Carbon tax changes damage our international competitveness

Make no mistake, it is the Australian economy, our Australian businesses, industries and every family and individual who is paying Labor’s $9 billion a year carbon tax cost. It is $36 billion in the first four years alone. We are all getting those power bills now and we are all seeing this cost. Whether you are in business or whether you are a family you are seeing these costs.

Our economy has been largely built on trade. We know that within OECD countries Australia has one of the highest trade to GDP ratios.

This has been largely made possible by access to internationally competitive, domestically affordable power—reliable, secure access to power. Yet this government is sacrificing this competitive advantage with the world’s largest and only economywide carbon tax—the world’s largest and only economywide carbon tax—while at the same time putting business and industry at risk.

We also know that the carbon tax is not an environmental solution at all. We know that carbon emissions will continue to rise—the government documents say so.

What we do see today with this legislation is that Labor’s carbon tax is a shambles. The government has made eight structural changes in just the first few weeks since its introduction—so around the world in eight days—

Mr Craig Kelly: And there is more to come!

Ms MARINO: changes that have added another layer of uncertainty and cost. With this legislation, the government is linking the Australian carbon market to the European Union’s Emissions Trading Scheme.

The explanatory memorandum which the government presented with the bill proudly states that the ‘global market is growing year by year with markets emerging across the globe’, but it conveniently forgets to mention that emissions are growing at the same rate. No wonder then that the price attached to the European scheme allowances has been in a constant state of devaluation.

I want to have a look at this Rolls-Royce scheme that the Labor government is leading Australia’s economy to. It is currently trading at around A$10 a tonne. It is predicted in some circles to drop as low as three or four Australian dollars.

Prices for December in 2012 showed that delivery of EU allowances fell by 50 per cent throughout 2011 and volatility has beset the EU ETS since its inception.

In the first phase in 2005 to 2007, prices started around 30 euros a tonne, but by May 2006 they had fallen to 10 euros.

This is a Rolls-Royce system. By March 2007 they had plummeted to 1.2 euros, and by the end of the first phase they were worth a mighty 10 eurocents.

Phase 2 of the EU ETS from 2008 to 2012 saw prices start at 20 euros optimistically, down to 13 euros in 2009, and they have spent most of this year under 10 euros.

This is because the European ETS is not efficient or effective—it is corrupted and impotent—and this is the volatile market that the Labor government is linking Australian business, industry and our economy to.

The initial caps and free permits agreed to by member countries were really status quo for emissions not emissions reductions, and countries just shifted their operations outside the eurozone to countries with no ETS or carbon price.

Massive offsets were available to countries that hid emissions growth in member nations. All these underlying problems just show you that the EU ETS is fundamentally flawed. And yet this is what Labor is seeking to tie Australia’s economy and our carbon tax to.

Do not take our word for it. Last year the Union Bank of Switzerland, the second largest Swiss bank and one of the world’s most respected banks, released a damning report into the European carbon market.

The UBS report was titled Carbon price to collapse, 210 billion euros wasted, and says of the carbon price that there had been ‘limited benefits and embarrassing consequences, including euro-billions of windfall profits and fraud’.

The report states that the European carbon market has had ‘almost zero’ impact on emissions. I thought this was an environmental measure.

Mr Craig Kelly: It hasn’t worked at all!

Ms MARINO: It has not worked. The report states that the European carbon price is in the midst of a collapse—40 per cent since June—and will continue until there was a ‘crash’ in the carbon price. During a time of economic instability in Europe—that is a way of putting it—a carbon crash will only add to the turmoil.

The report says that it is households in Europe that are paying for the waste and fraud. It says:

… the introduction of carbon pricing has “led to a double-digit surge in power prices across most of Europe.”

The European carbon price, instead of reducing emissions, has become an exercise in paper shuffling, a Ponzi scheme that has enriched market participants at the expense of consumers—it is sounding awfully familiar—advising that the CO2 price just provides a windfall to market participants paid by electricity customers through higher bills.

Worse still, fraud is rampant through the carbon market with fraudsters, shysters and organised crime rorting the system and lining their pockets at the expense of households. This is the very scheme that the Labor government is linking Australian business, Australian industry and the Australian economy to.

As the UBS report says:

Europol estimated that VAT fraud in the carbon market has cost European tax payers 5 billion euros and it also estimated that up to 90% of all trading in 2009 could have been such carousel trading to generate the VAT-fraud profits.

This is the Rolls-Royce European scheme that this Labor government is tying Australian businesses and industries to.

We know that Australia is the only nation in the world with an economy-wide carbon tax, which is going to be linked to a chronic failure of a carbon trading scheme that is not going to make any significant impact on carbon emissions at all.

