Julian McGauran (Victoria, National Party) Share this | Link to this | Hansard source

The question is that the amendment moved by Senator Milne be agreed to.

Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

Before recommencing my contribution to this debate I should very briefly acknowledge the remarks of the Minister for Defence, Senator Faulkner. They were indeed considered and thoughtful remarks and I look forward to reading the more lengthy statement when it is tabled and available in Hansard. I have two principal reasons for offering congratulations to the Minister for Defence: firstly, because of the intrinsic importance of the topic under discussion—that is, our continuing role in Afghanistan—and, secondly, because it is my view, more generally, that the more that matters are put into the public domain concerning defence outlays and expenditure and its roles the more there will be continuing public support for government activity in this area.

Returning to the topic under discussion before I was interrupted, I was developing an argument that there is huge interest in this bill. It is intrinsically different from a whole range of other legislation we have been discussing in this place for many years. The government is about reducing the level of emissions put into the atmosphere in this country and around the world. In the context of the debate, community concerns are of great consequence. I made the point that reform to date of a regulatory nature has been ad hoc. Key areas that have been attended to in the past and will be critical into the future are air, water and soil. I was about to turn to the issue of cost as part of the reform process and how this bill is centrally part of that ongoing reform process.  As I was about to say, the nub of the issue now is one of cost.

We acknowledge at the outset that the cost with climate change is indeed very significant. It is well accepted around the world that the basic policy is the polluter pays. This is a simple discipline which has its basis in the need for the cost of goods and services to fully reflect their real costs. We know that its operation is highly imperfect and that often the subsidies, real or intangible, are hidden, often deliberately so. For the consumer, most goods and services already contain some of these costs.

As the application of that discipline is gradual, it is barely noticed. The most obvious is the rapidly increasing cost of waste disposal. Even the humble car tyre incurs a cost after use. The difficulty however, is one of scale, and in the case of the scale is absolutely enormous.

Looking back some of us may remember the controversy over the introduction of lead-free petrol. It was billed as a means of clearing the atmosphere in our major cities and it was indeed, at that time, a significant cost to industry. Those costs included more sophisticated refinement of fuels, new distribution facilities and changes to the engineering of all the internal combustion engines which drive our motor vehicle fleet. The oil industry was aghast —notwithstanding the experience overseas in Europe and the United States. The motor industry complained about it too, even though they knew then that the technology existed. The consumer of course battled with the allegations of these vested interests.

In the end, we weighed up the costs and the benefits and accepted that the obvious benefits, which we currently enjoy, were worth paying for. The economy successfully absorbed the cost and now it is not even remembered. The effect is we see blue skies again in our cities. The arguments brought by the vested interests, understandable from their narrow business point of view, now seem trivial. That is exactly where we are currently on the bill before the chair. Additionally, the reform proposed is more than a simple regulatory approach focusing on specific emissions. It is a scheme which is systemic, all-embracing and integrated into the economy, consistent with the sound principle of user pays. It accepts there is strong global and domestic consensus and indeed many governments are heading right down the same track.

The real questions, as many have alluded to, are ones of timing and scheme design. With respect to timing, when there is radical change, there is never a good time—except, of course, that prevarication and procrastination, which are the key tools of the nay-sayers opposite, are simply not tolerable any longer. Even the convenient excuse of the current state of the world economy does not look much like it is going to continue holding up. The scheme design in fact recognises the need for industry and the community to adjust to the new regime. The targets set are modest—deliberately so. Equally, the pricing regime is flexible. The whole scheme is designed to establish the basics with minimal threats and then to progress over time to a more robust model. By then we will have gained our own experience and be able to learn from the experiences of others. We can come to better understand these costs, the practicalities of implementation and the need, I am sure, for ongoing research. That should include the links between carbon releases, global warming and climate change.

This evidence needs to be bolstered because the risk is, if Australia is relieved of serious drought, the matter might disappear off the radar. That is a possible result of standard, short-term thinking to which governments must not succumb, particularly in this difficult area of public policy. For some this is a brave new world. I have tried to show today that it is not. It is simply nothing more than a continuation of past policy, in a more holistic and integrated form than we have previously known and, of course, on a larger scale.

