the proposed carbon pricing scheme

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The proposed Carbon Pricing Scheme . Minerals Week 2011 Seamus French Chief Executive Anglo American Metallurgical Coal. Coming to a consensus!. There is a better way. …… there is a better way to reduce emissions!. Australia not “lagging others” - PowerPoint PPT Presentation


The proposed Carbon Pricing Scheme

The proposed Carbon Pricing Scheme Minerals Week 2011Seamus FrenchChief ExecutiveAnglo American Metallurgical Coal1

Coming to a consensus!There is a better wayAustralia not lagging othersAustralias reduction in emissions is superior to EU and US

Global action has stalledUS scheme defeated for 4th time; Canada waiting on US; Japan postponed; EU still granting 98% free permits

Australia is walking the plankThe CPRS is completely out of step with all current and proposed schemes with its design driven by revenue raising not carbon reduction

The CPRS will destroy jobs The CPRS will fail to safeguard export competitiveness leading to lower investment, job losses and reduced exportsthere is a better way to reduce emissions!A new approach is proposed to prevent loss of export competitiveness under carbon pricing.

Trade exposed businesses operating in fiercely competitive global markets have no capacity to pass direct or indirect carbon costs on to their customers.

The Governments re-heated CPRS fails to recognise this.

The fact that its scheme will support only 60 firms is clear evidence of this.

Australia should follow other nations and adopt a phased approach to the introduction of auctioning of permits.

And the Government must give equal weight to trade exposure when assessing eligibility for transitional support.

Its an approach already adopted elsewhere.

And adopting safeguards for trade exposed firms will not reduce the ability of the scheme to achieve its medium term targets.3Some inconvenient truthsThe world will follow our lead? Australia contributes 1.5% of world emissions, the US 18% and the EU 13%

Revenue raising or carbon reduction? The CPRS will raise more revenue in its first month than the US scheme in 2 years and more in its first 3 months than the EU scheme in 5 years

The CPRS will protect Australian jobs? The CPRS will destroy 126,000 jobs across all trade exposed industries

The CPRS will protect our export dependent economy? Only 16% of Australian exporters will receive assistance compared to 73% under the EU scheme

4Australia is not lagging the worldPM asserts that Australia is one of the worlds worst polluters on a per capita basis

The correct measure of emissions intensity is CO2 emissions per GDP $ not emissions per capita

Australia shows a far superior performance to both the US and EU with a 44% reduction from 1990 to 2008

Based on current targets a further 45% improvement will be achieved by 2020% change in emissions intensity1990-2008 It continually surprises me that the Gillard Government describes Australia as the worlds worst polluting nation.

If we had a world where there was no trade between nations, a world where all nations were identical in geography, topography, population density and physical endowment then the Governments measure would be the right one.

But in a globalised world, it is precisely the wrong measure.

The truest measure is the emissions used per dollar of GDP. In other words a nations carbon productivity.

And on the Governments own data, Australias carbon productivity has improved at a faster rate since 1990 than many developed nations.

By the Kyoto Protocols target period (2008 to 2012) Australias greenhouse gas emissions per $billion of real Gross Domestic Product will have declined by 44 per cent since 1990.

This far outstrips the 31 per cent improvement in the European Union and 25 per cent in the United States.

Under Australias offer of a 5 per cent reduction in emissions by 2020, Australias emission intensity will fall by a further 45 per cent between 2005 and 2020.

5Australia one of few to meet Kyoto targetsAustralias target was to limit 2008-12 emissions to 108% of 1990 levels

Actual level achieved was 103% coming in 5% under target

This reduction is despite its economy and population growing much faster than other developed nations % Change in CO2 emissions since 1990 Australia is one of the few nations on target to meet Kyoto commitments.

Australias emissions have increased by just 3 per cent since 1990, despite its economy and population growing much faster than most other developed nations.

6International action has stalled..United StatesAt national level, cap and trade scheme rejected for 4th time in 7 years. Regional schemes struggling. CanadaNo action (on cap and trade) until the US acts.JapanEmissions trading scheme delayed till 2013.European Union98% of permits allocated free of charge since scheme started in 2005.

