Ai Group calls for CPRS delay

The Australian Industry Group is calling on the Rudd Government to delay the introduction on the proposed Carbon Pollution Reduction Scheme (CPRS).

The Australian Industry Group is calling on the Rudd Government to delay the introduction on the proposed Carbon Pollution Reduction Scheme (CPRS) due to start July 2010.

Ai Group’s Chief Executive Heather Ridout said, “Ai Group reaffirms its view that a market-based approach such as emissions trading should be adopted as the central policy to achieve Australia’s reduction of greenhouse gas emissions. However, the 2010 start date is neither necessary nor realistic.

“Australia is already on track to meet its Kyoto commitments over the period to 2012. The sharp downturn in the economy and the associated reduction in emissions — for example from reduced metals production and slower growth in energy demand across the economy — will reduce our abatement task in the short-term.

“Business supports the passage in 2009 of the relevant legislation. This would remove a major source of business uncertainty which is currently acting as an obstacle to long-term business planning. A delay in the start date would provide much-needed breathing space in what has always been an arduous timetable from an administrative point of view.

“The 2010 timetable has also now become unrealistic because of the impacts of the global financial crisis on business confidence, cash flows and the availability of credit. One of the impacts of the crisis is that it is undermining the capacity for businesses to invest in the new processes, plant, equipment and training necessary for them to reduce their emissions,” Ridout said.

The association’s national policy making body, resolved the following in relation to the Federal Government’s Carbon Pollution Reduction Scheme in Canberra this week:

· An emissions trading scheme is the preferred approach as the major policy to reduce greenhouse gas emissions;

· Legislation giving effect to the Scheme should be passed in 2009;

· The start of the proposed Carbon Pollution Reduction Scheme (CPRS) should be delayed to 2012;

· Further improvements are needed to the detail of the CPRS, particularly in relation to measures for trade exposed businesses;

· Continued opposition to the Renewable Energy Target; and

· Strong support for the exploration and exploitation of the full range of low-cost abatement opportunities.

The meeting expressed support for an emissions trading approach to reducing greenhouse emissions.

The Ai Group says an emissions trading scheme approach provides powerful incentives for business to search for the least cost emissions reductions; it reduces the scope for bureaucratic and political meddling in investment decisions; and, in contrast to a carbon tax, is able to align directly with a national reduction through the quantity of permits issued.

The Ai Group’s support for the final design of the Carbon Pollution Reduction Scheme (CPRS) will be assessed against the following principles:

– Reducing emissions at the lowest possible cost to the domestic economy;

– Providing investment certainty;

– Allowing a sensible start that gives business time to adjust;

– Protecting, in an effective way, Australia’s trade exposed businesses from the additional costs imposed relative to competitors abroad;

– Securing the supply of electricity; and,

– Keeping compliance costs to a minimum.

The Ai Group believes the start date for the CPRS should be delayed until 2012. Australia is already on track to meet our Kyoto targets and the global slowdown will reduce the current emissions trajectory without the need for the CPRS to begin in 2010.

This, together with the detrimental impact of the global financial crisis on the business environment and the considerable administrative difficulties that are becoming apparent point to desirability of deferring the start date to 2012.

The global crisis is detracting from the ability of businesses to undertake expenditure to reduce their emissions.

The Ai Group believes there are further changes that can be made to the detail of the CPRS to reduce the potential impact on trade exposed businesses. Areas that could be considered include:

– Broadening eligibility for emissions intensive trade exposed permits;

– Raising the quantity of permits allocated;

– Ensuring the Climate Change Action Fund has a particular focus on trade-exposed businesses; and

– Reducing the unilateral commitment as insurance against a break-down of international negotiations.

The Ai Group says it supports the passage in 2009 of legislation giving effect to the fundamental architecture of the CPRS. Legislation this year would provide a greater degree of certainty to business and will assist in informing business decisions in key areas of investment.

The Ai Group reaffirmed its opposition to the current Renewable Energy Target. Ai Group is opposed to the current Renewable Energy Target because it is a comparatively expensive approach to emissions reduction; because it adds an additional layer of costs to business and because the Government does not currently propose to protect Australia’s trade exposed businesses from these additional costs.

The Ai Group supports exploration and exploitation of the full range of abatement opportunities. We recognise the importance of giving full recognition to genuine abatement and urge the Government to accelerate consideration of such abatement opportunities both within the Kyoto framework and in the domestic offset market. For example, the considerable opportunities in approaches to sequestration such as soil carbon should be explored.