Grattan on Friday: The government wins on carbon – pity about the budget shambles

After the parliamentarians finally head off for the winter break, the government desperately needs the major win it had this week to flow through to the opinion polls – because it is struggling with head winds on so much else.

The Coalition at last ticked off the repeal of the carbon tax, the iconic item on top of its checklist, but it has had serious setbacks in this first fortnight’s sitting of the new Senate, which was marked by considerable chaos and the start of a dramatic erosion of the budget’s savings.

The repeal of the mining tax went through the Senate at 11PM on Thursday. But there were amendments to preserve associated measures – the schoolkids bonus, superannuation help for low income earners and the low income support bonus. The lower house, which meets on Friday, won’t accept the changes (amounting to a hole of some $7.5 billion in the budget period), leading to a stalemate.

The Senate has wrought havoc with the budget plan to give funds to the states for selling assets and recycling the proceeds into infrastructure, blowing another hole. The government won’t accept that either, although it says it will go ahead with providing money to the states.

Beyond any actual win, even one as significant as the carbon repeal, perceptions are crucial – the government has to try to convince the public it is on top of things, or at least on the way to being so.

The end of the carbon tax is a demonstration that Abbott can “land” a policy; it is totemic for the hard core Coalition base. It gave a fillip to the Coalition backbenchers, amid the glumness of the struggling budget.

The government expressed delight that Bill Shorten pledged to campaign on an emission trading scheme at the next election. “I can tell Bill we will hang this around his neck like a rotten, stinking carcass, right through to election day at the end of 2016,” Leader of the House Christopher Pyne told parliament.

But how important, after the initial flush of delivery, will the carbon tax’s repeal be in the eyes of ordinary voters, the swingers? Will their attention soon turn back to issues like the proposed rise in their health costs (though that is likely to be stopped by the Senate), squeezes on family benefits and the like?

An Essential poll on July 1 suggested a lack of passion about the fate of the carbon tax. It reported 33% believed it should be dumped and not replaced, 22% backed replacing it with an emissions trading scheme, 9% preferred the Liberal’s “direct action” plan and 16% said the government should keep the tax.

Voters, whose limited faith in promises has been further shattered by Abbott’s performance, are likely to be sceptical of the government’s claim that the average household will be $550 better off.

It’s notable that Abbott stresses this is a Treasury figure, provided to the Labor government for the projected RISE in prices. Is he constructing a let out here? In a year’s time, if the benefit has been less than promised, he can blame Treasury or Labor or both.

Palmer has been centre stage in the new Senate’s first fortnight, dictating outcomes and setting the price the government has to pay if it wants to get its way.

Whether the fortnight enhanced or diminished Palmer’s authority is disputed; it is too early to get an accurate fix on whether, in the longer term, he’ll make the government’s task near impossible or just challenging (or indeed to speculate on whether he can keep his senators in the kennel as they mature beyond the puppy stage).

Palmer plays to the crowd publicly; privately he is both astute and pig-headed, used to getting his own way (or buying it) and apt to arc up when he doesn’t.

His attacks on Senate staff, because Clerk Rosemary Laing advised his amendment to the carbon legislation would be unconstitutional in its proposed form, were bullying behaviour. Senators across parties, notably excepting the PUPs and their ally Ricky Muir, reaffirmed their faith in Laing’s professionalism, in effect a public chastisement of Palmer.

One unexpected success for the government this week was the deal with Palmer to save from disallowance the Coalition’s changes to Labor’s Future of Financial Advice legislation. Palmer got minimal extra guarantees for consumers, while being able to claim a victory. He did the long negotiation himself.

Finance Minister Mathias Cormann had Malcolm Turnbull (who enjoyed that celebrated Chinese dinner with Palmer earlier this year) put some pressure on the PUP leader.

Cormann’s week was a good deal better than that of Treasurer Joe Hockey, whose threat of new cuts if the Senate didn’t behave achieved little beyond giving fodder to the opposition.

The battle to get budget measures through will intensify when parliament resumes in late August.

One question in Green circles recently has been how much pressure leader Christine Milne will come under over her party’s decision to oppose the reintroduction of fuel excise indexation (after initial indications it would go the other way).

Within the Greens’ rank and file there has been a lot of concern at the stand that’s been taken. It will be debated at the Greens’ national council in Sydney this weekend. Questioned on Thursday, Milne said the parliamentarians made decisions about legislation, informed by discussion with the membership including at the council. It would be an interesting situation if there was a strong view at the council opposing the parliamentarians’ stand, but Milne gives no sign of another reversal (which would be embarrassing though good policy) and some Green sources insist the dissent is only a small push.

After Thursday’s carbon victory Environment minister Greg Hunt sent a text to Tony Abbott saying “Factum Est” (It has been done). It was well publicised, designed as a celebration of the moment.

If only, the government might think, Joe Hockey could sent his boss a “factum est” text.

As things stand, Hockey would have to be texting: “A fronte praecipitium a tergo lupi”. (A precipice in front, wolves behind.)

Listen to the latest Politics with Michelle Grattan podcast, with guest Senator Sam Dastyari, here.