It does not preclude in any way continuing ad hoc regulatory reform of the kind I referred to earlier. In fact, I suspect some of that is going to be essential. We need to recognise a market model such as this scheme will have its own imperfections, as market models do. We do not know all the possible impacts, domestically and internationally, as our predictive capacity is somewhat limited by experience. However, the consensus around the world is that a start must be made. The time for procrastination is over, and leadership is demanded.

For my own part, the issue of most concern is the comparative disadvantage new costs might impose in the short term on our international competitiveness. We need to make sure that the developing world, as well as China and India, realise quickly that they too must invest as we propose to do. If they do not act as good citizens of the world their own environmental circumstances and their own populations will indeed mandate that they do act in such a way in due course. China, it must be said, is at least already showing some recognition of this domestically, and other external pressures will obviously shortly come to bear. So the critical matters for me are: firstly, to ensure that the scientific rigour continues to be applied to the basic propositions underpinning this scheme, simply for its own internal credibility; and secondly, to ensure that the cost structures are closely monitored so that Australian industry is allowed to adapt without losing its competitiveness. Ultimately, this model has to be self sustaining. For those who prefer procrastination, the burden will be theirs. And, may I add, it is excruciating to watch the sheer stupidity of those opposite, who after all this time and through this continuing debate still prefer not to offer any real alternatives. At least the National Party understands what straddling a barbed wire fence means. I commend the bills to the Senate.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

There you go. If ever there was a speech that said nothing and if ever there was a series of speeches that gave mission statements that meant nothing, we have it had them here from the other side today. This mob want to build a plane, a new-age aircraft, but they are going to forget to put the wings on it. They think that it will take off without wings. No-one on the other side, no-one in the Department of Climate Change and no-one at the estimates committees can even answer the question of what the questions are that have to be answered on agriculture and what the hurdles are that have to be jumped before we can tell agriculture whether we are in or out. They said, ‘We’ll give the answer in 2013 and then in 2015 we’ll implement it.’ This mob do not know. They have not considered agriculture. There is not one person on the other side who lives and/or makes a living in the bush. Not a soul. They would not know where the sun comes up in the bush if you did not point to it. This is agriculture; these blokes have not got a bloody clue, pardon my language. In the white paper, the government indicates that if the 2013 decision excludes agriculture—and bear in mind that if the Waxman bill gets through the Senate, they are excluding agriculture on the debit side—

Julian McGauran (Victoria, National Party) Share this | Link to this | Hansard source

Senator Heffernan, I just wish to interrupt you. I spend a lot of time with you on committees and I know your style very well, as this chamber does. Nevertheless, I think that you crossed the line and I ask you to withdraw.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

My apologies. I sincerely withdraw. God damn it! I apologise. In the white paper, they say—

The Acting Deputy President:

Senator Heffernan, order! I think that you crossed the line again with that previous statement. I do not think that that is parliamentary.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

All right. I withdraw that as well.

The Acting Deputy President:

Okay. Try very hard.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

My mother will be on to me next thing. Bear in mind that the government cannot even tell us what the questions are. I have asked these questions in estimates to try to get a decision on what the questions that have to be answered are. Bear in mind that if the Waxman bill gets through the US Senate, America’s farmers are going to be in on the credit side and out on the debit side, which is precisely what we should do here. But in the white paper they say, ‘If the 2013 decision excludes agriculture, mitigation measures should still be applied in agriculture which result in costs of emissions similar to those under the scheme.’ They want to have their cake and eat it, too.

The science on the future is sending a signal to the world that Mother Earth is the referee of all of this. What Senator Milne said is right: if the science is correct and consistent, there will be a billion people downstream from that watershed who will be short for water. You do not have to believe it, but you have to do something about it; you have to have a plan; you have to have a contingency for the variability and vagueness of the science. The science on the future says that in 50 years time 50 per cent of the world’s population, if we grow to nine billion, will be poor for water; there will be a billion people unable to feed themselves; 30 per cent of the productive land of Asia will go out of production; the food task will double; and, get this, 1.6 billion on the planet could be displaced.

