Carbon Shift to Ease Scrapping of Tax: Coalition

THE Coalition says the linking of Australia's carbon price to Europe's will make it easier for Tony Abbott to axe the scheme, by giving firms a market to resell unnecessary forward-dated permits. 
 
The opposition's acting climate change spokesman Simon Birmingham said Australian firms buying emissions permits in the European carbon market would not be left holding worthless paper when the Coalition abolished the Australian scheme.

“They will have a safe and clear way to offload those permits back into the European scheme,” Mr Birmingham said.

“We've always made it clear that it was possible to abolish the carbon tax and this further demonstrates there is absolutely no impediment to doing so.”

Labor yesterday moved assuage business fears about the impact of the carbon tax by dumping the scheme's controversial $15 a tonne floor price, a change that could slash hundreds of millions of dollars from annual company costs.

The scheme will be linked to the European carbon price from July 1, 2015, allowing Australian firms to buy and sell permits on the world's biggest carbon market.

But the move exposes the government to a potential multi-billion dollar budget hit, with emissions permits in Europe currently trading at about $8 a tonne - far below the $29 a tonne figure the government is relying on to reap a forecast $9.2 billion in revenue in 2015-16.

Australian Industry Group chief executive Innes Willox said linking the scheme to Europe was a good move.

But he said it was difficult to see the European carbon price getting up to $29.

“It's fanciful,” Mr Willox told Sky News, although he added: “This is a positive move in the long term.”

Mr Willox said there were a “whole lot of balls in the air” with the Coalition's policy.
“Business needs long term certainty ... the certainty of a regulatory framework,” he said.

Climate Change Minister Greg Combet said the EU carbon price had been hit hard by the eurozone financial crisis, but it would recover.

“It is three years away,” Mr Combet said. “The treasury modelling is something we stand by.”

Australia, EU ETS to Link in 2015

The Australian government today confirmed it will not enforce its carbon floor price when its emissions trading programme commences in 2015 as it moves to link with the EU Emissions Trading System (ETS).

Emitters in Australia are required to pay for every tonne of carbon dioxide they emit, currently at a fixed price of A$23 (US$23.87). It was originally proposed that from 1 July 2015, that price will be allowed to float within a band.

However, the Australian government and European Commission today announced that, from that date, Australian firms can use EU allowances (EUAs) for compliance and, by 1 July 2018, EU ETS participants will be permitted to use Australian allowances for compliance. To enable this linkage, the planned A$15 floor price will be scrapped.

And while Australian emitters can use international credits, such as EUAs, for 50% of their compliance from 2015, the cap on Kyoto credits – such as certified emission reductions (CERs) from Clean Development Mechanism projects – will be restricted to 12.5% of an emitter’s liability, said the government, from the previous 50%. “Linking the Australian and European Union systems reaffirms that carbon markets are the prime vehicle for tackling climate change and the most efficient means of achieving emissions reductions,” said Australia’s climate minister Greg Combet.

“Starting today, Australian liable entities can purchase [EUAs] for future compliance in Australia,” he added. “These arrangements provide Australian businesses with access to a larger market for cost-effective emission reductions and provide European market participants with enhanced business opportunities.”

“This would be a significant achievement for both Europe and Australia,” said the EU’s climate commissioner, Connie Hedegaard. “It is further evidence of strong international cooperation on climate change and will build further momentum towards establishing a robust international carbon market.”

“This is an impressive development – a first of its kind in having two major economies link their carbon pricing programmes,” said Dirk Forrister, Geneva-based president of lobby group the International Emissions Trading Association (IETA). “IETA members – and economists worldwide – have advocated the potential cost-savings benefits of linking for over a decade, so we are extremely pleased with this news, even as we continue studying the details.”

EUA prices were firmer this morning, up 2% at 8.30 GMT to €8.30 (US$10.42) for the benchmark December 2012 futures contract.

“It is a bit of much-needed positive news,” said one London-based trader.

“There might have been some knee-jerk buying this morning, but it’s too early in the day for the EU-Australia linkage to have a significant price impact,” countered Geoff Sinclair, head of carbon sales and trading at Standard Bank in London.