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Michelle Grattan does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

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Minerals Council calls foul on “anti-mining” diesel tax

Minerals Council of Australia CEO Brendan Pearson will today insist that the government keep diesel tax breaks for companies operating in remote locations.

Pearson will appear before a senate committee today to defend the fuel credits scheme that provides tax breaks for the use of diesel in off-road capacities.

He will also reject arguments that miners already receive significant subsidies, and say that any call to scrap the tax break is part of a “thinly disguised anti-mining agenda”.

Diesel is widely used in all segments of the mining industry to fuel generators, heavy machinery and light vehicles, especially in remote locations.

Tax paid on the diesel used in such situations is currently refunded to companies, a scheme that has been in place for about sixty years for industries such as agriculture, manufacturing, health services, construction, as well as arts and recreation.

The fuel tax credit was reduced by six cents a litre as part of the carbon tax to put a price on the carbon content in diesel, which will be replaced if the carbon tax is repealed.

“Every year, the Productivity Commission conducts an exhaustive analysis of industry assistance. In the most recent … review concluded that budget and tariff assistance to the mining industry was negligible,” Pearson said.

Pearson will tell the inquiry the Commission of Audit is timely because Australia faces a budget repair challenge.

“But equally we need to recognise that the means by which fiscal repair is achieved will have a major bearing on growth, investment and job creation,” Pearson said.

Senate committee draws battle lines ahead of carbon price fight

A Labor-dominated Senate committee has set the stage for the post-July tussle over carbon policy, recommending that Australia commit to much deeper emissions cuts than the current 5% target, and advising against scrapping carbon pricing.

The report, from the Senate Standing Committees on Environment and Communications, has given a damning verdict on the Abbott government’s Direct Action climate policy.

Among the committee’s recommendations are to:

  • Cut emissions by 19% relative to 2000 levels, broadly in line with recommendations by the Climate Change Authority;
  • Adopt a market-based carbon pricing scheme from July 1, 2014;
  • Not to substitute carbon pricing with the A$1.5 billion Emissions Reduction Fund, the key plank of the Direct Action policy;
  • Abolish the repeal of the Clean Energy Finance Corporation.

Half of the committee’s six members are Labor senators, with one each from the Liberals, Nationals and Greens.

The current Labor/Greens-controlled Senate has already twice knocked back the Abbott government’s plans for repealing the carbon tax, but depending on the outcome of the April 5 election in Western Australia, the dynamics of the upper house are likely to be different after July 1.

Power games in the Senate

It is still unclear who will hold the balance of power when the new Senate term begins.

If WA voters deliver the same result as they did during September’s botched poll, the government will need the votes of six out of eight crossbench Senators in order to pass legislation. But the Liberals could potentially lose one of the three seats they won in September, while Labor and the Palmer United Party could each potentially gain one more on their current total, while the Greens could lose one if Scott Ludlam fails to win re-election.

Associate Professor Peter Christoff, who teaches climate and environmental policy at the University of Melbourne, described the Senate committee’s recommendations as “utterly predictable”, but said the report still represented a good critique of the Abbott government’s policy.

“I think the recommendations themselves are sound. They could probably even be a little tougher – 19% (emissions reduction) is a fairly weak target given the science and Australia’s responsibilities. The recommendations point to really significant flaws in government policy,” he said.

In the government’s Green Paper last December, environment minister Greg Hunt described the Emissions Reduction Fund as a “classic market mechanism” that will “buy back the lowest-cost abatement” – in contrast with what he called the “heavy punitive tax” legislated by Julia Gillard’s Labor.

“Seriously unfunded” plan

Christoff described the Direct Action plan as “seriously underfunded, and lacking the revenue base that a carbon tax or market would provide”. The government has pledged not to expand the fund’s budget even if the scheme is not on track to meet its 5% emissions target.

But he predicted that the report would be “resoundingly ignored” regardless of the election result on April 5. “The current government is not interested in listening to Labor or the Greens. The divide has become so profound as to be purely ideological.”

It is still unclear exactly what will happen in the new Senate, even if the Palmer United Party gains the balance of power, Christoff said.

“There are some assumptions being made about PUP’s support for all elements of the Coalition’s climate legislative program. I don’t think it’s clear that PUP will support the rollback of the Clean Energy Fund, for example.”

Penny van Oosterzee, who studies carbon reduction strategies at James Cook and Charles Darwin universities, said Direct Action is “aimed mainly at getting energy-efficiency initiatives up”, meaning that it won’t offer as much incentive for other carbon-reduction options such as planting trees.

“It discriminates against the land sector in favour of the energy sector. If you are going to play a part within the land sector, you would need to be a big player. It discriminates against the small landholders who make up the majority of Australia.”

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Labor should not block Abbott on Carbon Tax: Labor MP

A Labor backbencher says that his party should not block the newly elected government as it tries to cut the carbon tax.

AAP reports that Labor MP Nick Champion says that Labor should vote against the move in the House of Representatives but abstain from the Senate vote on the issue.

He claims that such a move would expose the government and let the public see what a bad policy the Coalition’s Direct Action Policy on climate change is.