The one thing that everyone takes for granted in this debate is the modelling on energy and the impacts on coal, gas and all the rest of it. No-one is worried about food. Everyone takes it for granted that if you go to Coles, Woolies or Aldi and you go down the right aisle you will get bread, the veggies and the meat. Let me tell you: in the future, what is in your fridge is going to be more important than what is in your garage.

I want to address two issues tonight. We need to allow science to catch up. If you have any brains, when you drive into a fog, you turn your lights on and slow down. That is what we ought to be doing. We should recognise the problem, recognise the danger, but give time for science to catch up. There is an MBD company which has had an algae proposition go through the science build stage and move to the commercialise up stage. If that comes on stream, every coal fired power station on the planet that applies that process, which downstream provides—through the CO2 extraction—zero emissions, will have a biofuel base and a feedstock for feedlots. If that happens, if we allow energy to catch up, it will completely alter the sums on global CO2 and what will happen. That is just one.

We can also go to energy through thorium. If we put the money that is going into pink batts into the development of thorium, we could bring it forward with a bit of intensive science. Australia has the world’s largest supply of thorium, a non-plutonium based next generation after uranium nuclear source. And we have the Indians out here trying to buy up our resources without telling anyone. We could have that sort of electricity generation.

We ought to let technology catch up and we ought to slow the debate down. How ridiculous is it to try and pass this legislation through this parliament before we even know how it is going to impact on farmers? They take their food for granted. But at $17 a tonne, if farmers are included, most irrigated dairy farmers are insolvent.

When bottled water, which has got less than a cent’s worth of water in it, is sold for $2.50 and milk is cheaper—when you have to get out of bed at four o’clock in the morning to milk the cow—it is stupid. It is stupid. How can you make that decision when this government does not even know what the questions which have to be answered are? But it wants to include us and give us the answer later. How ridiculous is that? Where are we going to go? Where is the food task going to be met? At $40 a tonne, 30 per cent of the production cost for beef and mutton is the tax. You are going to put us out of business.

The CSIRO is already doing work, which is included in Science of the Future, to meet the global protein task—part of the food task—with fish protein. But noone in this debate is giving serious consideration to the impact on agriculture of the legislation that is before the parliament now. In fact the government have ducked the question, because they are saying, ‘We will give you the answer in 2013.’ What they are doing is telling our farmers that, when they go to the bank to renegotiate their mortgages and the bank wants to know what their five-year plan is to service the mortgage and asks, ‘What about this tax that is going to be imposed in 2013 which might mean 30 per cent of your production cost is just the tax?’ they are supposed to tell the bank, ‘We will tell you in 2015, old mate.’ And you expect the bank still to extend the credit line to farmers! I think that deserves an expletive, but I will not use the expletive.

Can I ask, if the government is listening—and noone on the other side has talked about agriculture yet—wouldn’t it make sense to give consideration to having farmers in on the credit side so that, if you do rotational grazing, zero tillage or annual perennial farming, you can get some credits? How do you calculate that? This is why the Waxman bill has excluded beef. India has 250 million cattle—a quarter of a billion cattle. Australia has 28 million. Brazil has 3½ times what Australia has and America has slightly more than that. India has more cattle than Brazil, America and Australia put together. Why would we go in with our 28 million cattle—and by the way our sheep herd has gone to 70 million from 210 million—if India has 250 million cattle which they pat and milk and do not eat? Why would we put ours in if we want to keep ourselves in business? How ridiculous is that? How corny is the thinking?

I cannot believe that, when we went to the Climate Change Committee, they just sat there with dumb faces and did not know any answers. ‘Let’s talk about energy,’ they said. They do not have any answers. So the government have to tell agriculture where farmers are up to before we make this decision, whether it is before Copenhagen or after Copenhagen. At the present time, they have no idea and I have not found one person in the government that can answer the question—not one person in the opposition that can ask questions of the bureaucrats to get an answer on what it all means because the bureaucrats do not know. They have said, ‘We will tell you in 2013.’ It is absolutely stupid.

I turn to something that came up today. A company that came in today wants to do something that is unique to the world—coal gasification and fertiliser production. This is the stupidity of where we are. Under what is proposed, and I am going to talk in detail on this, the company cannot start that process. A $50 million tax is going to be applied.

