Joint Press Conference - Frontier Economics Report

The Hon Malcolm Turnbull MP
Leader of the Opposition (to 1 December 2009)

The Hon Andrew Robb AO MP
Shadow Minister for Infrastructure and COAG and Shadow Minister Assisting the Leader on Emissions Trading Design (archive)

E&OE

MALCOLM TURNBULL:

Now this report represents the modelling the Government has refused to do. This is the hard work, the close analysis the Rudd Government has failed to do in its rush, its reckless rush to implement a poorly designed emissions trading scheme – one that will cost jobs and will not achieve the levels of greenhouse gas abatement that are possible with a better designed scheme.

What Frontier Economics have done is analyse alternatives, as Senator Xenophon and the Coalition asked them to do. This was our joint decision. We believe more work needed to be done and we chose Frontier Economics because they are leaders in this field. They developed, modelled, designed the New South Wales greenhouse gas abatement scheme. They are the leading firm in this area in Australia and their expertise is respected right across industry and across governments.

What they have proposed here is a hybrid scheme that would allow at much lower cost a doubling of the unconditional reduction in greenhouse gas emissions. So instead of an unconditional five per cent reduction, a ten per cent reduction. So it’s greener. It will also be cheaper. It would be 40 per cent cheaper than the Government’s scheme – a $49 billion saving to our economy over the next 20 years. And, above all, it will be smarter. It will ensure that there are more jobs, more Australians in work, earning higher wages, and this impact will be particularly felt in regional Australia. Regional Australia is going to be hammered by the Rudd ETS and you’ll see here in the work that Danny and his team have done that this change that they’ve proposed, this hybrid scheme with a different approach to the generator sector, will ensure that there is a significant, a significant improvement in employment opportunities in regional Australia versus what would be the case if Mr Rudd’s scheme is allowed to go into action.

So these are very important measures. This shows that close analysis, hard work, rigorous examination of alternatives can produce better results. It underlines the recklessness of Kevin Rudd rushing to introduce and pass his emissions trading scheme, not simply because he’s doing it before the Americans have concluded their work or before the Copenhagen summit has met and confirmed its deliberations, but because he has not even done the hard modelling work himself. What we are seeing with Kevin Rudd’s ETS is thousands of Australian jobs being put on the line, billions of dollars of Australia’s wealth being lost because of poor design. It’s not good enough.

The time has come for Mr Rudd to sit down with the independent senators, with the Coalition, to sit down with us here assembled and discuss a better scheme, a better design. We’re prepared to do that. He’s rejected our approaches out of hand. Now he will have to say why this report is wrong. He’ll have to deliver reasoned argument to refute what is presented here. Of course reasoned argument is not something the Government is very interested in at the moment. I see Mr Combet has rejected this report without having read it. That must be wonderful to be able to come to a conclusion about reports without having to read them, so confident is he in the direction they’re taking Australia.

So that’s our commitment for a well-designed scheme that is greener, cheaper and smarter. That should be the aim of all sides of politics and this contribution from Frontier Economics is an extremely valuable element in the debate we have to have. Andrew.

ANDREW ROBB:

Well thanks Malcolm. As Malcolm said, this design that’s been recommended to us is greener and cheaper and smarter. I’d just like to make a couple of comments before handing over to Nick Xenophon about the smarter element of this design that’s been put in front of us by Frontier Economics.

The current Government scheme will lead to the export of jobs and emissions because of the massive tax primarily on electricity. That’s it. That’s the essence of it – a massive tax on electricity. The big design breakthrough that I think is embodied in what Frontier has put forward is that there will be, rather than an abrupt massive 40 per cent increase in wholesale electricity prices, which introduces a great shock to the system and introduces huge indirect costs to hundreds of thousands of small businesses – not just the energy intensive, but across the board, and to households – because there is no abrupt 40 per cent increase, rather there is a gradual, starting at five per cent increase in wholesale prices and gradually moving up over 20 years to 25 per cent. So you get a demand response from that, but you’re not introducing a shock in terms of costs.

Now the big thing is – and it’s the untold story – with the Government’s scheme they will face massive indirect costs from day one. You take the average dairy farm; the Government’s own research body ABARE has confirmed that you’ll see an $8000 to $10,000 increase in costs on the average dairy farm purely and simply from the indirect increase in electricity prices. Now that’s true not just of dairy farms and beef producers and other parts of agriculture, it’s true for the tens of thousands of small manufacturing businesses. It’s true for all of the small retail. You take fish and chips shops. All of these, they cannot change their equipment overnight. It takes years to do that. If they’re hit with a massive tax, it goes to the bottom line and it slows growth.

Now what this scheme does is not have that drag on the economy of hundreds of thousands of businesses with higher costs restricting their growth. And the important thing about being smarter is that when companies are not hit with that increased tax, small and large, they’ve got the capital on their balance sheets to invest in low emission technology. And Australia can be, in many respects, if we want to show leadership on this whole issue, we can be the laboratory in my view for innovative, low emissions technology. But you have to protect the balance sheets of companies. You have to make sure they’ve got the money. Sure, the price of carbon will be there; they’ll be an incentive to reduce their overall emissions and that’ll be as strong as the Government’s scheme, but you haven’t stripped their balance sheets so that they cannot afford to make investments in low emitting technology.

We can lead the world. We can provide that technology to China and India and Indonesia and all the others. That’s the contribution we can make as leaders because we’ve been in this energy business for 100 years. We’re good at it, we know it and if we can provide the right incentives for business, we can make a very smart contribution to lowering world emissions. Nick.

SENATOR NICK XENOPHON:

Thank you. Thank you Andrew and Malcolm. Let’s go back to the beginning. When the Government undertook its green paper, its white paper, there was never a thorough examination of any alternative schemes, of an alternative approach to achieve a better environmental outcome and a better economic outcome, and that’s why Frontier Economics has been commissioned to undertake this report and my agenda is very clear. I believe that we ought to go for deeper cuts, and I can’t see how we can do that economically responsibly under the Government’s scheme.

This report gives an approach, a springboard for deeper cuts, deeper, more effective environmental cuts in a way that’s economically responsible. And I guess the message is this – that this report makes it clear that if this scheme can be twice as green at forty per cent less cost, then why wouldn’t the Government want to sit down and talk to us about this?

In relation to Danny Price, he’s here with his team, Amar Breckenridge and Matt Harris, who have prepared this report. They’ve been working around the clock for the last six years, six weeks to prepare this – seems like six years! But can I say that Danny Price was commissioned by the Carr Government in New South Wales ten years ago to implement the world’s first mandatory emissions trading scheme, albeit a baseline and credit scheme which was relatively narrow in its scope, but it has still been very effective in reducing emissions in that state by many millions of tonnes. So he has an expertise that is unparalleled. He’s actually not only designed it but implemented it for the New South Wales Government. His consultancy has worked for NGOs, for industry and for governments, Labor and Liberal, around the country for a number of years. And I think he has an unparalleled expertise to give some independent advice in relation to this, and if I could ask Danny to outline how this would work.

Share via:

Kwoff

Digg

Delicious

Newsvine

Facebook

StumbleUpon