“If it remains in legislation, this might add around 100 million tonnes of demand to the EU scheme, although the extent to which it does will rely heavily on relative prices and exchange rates, so this doesn’t get the EU off the hook when it comes to the need for a set-aside [of EUAs to address massive oversupply in the EU ETS].

“At the same time, the linkage is likely to make the Australian scheme more palatable in terms of domestic politics, which is likely to boost investor confidence about its longevity,” he added.

“The removal of the floor price, the linking with the EU and the limit on the use of Kyoto units all impact the shape for the forward price curve from 2015 onwards,” said analysts at Westpac in Sydney. “Subject to the release of the actual legislation, the aggregate impact of these changes is that the EUA price will now become the primary influence on the [Australian carbon] price rather than the CER price.

“Further, the removal of the administrative complexity of hedging the price floor’s ‘top-up fee’ will presumably free up Australian liable entities to access cheap, cost-effective options in international markets sooner rather than later.”

The Australian government foresaw some kind of measure to require Australian emitters buying CERs below the floor price to pay a top-up fee – an administratively complex exercise, that is now unnecessary.

The Australian and EU authorities hope to agree on how to link their respective emissions registries, which track trades of allowances, by the middle of next year. However, the European Commission still needs to receive a mandate from member states to enter into negotiations for the two-way link.

Government to Scrap Carbon Floor Price

After weeks of secretive talks between the Gillard government and the Greens, Climate Change Minister Greg Combet has announced Labor will scrap the planned $15 floor price on carbon permits in a major overhaul of the carbon pricing scheme.

Following intense lobbying from business and threats by the independent MP Rob Oakeshott to block the floor price, the government will ditch the mechanism and instead restrict the purchase of cheap overseas permits from developing countries.

A limit on the amount of United Nations-backed permits that Australian companies can buy will effectively prop up the price at home.

Climate Change Minister Greg Combet plans to scrap the $15 carbon floor price. Photo: Alex Ellinghausen

Mr Combet also announced plans to link Australia's scheme to Europe's emissions trading scheme from 2015, which is likely to have the effect of matching the two prices.

 

The link with Europe means that Australian companies can start buying European permits - which are now trading at $9.80 - right away to meet their future liabilities.

This could make the carbon price cheaper overall for Australian businesses, though the European price is likely to rise by the end of the decade as the European Union moves to make restrictions of its own.

Australian companies will only be able to meet 12.5 per cent of their liability under the Australian carbon scheme with the UN-backed permits.

And from 2018 - or possibly sooner - Australian companies will be able to sell credits in Europe. This could be a boon for farmers, who can generate credits through changes to their land practices, such as tree planting, though Mr Combet said that aspect was still to be negotiated.

The carbon price, which came in on July 1, will initially be fixed at $23 and will rise slightly over the next two years, when it becomes a floating-price emissions trading scheme.

Europe has the largest emissions trading scheme in the world. A linkage means that carbon permits can be traded back and forth between Australia and Europe. The idea is that the free market then finds the cheapest possible way to reduce carbon. From an environmental viewpoint, it does not matter where the carbon cuts are made.

The floor price was intended to create certainty for potential investors in clean energy. But businesses complained it would be an administrative headache.

Without a restriction of the UN-backed international permits, the Australian price could crash to as low as $3 or $4. The Greens have been concerned that a very low carbon price would not be enough to drive investment in cleaner energy such as wind, solar and wave power.

Today's announcement is also likely to have an effect on negotiations between Energy Minister Martin Ferguson and electricity generators who could be paid billions of dollars to phase out their dirtiest power plants.

The likely price of carbon over the next decade is one factor in deciding the value of these power plants. They may argue that scrapping the floor price raises the value of their assets.
The Greens have already backed the changes.

Independent MP Rob Oakeshott said this afternoon he would also support the legislation.
He said the announcement would protect Australia's emissions trading scheme from some ''very difficult decisions into the future''.

Opposition Leader Tony Abbott said the changes showed the government was all at sea on the carbon tax.