“I think it would be a disaster for Mr Abbott, it would be a disaster for the Liberal Party and it would hasten their demise,” he told the ABC.

“And in effect, I believe that the Liberal Party want to hang themselves, well we should give them as much rope as they need.”

He added that scrapping the carbon tax and moving to the direct action plan would push electricity prices up, raise Australia's emissions and waste billions of dollars.

The statement has opened something of a rift in the ALP.

The ABC reports that, Construction, Forestry, Mining and Energy Union president Tony Maher called Mr Champion an amateur for making the comment and said that it should be ignored by the Labor Party.

"I think it's just cheap kindergarten politics, trumping standing up for something,” Mr Maher said.

"It could equally apply to the IR laws, to the ABCC, to anything else, so once you go through that path, of waving through everything for the Coalition, then why would people vote for you, why would all those Labor stalwarts stick with Labor?"

In addition, the two major contenders for the Labor Party leadership, Bill Shorten and Anthony Albanese are both committed to opposing the repeal of the carbon tax.

Delay in carbon tax repeal would be costly: business

According to business lobbyists, delays to the incoming government’s pledged repeal of a carbon price would have costly results.

Prime minister-elect Tony Abbott on Sunday began moves to have legislation drafted to do away with the tax, which has been in effect for 14 months.

The Australian reports that The Energy Supply Association’s figures predicted business would pay $4.6 billion in 2013-14 and $5.2 billion in 2014-15 due to the carbon tax, taking into account the granting of free permits.

The Greens and senior figures in the opposition have said they would block attempts to remove a price on carbon emissions.

"We are absolutely going to defend taking action on climate change – I could not look my son in the eye and walk away from taking action on climate change," the West Australian reports Labor frontbencher Anthony Albanese as saying.

"We have supported an emissions trading scheme for a very long time. We have that mandate and I see no reason why we should walk away from our legacy."

Innes Willox from the Australian Industry Group said that if the new Senate – in which the Coalition will have a minority – blocked the legislation until 2015, it would mean another two years of emissions costs higher than were paid elsewhere, and that the Coalition’s mandate should be respected.

"It would seem ludicrous if we got to that point of business paying for almost two years of the carbon tax that the voter has voted against," he told The Australian.

The Business Council of Australia also believes that Australian companies should be relieved of the burden of the tax.

"What must be recognised is that Australian businesses will be continuing to be paying the highest price for carbon reduction across the major emitting countries," the BCA’s Maria Tarrant said.


Tas firm wins $500k grant

A Tasmanian manufacturing company has been awarded nearly $500,000 to trial a new system that will improve the efficiency of electrical rail and tram lines.

In a statement Climate Change, Industry and Innovation Minister Greg Combet said Dunham Holdings, trading as Hivotech, had won a grant of up to $499,748 to develop its Network Integrity Management System.


The grant will be taken from the carbon tax-funded Clean Technology Innovation Program, and Combet said the new system could improve maintenance efficiency on tram and rail lines.


This is a great example of a clever Tasmanian business coming up with a solution to a world-wide problem. Hivotech's system could virtually eliminate the laborious and expensive physical maintenance cycle for electrical railway and tramlines,” he said.


This grant will allow electrical railway and tramline operators to remotely identify the location of faults in the network and target their maintenance effort.”


The main element of the new system centres on a monitoring unit placed at the top of power grid support poles every 2km for rail and 500m for trams.


The units measure the condition of the electrical network at that point, and could be used to target maintenance to the areas that need it.


Rail networks operate a 45-day maintenance cycle to inspect every insulator and joint. The annual maintenance budget for the Australian electric rail industry as a whole is more than $3 billion,” the Department said.

European emission trading to hit airlines

Airlines will need to pay more for flights to Europe as the European Union’s emissions trading scheme is to include aviation from 2012. 

The European Parliament voted 640 to 30 in favour of a rule that airlines would have to cut greenhouse gas emissions by three per cent in the first year, and by five per cent from 2013 onwards, paying for 15 per cent of their emission permits at the beginning, Reuters reported.

The result of the vote will turn the proposal into law, which will affect all airlines flying into and out of the EU, including non-European airlines.

EU environment commissioner Stavros Dimas said the vote will enable the aviation section to make a fair contribution to Europe’s climate change targets as many other sectors are already doing.

Under the scheme, all flights departing from and landing in the EU will be liable to pay a carbon tax, estimated at a minimum charge of around AUD 65.00 for long-haul flights, and AUD 14.80 for short-haul flights.

In reaction to the decision, German airline Lufthansa said: “From our perspective, the emissions trading scheme is ecologically counter-productive and economically harmful.”

The EU’s determination to tackle climate change is also countered by Australian airlines.

Qantas chief risk officer Rob Kella told The Australian the airline supported emissions trading, under the condition that the scheme did not exacerbate competitive distortion between airlines, industries or regions.

“As the price of jet fuel skyrockets, the addition of an unrealistic trading scheme will place a serious financial burden on airlines,” Mr Kella said.

“We believe the proposed EU scheme goes well beyond the current Kyoto Protocol, and introduces competitive distortion.”

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