Here is what they propose—and I have to say there is work for the government to do on this, on sovereign issues. A company is restricted in the amount of output of a fertiliser plant which can be sold in Australia. It may produce up to a couple of million tonnes, but they can only allow seven or eight per cent of that to be sold in Australia. If there is one thing that Australia needs for its farmers, it is competition in the fertiliser market. So these fellows are at a serious disadvantage. They are proposing to build a plant which will mean a couple of million tonnes of fertiliser a year and only 100-odd thousand tonnes of that will be allowed, under what is proposed, to be sold in Australia.

I would like to go to the debate on emissions-intensive trade-exposed activities. There has been much criticism in the media in recent days about the failure of Rudd government Minister Wong to focus on the details of their proposed pollution reduction scheme. There has been a feast of motherhood statements. We met today with Rio Tinto. Rio Tinto ought to be out the front of the building, instead of sneaking around corridors here having meetings that they do not want exposed, about the problems that they are going to be presented with. The same goes for Mitch Hooke and his mob. They should have all the people who are going to lose their jobs out the front here holding up placards, not sneaking around the corridors here with some sort of merge deal with the CFMEU saying, ‘Oh no, don’t get offside with the government even though we are going to lose all these jobs.’ How ridiculous is that?

We on this side of the chamber believe in looking at the detail of this scheme. No one wants to go to the detail: ‘We will give you the detail later. It will be in the regulations. She’ll be right, mate. Go and have a beer.’ The biggest economic reform package that this country has ever seen deserves close scrutiny and debate, and we have not had that debate yet. We have had a lot of point scoring politically. We have not gone into the details. As I say on agriculture, noone has a clue. No one has a clue what it means, but it has the potential to put our farmers out of business. So let’s look at the detail. Let’s have a debate about the detail. What is the hurry? We have plenty of time.

This is a bit like the apology. It had to happen for our Indigenous people, but for a lot of people it was sort of like: ‘Let’s do it and get it out of the road.’ So we did it and got it out of the road. Now please explain to me how any Indigenous people are any better off. Every year I talk to thousands of Indigenous people who are mates of mine, but please explain to me how they are any better off and how the disgusting conditions they live in in the Northern Territory, where there are 7,000 kids that do not have access to a high school and there are 17 people to a home—when we allegedly have between $700 million and $800 million to build homes—have improved. How are they any better off now we have apologised? It is a disgrace.

This is the same thing. This is going to confession. We all feel guilty—80 per cent of Australians feel we have to do something about it, but there would be 75 per cent of Australians who have no understanding of what it means and how it is going to happen and how it is going to affect them. But, yes, we will all go to confession with: ‘Don’t worry about the details; we will just get it out of the road.’ That is what we are doing.

I want to focus on one very important part of the detail of the proposed scheme and it relates to how our emissions-intensive trade-exposed industries work out their carbon liabilities in this scheme. If I do not finish this, I would like to table what I have left.

One of the stated rationales for providing an EITE assistance package is to avoid carbon leakage and to compensate Australia’s emissions-intensive trade-exposed industries for the costs they will wear in competing on price with nations that do not face a carbon cost. As I understand it, for each emissions-intensive trade-exposed activity the government will publish an allocative baseline. These allocative baselines are for EITEs in determining what their carbon liability will be, the number of permits they will have to purchase and the number they may be entitled to receive for free. So these allocative baselines will determine the bottom-line impact of the scheme on every EITE, emissions-intensive trade-exposed, industry operating in the country and how every new one considering investing in Australia today will be affected.

These allocative baselines are the key for EITEs in determining all of this. So where are these allocative baselines? Where is the detail of this most important element for the future operating costs and price impact of our emissions-intensive trade-exposed industries and their bankers and everyone else down the line in their business model? The government gives as one of its reasons for passing this legislation this week the need to give certainty to industry. I hope the government are listening, but they turned off a long time ago. They have turned this into some sort of low-grade, cheap, political ambush. Yet the detail of these allocative baselines is not in the legislation before us. There is no sign of them. The government says it will put these all-important baselines, which determine the bottom line for the emissions-intensive trade-exposed industries, in the scheme regulations, for God’s sake. But so far they have only released eight, and for those eight they merely communicate the end result of their decision. If you go to the table on pages 20 and 21 of the exposure draft regulations you will see it.

