding conclusion:

As Australia beats the path forward, other countries without such policies become more attractive for agribusiness investments. This is unfortunate, given the potential for this business and other agribusinesses, to make the required savings through new technologies. Given a choice of re-investing to stand still, or moving an investment to another country and increase earnings, foreign owned businesses such as Rockdale may find themselves moved to more financially attractive countries. The challenge for Australia is to generate carbon reductions without compromising its future economic sustainability.

The NFF are very concerned that the rural sector’s financial capacity to engage in a majority permit auction will be restricted and place financial stress on the sector, from which many may not be able to recover. The NFF strongly disagrees with the comment in the green paper that:

... firms will generally pass the carbon cost through to consumers for emissions intensive goods.

Agriculture’s capacity to pass on costs is notoriously poor, meaning that many farmers will be forced to absorb the vast majority of the cost of these permits. The NFF also takes issue with policies that provide incentives for forestry which have the potential to lead to significant perverse outcomes in areas such as water run-off, groundwater hydrology on neighbouring farms, biodiversity, social structures and Australia’s ability to continue to make a contribution to global food and fibre supplies.

The dependence of many rural communities on a single agricultural industry makes the economic risks of a CPRS higher for regional Australia than for urban Australia. Using Australian Bureau of Agriculture and Resource Economics data, approximately one-third of total broadacre farming input costs are energy dependent. This includes direct costs such as fuel and electricity, as well as other energy-dependent farm costs such as freight, fertilisers and crop contracting. This figure increases to a substantial 45 per cent of input costs for cropping operations.

The NFF also recognises that a CPRS will inevitably lead to increased costs throughout the complete agricultural supply chain—costs that in most cases will be borne by farmers in the form of lower prices for their produce. Farmers’ returns in horticulture are already suffering from a flood of cheap imports used in Homebrand products on supermarket shelves. Icons like Golden Circle and SPC Ardmona are under great strain trying to compete as it is. Golden Circle advised growers just a couple of days ago that they will take one-third less pineapples than last year. Imports of processed tomato products rose 19 per cent last year alone. In 2005-06, imports of prepared or preserved vegetables, fruit and nuts amounted to $837 million. As the carbon scheme reduces the competitiveness and profits of Australian produce, farmers will simply stop farming. Then our food security will suffer.

The NFF makes the crucial point that in the context of the current global shortage of food, Australian farmers must not be forced into a position where the only way that they can meet their liabilities under a CPRS is by reducing production. The Australian Chamber of Commerce and Industry has cautioned that smaller businesses will incur the impact of rising energy costs with little or no capacity to pass these on. There are no no-cost options for a scheme that will have no measurable effect on future climate.

Faced with all these threats to jobs and rising living costs for working families under the government’s Carbon Pollution Reduction Scheme, what does the union movement do? What action are the unions taking to ensure the jobs and incomes of their members? They want a right to strike on climate change issues! ACTU President Sharan Burrow called last week for 18 new enterprise bargaining laws to include the rights of workers to bargain over climate change solutions. Instead of defending workers’ jobs, the ACTU is out to abolish them. If workers insist on carbon reduction in their workplaces or enterprises, they could well vote their jobs out of existence because of the higher costs of production. It defies belief that in this time of financial crisis, the Rudd government is going to throw our major industries to the high-emitting wolves of international trade.