You have just heard me explain what UBS thinks of this European scheme, but the Labor government refers to it the explanatory memorandum as a ‘credible overseas emissions trading scheme’.

The government is tying our economy to this scheme, as I keep saying. We are tying our economy to those of Portugal, Italy, Iceland, Spain and Greece—the European system, the beacons of economic management.

The government is making a major structural change to the carbon tax by removing the legislated floor price.

I look back at the comments made by the Prime Minister, the Minister for Climate Change and Energy Efficiency, and others. The floor price was needed, it was vital, to ‘limit market volatility’—what I just described in the EU scheme—and it was necessary to reduce the risk for business. It was necessary for ‘stability in pricing’ and the ‘price cap provides confidence’ and removed ‘uncertainty’.

Do we remember those words? Conversely now, after just a few weeks—just five minutes after the introduction of this tax—with the latest policy mess and linking to the European ETS and no floor price, the government unfortunately appears, very knowingly, to be increasing market volatility.

What respect is there for Australian business and industry when the government, after making those statements in introducing the floor price and cap, is saying: ‘We are knowingly increasing market volatility, increasing the risk for business.

We know we said we needed to do this to reduce that, but now we are saying we are going to increase the risk for business and we are going to increase the market volatility.’

So Australian businesses and industry are going to be subjected to sharp price spikes and plunges and reducing confidence, and we know all about the volatility of the European ETS and what UBS said about it. All the reasons the government said made it critical to support the floor price are now part of the government’s carbon tax package.

We also know that through the Carbon Farming Initiative the government has excluded farmers from selling carbon credits to Europe until 2018.

What is this government doing to Australian farmers yet again? We heard the previous speaker talk about the costs associated with a carbon tax for farmers who cannot pass on the tax because they are price takers.

This comes on the back of the trade-exposed dairy and food processors that do not qualify for free permits like their European competitors do, the ones that now have to try to compete with both hands tied behind their backs, not just one.

They have had to compete for years against subsidies, tariffs, or a combination of the two. They have had to compete against the free permits issued to European manufacturers.

They have to pay the carbon tax on their production chains, they compete here in the domestic market with companies and products that do not have the world’s biggest economy-wide carbon tax costs and they compete with manufacturers in Europe that get 93 per cent free permits.

Our government is knowingly exposing our food manufacturers and food processors to this. The government is doing this knowing the volatility of the markets in Europe. It is just—

Wyatt Roy: A mess.

Ms MARINO: It is a mess. There are no words for such stupidity. We know that the world’s CO2 emissions are projected to rise by around 32 per cent to 45 billion tonnes by 2020.

That is a compounding rate of three per cent a year. We know that the experts have said that these increases will not change this decade. This is supposed to be an environmental measure. Ross Garnaut said in his 2011 emissions update that there would be a 2.8 per cent annual rise.

So Australia’s five per cent reduction will reduce that rise by 0.03 billion tonnes. In fact, under Labor’s carbon plan, Australia’s emissions will increase in the period 2012 to 2020 from 578 million tonnes to 621 million tonnes.

We know the government’s adviser and chief climate commissioner, Professor Tim Flannery, said:

If the world as a whole cut all the emissions tomorrow … the average temperature of the planet’s not going to drop for several hundred years, perhaps over 1000 years.

We should be having a practical adaptation debate, like we do in our policy, instead of what is a load of hot air but a tragedy and a travesty for Australian business, Australian industry, Australian families and Australian competitiveness.

This whole carbon tax debacle—and it is a debacle—is best summed up by Alan Moran, from the Institute of Public Affairs, who said:

… it must be unique for a nation to deliberately sabotage its own competitiveness by shackling the industries that represent the highest value in terms of productivity: coal and electricity.

That is exactly what this government is doing. We know that Treasury estimates that with Labor’s carbon tax Australian companies will be paying $57 billion a year, every year, by 2050.

And the economic cost, on Treasury’s own figures—I am not making this up, these are Treasury’s own figures—will be $1 trillion by 2050. That is what it is going to cost.

This is sheer, unmitigated madness. Here we have come from being one of the most competitive trading nations in the world and yet—two hands tied behind the back—

Mr Entsch interjecting—

Ms MARINO: The member has just mentioned the dairy industry. Let me tell you that dairy farmers are price takers, as the member for Paterson said.

There are at least nine billion litres of milk cooled on-farm by the farmers who have to pay the carbon tax on that extra cooling, and I would suggest that not one of them is going to be able to pass that cost on and that they will not be paid one cent extra for their product.

Yet those things do not seem to matter to this government.

What a tragedy and a travesty for every small business person and every farmer in this country.