Of further concern is that the rules for making these allocative baselines were clearly stated in the white paper but these all-important rules have not been included in the legislation—and, please, why not? Is it like agriculture and they do not know the answer and are trying to dream it up? The Rudd government talk all the time about the importance of transparency and accountability. It seems odd, therefore, that they would leave out this important detail. These people need to know. In the interests of transparency in government decision making and of providing business certainty, these rules should be included in the legislation. This is flawed legislation. This is dopey.

I understand that these allocative baselines are meant to be technologically and feedstock neutral. I also understand that these allocative baselines are meant to be made in reference to Australian historical emissions data but that, where an Australian EITE industry is made up of one or a few entities, the international emissions data for that activity will also be used to set the allocative baseline. The reason for this, and I quote from the white paper, is ‘so as not to result in more or less favourable treatment of activities in where there are few Australian producers, compared to industries where there are many’. This makes sense as, after all, Australian EITEs, whether existing or potential, are competing globally and should be assessed accordingly.

I have recently heard of several instances where it is believed that the government’s intention is to ignore its own guidelines and set these allocative baselines with reference to only one possible feedstock instead of considering the full range of feedstocks used here and globally to produce any EITE product. How cuckoo is that? We all know that natural gas has fewer emissions than coal. We also know that Australia has an abundance of coal and more limited supplies of natural gas. So what would be the effect of setting allocative baselines for an activity that can use either natural gas or coal as a feedstock in reference only to natural gas emissions? We are talking here about non-power uses of coal, of course. It would mean that those EITEs who use coal to produce product A would be required to purchase disproportionately higher numbers of permits compared with EITEs using natural gas for producing exactly the same end product. An allocative baseline set out in this way clearly disadvantages coal, even low-emissions coal, and reduces the international competitiveness of industries that depend on it. Yet the government says it wants a low-emissions future for coal.

The government ought to allow technology to catch up for coal. That is the better solution. Slow down and put your lights on and let technology catch up. For God’s sake, technology will catch up. Farmers now do zero tillage farming. Twenty years ago you ploughed the paddocks three times before you put the crop in; now you do not plough it at all. We have Spanish and Israeli technology that is 40 times more efficient than the old furrow irrigation. Let technology catch up and solve this problem. What is proposed here is to send the message that we are on the ball. Everyone wants to do something about Mother Earth’s interpretation of how we are destroying the earth. She is the referee and we have to fix it up or we will all be ruined. But let us give time to technology to catch up. I quote a recent statement by Minister Wong:

When it comes to coal what I would say is this, if you are serious about action on climate change, then you have to find a lower emission solution for coal.

               …            …            …

We have to find lower emissions technologies …

That was Penny Wong on 6 August 2009 in a doorstop interview at the Pacific Islands Forum. Even she says we have to do it. For God’s sake, why doesn’t the government listen to her? This is crazy. What is the hurry? Turn the lights on and slow down; we are in a fog. They are in a power dive. They are flying in cloud and are in a power dive. They ought to be flying straight and level. And they are trying to build a plane without wings, for God’s sake.

There is technology in the pipeline to solve these problems. If I were in charge in a philosophical sense I would shoot two out of three lawyers, but there are lawyers and bankers who see this as the new feast coming. This is the new river of gold. We should slow down and let technology and hardworking scientists provide a solution for the planet, not hand it over to the bankers—thanks very much.

Scott Ryan (Victoria, Liberal Party) Share this | Link to this | Hansard source

I appreciate the Senate’s time is precious and I will not recite all the arguments that have been so eloquently explained by my colleagues, including my predecessor here, Senator Heffernan, with his discussion of the impact of the Carbon Pollution Reduction Scheme Bill 2009 and related legislation will have on agriculture. There are several issues I wish to highlight that go to the heart of the reasons as to why this is the wrong legislation at the wrong time, and it contains the wrong approach to dealing with this problem. I would like to state at the outset that this is a debate about this particular legislation; it is not a debate about climate change or the science underpinning it. The government’s constant attempts to confuse these issues only signal their own insecurity and their lack of faith in their own proposal.