''You can't fix it. You've just got to scrap it,'' Mr Abbott told reporters in Rockhampton.

''We haven't had the carbon tax for two months yet and they've admitted there is a fundamental flaw at the heart of the carbon tax.''

Mr Abbott said there would be a ''huge hole'' in the budget as a result of the decision.

''If you can't take the price for granted, you can't take the revenue for granted, and if you can't take the revenue for granted, you can't rely on the compensation,'' he said.

However Mr Combet said the government would not reduce household assistance payments and tax cuts set up to compensate for the price impacts of the carbon tax.

Asked if he was contemplating any further changes Mr Combet said: ‘‘no’’.

''We will not be cutting any household assistance,'' he said.

''We committed to it and you might recall that there are further tax cuts that have been legislated from 2015 as well.''

Carbon Tax Not Yet ‘Catastrophic’: Abbott

Opposition Leader Tony Abbott has conceded the introduction of the carbon tax has not immediately been “catastrophic”.

But he is adamant its long-term effects will eventually spell disaster for Australia’s economy.
Speaking at the Tasmanian state council of the Liberal Party, Mr Abbott restated his promise to abolish the controversial tax if he is elected prime minister at the election due next year.

“Yes, the initial impact of the carbon tax may not be absolutely catastrophic,” he told the council conference.

“But I ask you Tasmanians to understand the logic - if there is any - in a five-and-a-half per cent increase in your power prices because of the carbon tax, even though some 85 per cent of your electricity is hydro-generated.”

Mr Abbott said government modelling of the tax’s impact painted a dire picture for Australia’s future.

“I’m often accused of running a scare campaign about the carbon tax,” he said.
“I invite people who think I could be exaggerating the impact of the carbon tax to look at the government’s own modelling.”

He said it showed Australians would on average be $5000 worse off by 2050 and the country would miss out on $1 trillion.

“It’s as if our country were to shut down for a whole year because of the carbon tax,” he said.
“This is an unmitigated economic disaster for our country.”

Mr Abbott announced he had formed a working group of Liberal senators to examine how the struggling Tasmanian economy can be grown.

Australians Led The World in Home Solar Installs in 2011

Australian households installed more residential rooftop solar power systems last year than any other nation.

Approximately 392,500 new home solar systems were activated in 2011 according to data from the Clean Energy Regulator and the International Energy Agency.

A fact sheet released by REC Agents Association (RAA) based on data from the Clean Energy Regulator states Australians had installed nearly 1.5 million solar hot water and solar panel systems to the end of June.

As at 30 June, 2012, renewable energy certificates had been created for 753,844 solar panel systems; representing 1,671,489 kW capacity. A further 743,842 heat pump and solar hot water systems had been installed.

Close to 18 per cent of all Australian families now has one or the other or both installed – 9 per cent of households have solar electricity generation systems.

“Recognition must go to the Howard Government for having the vision to establish a world leading Renewable Energy Target, to the Rudd Government for increasing that target four-fold and to the Gillard Government for delivering on the promise of the Renewable Energy Target,” says Ric Brazzale, President of RAA.

“Whilst four million Australians now have solar on their roofs, many more Australians are keen to get on board. The Renewable Energy Target must be maintained, expanded and extended over time to help deliver solar to all Australians.”

Some corners of industry have called for the scrapping of the Renewable Energy Target due to the introduction of a carbon price. However, last month, Australia’s Minister for Climate Change and Energy Efficiency Greg Combet stated this would “fail to deliver the transformation needed in our energy sector and only increase the cost of that transformation in later years.”

REC Agents Association represents businesses creating and trading inRenewable Energy Certificates (RECs); the mechanism behind Australia’s Renewable Energy Target and the basis of the Solar Credits Scheme. Often referred to as a solar rebate, Solar Credits is an initiative that subsidises solar panel systems.

Low Income earners Burnt As Cost Of Solar Subsidy Spirals

RENTERS, pensioners and other low-income earners are paying for their wealthier neighbours to enjoy cheaper power under the state's skyrocketing solar subsidy system. 
 