..and beware exaggerated claims of action

ChinaCopenhagen/Cancun offer would see emissions rise by 496 per cent by 2020 (on 1990 levels).IndiaCopenhagen/Cancun offer would see emissions rise by 350 per cent by 2020 (on 1990 levels).7Since the fiasco in Copenhagen in December 2009, action by other Governments has slowed.

In the United States, there is no prospect of a cap and trade scheme in the foreseeable future.

And it is not just the Republican Party that is opposed to a national emissions trading scheme.

On each of the 4 occasions that cap and trade schemes have been defeated, Republicans and Democrats have combined to defeat the proposal.

In Canada, the calculation is simple. No cap and trade scheme until the US adopts one.

In Japan, industry concern about competitiveness impacts prompted a delay until 2013, at the earliest.

In the European Union, 98 per cent of permits have been allocated free of charge since the start of the emissions trading scheme in 2005. I will say a little more about the EU ETS shortly.

Some analysts have claimed that Australia is even falling behind nations like China and India.

But research by respected economist Warwick McKibbin and colleagues at the Brookings Institution shows otherwise.

That research produced projections of emission under the various offers made in Copenhagen.

The findings are clear.

Under Chinas offer, its emissions will be 500 per cent higher in 2020 than they were in 1990.

Under Indias offer, its emissions will grow 350 per cent by 2020 compared with 1990.

In the absence of concerted global action Australia will go it alone with the CPRSTreasury modelling found that a CPRS-style scheme would produce up to 10 years of temporary unemployment, and reduce growth in aggregate productivity.

Research for State Governments indicates 126,000 fewer jobs.

In Minerals sector alone, 23,500 fewer jobs will be created by 2020.

Minerals sector will pay $25 to $30 billion by 2020 - $18 billion for coal sector, $3 billion for gold sector, $2 billion for nickel sector.

Not a single Top 4 competitor/producer in any of the 13 major minerals commodities has a functioning carbon pricing scheme.We have just explored some of the inadequacies of the Gillard Governments proposed approach.

Now a quick look at the likely economic impacts.

The key point is that action by Australia on climate change will hurt our economy more than most other economies.

Thats because we depend on exports more than most nations.

Thats because one-third of our emissions are generated in the production of exports, and because our economic growth and population are both growing faster than most other nations.

And that is why the 5 per cent target as flagged in Copenhagen - will involve a bigger hit to our GDP than any other nation.

The minerals sector faces combined carbon costs up to $30 billion (in current dollars) over the period to 2020.

It is a burden that threatens an investment pipeline worth $140 billion.

It directly contradicts the Governments own strategy of maximising the opportunities of the Asian Century.

Over the period 2012-21, the likely liability for the coal sector will be more than $18 billion.

An indicative cumulative carbon cost through to 2020 for the gold sector is more than $2 billion.

The likely carbon cost through to 2020 for the nickel sector is $1.34 billion.

The principal beneficiaries of the CPRS-style scheme will be Australias competitors in global commodities markets.

Most of Australias competitors across major commodities are developing nations that have no plans to introduce a comparable carbon price.8

44%54%53%49%0%10%20%30%40%50%60%70%80%90%100%Project 1Project 2Project 3Project 4Over 60% of coal mining emissions are fugitive in nature with no commercially available abatement technologyNo other scheme in the world plans to apply carbon pricing to fugitives but the CPRS will tax the industry $10 billion by 2020 for fugitives aloneThe CPRS will Reduce coal mining output by 33-35%Reduce coal mine investment by 13% and Create an average 45% drop in value for most coal projectsThe CPRS will eliminate 9040 coal mining jobs CPRS impact on coal miningImpact on Value of Coal ProjectsAnglo American ExampleOver recent months and years, those critical of the CPRS Mark I and II have been accused of scare-mongering.

But the indictment of a CPRS style scheme can be found in the Governments own Treasury modelling.

10 years of temporary unemployment, then lower wages when jobs eventually emerge.

Lower productivity growth.

Coal output down by a third. Investment in the minor sector to fall by 13 per cent.

Meanwhile independent analysis for then Labor State Governments predicted 126,000 fewer jobs by 2020 under a CPRS style deal.

And we know that there will be 23,500 fewer jobs than forecast in the minerals sector.

Australia is out of step with the CPRSEuropean Union ETS has rais


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