First and foremost, these bills are a massive tax grab. The budget papers show that in 2011-12 in cash terms this government will collect just under $2 billion in extra taxes as a result of this legislation, rising to just under $12 billion a year later. In simple terms, this is a new tax. This is a new impost and it is not being undertaken in a revenue-neutral way, as previous tax changes have been. The government will use only half this revenue—or approximately that—in providing assistance to households. Apart from undertaking a massive churn of funds from the private to the public and back to the private sectors, with the associated economic dead-weight cost that that involves, this represents a huge new revenue stream for government. As we have seen this week, such a tax grab is not necessary to achieve these ends. It is the choice of this government to undertake it and it is consistent with this government’s approach: if it moves, regulate it; if it does not, tax it. This government sees the ETS as an opportunity for a dramatic and historic expansion in the role of government in the lives of all of us across Australia.

Secondly, this tax grab is directly related to the second major flaw in this legislation. Sadly, it is an issue all too familiar to the Labor Party and to those who have lived under their governments. For all the wrong reasons, it provides a massive opportunity for patronage. I thought that the governments had learnt from decades of misadventure and miserable failure that they should not try to pick winners in our economy. Governments are terrible at predicting the fruits of human innovation. But, with a third of the funds from this revenue stream going to industry assistance, the government is trying to do just that. And, as Senator Heffernan pointed out, the regulations that underpin the detail and the operation of these bills are also missing and we are apparently meant to await those.

But failing to pick winners with taxpayers’ money is not the worst of this patronage. That, I fear, underestimates Labor’s potential to use this very opportunity for its own sectional ends. When government has been granted the power of life and death over economic activity, over particular industries or particular businesses, this temptation has sadly proven to be too great, especially for the Labor Party. We only have to look up and down the eastern seaboard and at those Labor state governments to see what the opportunity for such patronage leads to, and it has been in the press lately: Labor ministers, Labor connections and Labor mates all having a covert influence over policy and decisions at the expense of the public interest. This legislation is unnecessarily interventionist. It taxes too much and it dramatically increases the role of the state in our economy. Whenever the government has the ability to make or break an industry or company, that is simply too much power. We have seen the changes the government has made to its own proposal over the last six months, and these very changes illustrate the power that the government is trying to accrue to itself to direct economic activity.

There is another concern I have with this, and it is about one of the justifications the government uses for this legislation. It is the saddest part of the legislation. It represents its betrayal of working Australians. It is the false hope of green jobs. Just like its Centre Left brethren around the world, the Labor government and Senator Wong recite the mantra of so-called green jobs as if this washes away the job losses that this legislation directly causes. Repetition and spin, however, will not wash away the broken dreams that this unemployment will lead to. It is this farce of so-called green jobs that lies at the heart of these claims. There may well be jobs created—and they may be created in new industries, including renewable energy—but at what cost will these jobs come? How many jobs will be lost as these jobs are created? The evidence is beginning to show that green jobs are a furphy. They may well be developed, but they will come at the expense of other jobs and they will provide no net benefit. A job that exists purely as the result of a public subsidy or that comes at the expense of another job is not a new job. Government created and funded jobs do not add to our economic wellbeing. They may benefit the select and lucky few, but they come at the expense of everyone else unless they add to overall jobs. So we need to be very careful about such claims.

Indeed, recent research out of Spain paints a very worrying picture. A study of the effects on unemployment of public subsidies of renewable energy sources by Gabriel Calzada Alvarez PhD from King Juan Carlos University in Spain outlined this in gruesome detail. In a chapter titled ‘The economics of artificial job creation: a calculation of the cost of green jobs on the rest of productive activity’, he outlined exactly how the creation of these green jobs has come at the expense of other jobs. Indeed, they depend upon the destruction of those other jobs. In the Spanish example, there was a cost of US$774,000 since 2000 for each green job that had been created through renewable targets and mandated targets. It is a cruel hoax to rely on the promise of green jobs as a basis for this legislation without being entirely frank to those in our community who will lose their jobs, to the cost of the rest of the economy and to the cost of thousands of families and individuals.

Debate interrupted.