Penny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Hansard source

First, obviously the dairy industry in Australia, given the competition with New Zealand, particularly with Fonterra, is an important issue. The New Zealand parliament has in fact already passed its emissions trading scheme, although it is not in operation as yet, pending some legislative committee review, from memory. But I would say that both prime ministers have indicated in previous discussions—and also I have had discussions with my New Zealand counterpart—the possibilities of harmonising the Australian and New Zealand schemes in the future. So that is a matter where the two governments are considering those possibilities. A lot more work would need to be done, because obviously Australia does not actually have a scheme as yet, but that preliminary work is being done in order to consider that, because there would obviously be some benefits in the two markets being integrated. So that is one set of issues, and that work will continue. If we are going to harmonise, we will actually have to have our own scheme, Senator Boswell! That is a prerequisite.

You asked a question about the Productivity Commission possibilities. I am happy to provide those words again, Senator Boswell. I have provided them to the opposition formerly—yesterday. I do not know if the relevant shadow ministers have had a discussion with the National Party, but these words were provided to the opposition and their representatives as part of the negotiations and they were also read into Hansard.

What the government agreed to do in relation to the Productivity Commission is extend the capacity which already exists under the CPRS white paper if an industry which does not qualify for industry assistance—I should take a step back. In terms of assistance, the first point for any industry, if they believe that they should and can qualify for assistance under the CPRS, is to make application accordingly and to work with the department on assessing whether or not they are sufficiently emissions intensive to qualify for assistance. I do not know if the dairy industry has formally started that process or not. If they are eligible then there are a quantity of free permits available in accordance with the government’s policies. If they are not eligible, what we did include as part of our agreement with the opposition to pass this bill was enable the existing provisions of the white paper in relation to industries who do not qualify for assistance to extend that to industries impacted on by the renewable energy target. So these arrangements allow firms, including those that do not qualify for industry assistance—I perhaps erroneously suggested that this option was open only to industries that did not qualify for assistance; it is potentially open to both: industries that have assistance and those that do not. So I will read again the words I read out yesterday, Senator Boswell, that form part of the agreement with the opposition:

… the government will extend the current potential review provisions under the Carbon Pollution Reduction Scheme—as set out in the white paper at section 12.7.4—to industries potentially affected by the renewable energy target once the renewable energy target has commenced. These arrangements allow firms, including those that do not qualify for industry assistance, to make representation to the government to request that the government commission the Productivity Commission to undertake an assessment of the renewable energy target’s impact on their industry. The government will not necessarily refer all requests to the commission; it will take into account the nature and details of the request.

The Productivity Commission will make an assessment of this industry’s circumstances, taking into account the range of factors unrelated to the scheme that will also affect the profitability of firms and industries, such as exchange rate movements, capital and labour costs, and commodity price movements. It will assess whether the introduction of the renewable energy target—including the assistance provided under the renewable energy target and Climate Change Action Fund assistance programs—will substantially adversely affect the industry in which the firm is located within the next five years, result in carbon leakage and be likely to result in the premature closure of an industry that would be likely to be competitive in a carbon constrained world. Taking into account all of the above, the commission will make recommendations to the government about whether it should provide additional support to this industry from the Climate Change Action Fund and the appropriate mechanism for that support.

That is what was read into Hansard yesterday and provided to the opposition yesterday as well. I think that answers your questions in relation to the Productivity Commission issue.

I would also make the point that the government is opposing this amendment, Senator Boswell, and there are a range of reasons for that. The first is that there is not an activity definition for food processing and, as you know, food processing would encompass a diverse range of businesses which would have very different levels of exposure to changes in electricity prices, whether from the renewable energy target or the Carbon Pollution Reduction Scheme. This is precisely why the government has chosen to go down the route of providing assistance on the basis of activities rather than industries. ‘Industries’ can be very broad notions that cover a whole range of activities, some of which are very energy intensive and some of which are not; therefore, if you provided assistance on the basis of industries, you would get a less fair form of assistance, a less fair architectural assistance. We welcome the fact that the opposition has recognised this by, in this bill, essentially endorsing the architecture for assistance under the CPRS which is based on activities. We think it is important that assistance be fair.

It would be unfair to provide more assistance to a firm that was, arguably, engaged in food processing but had a lower exposure to electricity price increases than another firm that was not doing food processing but had higher energy use. You would essentially be saying, ‘We’ll give more to one sector because it’s called food processing, even if they have less liability.’ We do not think that is a sensible or fair way to provide assistance. We think the fairest way is to do what we have done, which is to assess the potential cost impact and the exposure to cost increases by looking at the energy intensity of activities. On that basis, you provide assistance across the economy fairly. So the government is not minded to support this amendment.

In addition, neither the renewable energy target for which you voted when in government, Senator Boswell, nor, for example, the Victorian renewable energy target provided any exemptions to the food-processing sector. The John Howard renewable energy target, which was introduced under the previous government, did not provide an exemption for this sector.

In addition to the Productivity Commission possibility, as I said, food-processing businesses may qualify for assistance under the Climate Change Action Fund to implement, for example, low-emission technologies, energy efficiency technologies. I note there is some capacity in some of these industries to abate, and in fact a number of industries and firms have been very responsible in seeking, ahead of the introduction of the Carbon Pollution Reduction Scheme and the renewable energy target, to reduce their liability by becoming more energy efficient. For example, I know from my private discussions with Murray Goulburn that they have significantly reduced their emissions over their, I think, eight sites over the last few years. Fonterra, which the senator referred to, has also cut its energy use by around 15 per cent since 2002-03. Obviously, reducing energy use reduces your exposure to cost increases flowing from these bills. So, Senator, I appreciate where you are coming from, but we do not think this is the fairest or most sensible way to provide assistance to that industry or to any other industry.