Mathias Cormann (WA, Liberal Party, Shadow Parliamentary Secretary for Health Administration) Share this | Hansard source

I invite you, Senator O’Brien, to have a very close look at what they do because they are researching some very good technology which will be very environmentally significant. Yet if this Carbon Pollution Reduction Scheme comes into play, that will be the end of it for Australia—it will be the end of it.

There are some basic principles to understand. The Europeans understand them and the Americans understand them. People keep pointing to Europe: ‘They have had an emissions trading scheme and the world has not fallen apart over there.’ Let us just start off by noting that when they introduced their emissions trading scheme they provided more permits than there were emissions at the time. That was the way Europe started off. But then let us just note that their emissions-intensive trade-exposed industries—their export industries—are 100 per cent protected. In Australia we are saying, ‘Oh, well, the LNG industry’. In the end, after a lot of public debate, the government said, ‘We will give you 60 per cent free permits, which over a period of time are going to go down.’

Some other industries were given 90 per cent free permits, but when you actually look at the way it is calculated and go through the ins and outs of it—activity based definitions and all of the bureaucratic mumbo-jumbo—this is a very complex, very bureaucratic scheme. It is very difficult to get your head around it. The bureaucracy and the red tape that is going to be built around all of this is just incredible, if this ever gets up. But the government says, ‘Ninety per cent free permits are here’, but in the end clearly we are talking about 60 or 63 per cent of permits. So there is going to be a significant cost. The government is aiming to raise $25 billion through all of this. It is a cost that has to be borne by business across Australia—a cost that is not going to be borne by competitors overseas.

Has the government actually set itself a target as to how much it will reduce global greenhouse gas emissions as a result of this measure? No, it has not. Very specifically, I asked an official from the Department of Climate Change and Water at the table at a particular Senate committee hearing, ‘Can you point me to where in any of your legislation, policy documents, green papers or white papers there is a target as to how much you want to contribute through this scheme to reduction in global greenhouse gas emission?’ There is no target. There is no target as to how much this proposed scheme for Australia will contribute to a reduction in global greenhouse gas emissions. The reason is this government knows what we know: it knows that this scheme is not going to reduce global greenhouse gas emissions, yet it is quite prepared to impose the economic cost and the sacrifice on people right across Australia. It is flying blind.

Let us just reflect on the modelling that was done by Treasury. Treasury went through this political exercise: ‘We have got to send this message out there.’ The objective of the exercise was, ‘Let’s go through some modelling so we can send a message out there that the impact is not going to be so bad. It is just going to be a small impact. You can just sort of squeeze it in—softly, softly, don’t worry, she’ll be right.’ Except that is not the case when you start scratching the surface.

We commissioned a peer review of the Treasury modelling and Dr Brian Fisher had a look at it. Dr Brian Fisher asked for access to a whole heap of information, which the government decided to keep secret—but I will get to that in a minute, because it is quite incredibly contemptuous how the Treasurer has handled successive orders of the Senate and legitimate requests by the Senate Select Committee on Fuel and Energy in relation to that information. But this is what Dr Fisher concluded in terms of the Treasury assumptions of its modelling: its international action assumptions are highly optimistic—and I think that has been widely canvassed; the emission-pricing and permit-trading assumptions bias the results toward artificially low costs of mitigation, with Treasury assumptions, ‘which virtually guarantee that the permit prices from the modelling are unrealistically low’ and the electricity sector transformation assumptions appear to underestimate significantly the cost and structural adjustment challenge of moving to a decarbonised electricity generation sector.

In fact, the Treasury modelling assumed there would be an absolute immediate transition, totally ignoring the capital intensity of power generation and completely ignoring the replacement costs and the transitional issues involved with moving from one method of power generation to another. The Treasury modelling assumed that there would be seamless transition. Anybody who knows anything about electricity and power generation knows that there is not going to be any seamless transition should this scheme come into play.