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Sept. 9 --A conservative alliance opposed to mandatory carbon pricing has decisively won Australia’s Sept. 7 federal election, although it will not control the Senate in its own right.
The Liberal-National Party Coalition is expected to have 89 of the 150 seats in the House of Representatives, with the Labor Party likely to be reduced to 57 seats. The coalition is committed to a full-scale repeal of the country's carbon price scheme.
Australia’s preferential voting system means it could be some days before the final makeup of the Senate is known, but a range of micro-parties broadly sympathetic to the coalition’s ambitions to repeal the price on carbon are likely to hold the balance of power.
Prime Minister-elect Tony Abbott has already ordered the drafting of repeal legislation. Parliament is expected to convene in late October or early November.
However, the new senators don’t take their seats until mid-2014, and until then, the Senate remains in the control of Labor and Greens senators who are expected to oppose repeal.
A key issue for business will be the timing of the repeal attempt. If Labor and the Greens reject the new government’s repeal bill, then the coalition would either have to call another election--which it has not ruled out--or wait until the new senators take their seats in mid-2014.
If the coalition has to wait until July 2014 for the Senate to consider the bill, then repeal would not occur until after the pricing scheme has entered its third year, which runs from July 1, 2014, to June 30, 2015.
The coalition would then have to ax the scheme partway through a trading year, a more complex task than abolishing it at the start of a compliance year.
Industry associations representing Australia’s largest companies welcomed the prospect of the repeal of the carbon price scheme.
However, a leading climate think tank has cautioned that business should ensure any replacement policy is demonstrably able to deliver emission cuts of up to 25 percent by 2020.
Labor and the Greens are also expected to reject coalition efforts to steer through the Senate legislation that would abolish the Clean Energy Finance Corporation, which helps finance clean energy and energy efficiency projects, and the Climate Change Authority, established to provide independent advice on emissions reduction targets.
The new government does not need Senate support to fulfill its commitment to abolish clean energy grant schemes and other assistance programs that are funded out of the revenue collected from companies currently required to pay for their greenhouse gas emissions.
The new coalition government’s approach to reducing emissions is set out in a high-level “direct action” policy framework that it released in early 2010.
The policy, which the government says it will develop through a soon-to-start “white paper” consultation process, proposes few if any regulatory controls on greenhouse emissions.
Instead, it has as its centerpiece an “emissions reduction fund” that would distribute money to bidders that offer abatement of greenhouse gas emissions at the lowest cost.
The fund would have an initial allocation of A$300 million ($276 million) in the 2014-15 financial year, rising gradually to A$1 billion ($920 million) by 2017-18.
The new government also plans to retain and expand the country’s carbon offset scheme, known as the Carbon Farming Initiative (36 INER 1138, 8/14/13).
The incoming coalition government has said its direct action policy can deliver a reduction in emissions of 5 percent by 2020.
It has also said it remains open to making cuts of up to 25 percent by 2020 depending on commitments made by other nations, a pledge that mirrors one made by the ousted Labor government.
However, the coalition has not offered any modeling that indicates its policy can deliver a 5 percent cut, and separate research studies commissioned by the environmental group WWF and the Climate Institute think tank have both concluded it cannot do so.
Welcoming the election result, Minerals Council of Australia (MCA) Chief Executive Officer Mitchell Hook said the carbon price scheme “has been a dead-weight on the economy.”
The MCA represents companies including Rio Tinto, Anglo American Metallurgical Coal, GlencoreXstrata and Newcrest Mining.
The prospect of repeal was also welcomed by the Business Council of Australia (BCA), which represents large companies including ExxonMobil Australia, ConocoPhillips Australia, Bank of America Merrill Lynch, Boeing Australia and South Pacific, British American Tobacco Australasia, McDonald’s Australia, McKinsey & Company, Microsoft Australia, and News Corp. Australia.
BCA President Tony Shepherd urged the Senate to respect the new government’s “clear mandate for reform.”
Australians have spoken in favor of an agenda that includes “getting rid” of the carbon price scheme, he said.
Both the MCA and the BCA have been highly critical of the carbon pricing scheme.
In July 2011, the MCA helped fund a high-profile television and print campaign portraying parents and small business owners concerned about carbon pricing.
“The campaign message of 'carbon tax pain, no climate change gain’ highlights the futility of the [Labor] government’s proposed scheme,” Hooke said at the time.
The BCA has refrained from offering any substantive comment on the merits of the direct action policy framework since the coalition released it in early 2010.
Instead, it has focused its attention on the outgoing Labor government’s “clean energy” package, warning that the carbon price scheme has a “flawed design with many risks for the economy.”
The MCA and BCA support for repeal comes despite widespread confusion about how direct action would operate, with some large companies favoring an early move to a floating price scheme rather than abolition of the entire carbon price regime.
In May, for example, BP Australia’s environmental affairs adviser Tzila Katzel told a seminar in Sydney that “there is not much of a 'direct action’ package, so it’s very hard to pass judgment” (36 INER 834, 6/19/13).
“We have been urging the opposition for more details around some of their proposals and I don’t think anyone has had any response with regards to more detail so it is quite difficult,” she said.
Katzel told the seminar that BP, which is a BCA member, “would like to see the current system stay and improve” by moving immediately from a fixed-price format to a floating price. The previous government had been aiming to move the country from a fixed carbon price to emissions trading as of July 1, 2014, a year earlier than currently scheduled (36 INER 1072, 7/31/13).
Meanwhile, the Climate Institute think tank Sept. 8 cautioned that its exit polling indicated the election result reflected voter concern about the economy rather than hostility to the carbon price.
“The single most important issue for voters was the economy and jobs, nominated by 31 percent as their major issue, followed by cost of living at 15 percent,” Climate Institute Chief Executive Officer John Connor said. “Climate change (5 percent) and the carbon tax (3 percent) lagged significantly. Amongst coalition voters, only 3 percent nominated scrapping the carbon tax as their top issue.”
Connor told Bloomberg BNA that business should be aware that the new Senate could deliver some “very unsatisfactory policy.”
Business groups should help to shape a policy package that can deliver cuts of up to 25 percent by 2020 “if they take climate change seriously,” he said.
Australia’s preferential voting system and the plethora of candidates for the Senate has meant that a range of so-called micro-parties are likely to be influential in deciding the fate of the coalition’s repeal legislation.
These include the climate change-skeptic Family First Party, which is likely to have one senator, and the Clive Palmer United Party, which is led by a businessman who owns one of the few companies that did not comply with its carbon price scheme obligations in the 2012-13 financial year.
The Australian Coalition's Direct Action Plan on Environment and Climate Change is available at http://bit.ly/1ax0W75.
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