The Queensland Consumers Association says costs to subsidise solar are forecast to triple, as the state's bill to fund the scheme continues to grow.

More than 100,000 applications were received last month from homeowners wanting to profit from the state's generous 44c per kilowatt hour tariff - twice the retail power rate - which will continue for 16 years.

By installing solar systems up to 5kW, the mostly well-heeled applicants stand to earn $200-$300 a quarter from a subsidy that is costing their non-solar neighbours more each year.

One of those who applied was Algester resident Ron Ruys, who feels badly for his neighbours who are indirectly helping to pay for a $10,000 5kW system that will earn him extra income.

"I'm going to do it and I'm going to make money out of it," he said. "But it is unfair to other people because of the subsidy. I don't think people know what the 44c means to their bill."

Energy Minister Mark McArdle has estimated the tariff would cost $1.8 billion by 2028 if the scheme remained unchanged. The July 9 deadline limiting future payments at an 8c cent rate.

The Government projects that the annual cost of the subsidy will rise from $50 to $100 for each household from the surge in applications, and another $50 for upgrades to the power grid.

Whether the increases will become a reality depends on whether the Government is successful in cutting expenses elsewhere in the budgets of power suppliers, including "community services".

Queensland Consumers Association vice-president Ian Jarratt said the threat of a $100 annual hike should be a concern for many people trying to stretch their income.

"A dollar is always more for a pensioner," he said.

The association said it voiced concerns about the scheme's cost several years ago to state officials. "Things had been done far too quickly and not thought through enough, especially about the cost to consumers who could not afford to install solar systems," Mr Jarratt said.

The solar scheme has had some benefits: creating employment for thousands of installers, reducing the state's dependence on coal and lowering carbon emissions.

Prices of home solar systems have dropped 50 per cent.

Installer numbers have increased from 78 in 2008 to more than 1100 today. The number of customers has increased from 1200 to around 180,000.

On the downside, "all Queensland households and small businesses indirectly foot the bill", Mr McArdle said.

The Government said it was obliged by legislation to continue the 44c tariff for the next 16 years, and risked lawsuits if it reneged.

PM Julia Gillard Blames Electricity Bill Shock on The States

PRIME Minister Julia Gillard will launch an attack on the states today over soaring power prices, barely a month after her own price-inflating carbon tax began. 
 
And she will use the latest figures to back up her argument - which show household power bills have increased by a staggering 62.4 per cent in South Australia over the past four years, adding $1086 in expenses to the average bill before the carbon price even kicked in.

That equals the second highest jump along with Western Australia, but is less than the 69.2 per cent hike in New South Wales since 2008-09.

Ms Gillard will say the burden on households from her carbon price will add a comparatively small $115 to that pain this financial year.

In a bold square-up to state governments who she says have too often benefited from revenue increases from electricity prices, she will claim the states are doing very well out of the misery of households and declare it simply cannot continue.

"Power bills have become the new petrol prices: not just an essential of life that always seems to be going up, but a vital commodity, where what we consume each day, or pay every quarter, seems far beyond our control," she will say in the address to the Energy Policy Institute of Australia.

"Prices have gone up - have gone up far and fast."
Government figures show the conservative-run states of NSW, Queensland and WA, where network services remain state-owned, have experienced windfall gains in revenue including 60 per cent growth for NSW, 16 per cent for Queensland, and almost 200 per cent growth for WA since 2009-10.

"Following the recent round of price increases, revenue for enterprises wholly owned by State Governments is up 50 per cent over the previous five-year period," she will say.

"This was in a period when revenue for the rest of the market players grew less than 30 per cent  ... for too long, some state governments have been increasing their revenue at the expense of the family electricity bill - that has to stop.

Plugging in will cost up to 70 per cent more in NSW this winter. In Victoria it will cost just 10 per cent extra. Picture: Herald Sun

"Australia did not need nearly 50 per cent price increases for households over the last four years and Australians can't afford the same kinds of increases over the next four years.
"It's a huge cost to our economy and it's a threat to fairness in our society."